New York City-based fintech startup Extend, whose platform enables rapid creation of digital payment cards, plans to extend its reach thanks to a $40 million Series B round of funding.
The funding deal comes on the heels of the September announcement about Extend’s new partnership with American Express. Under this partnership, American Express offers Extend’s virtual card capabilities to millions of holders of American Express business credit cards. Other partners of Extend include Global Payments/TSYS, Mastercard and Visa.
Since being founded in 2017, Extend has raised $54 million from investors.
“The market is inundated with neobanks offering new banking solutions, but there’s little payment innovation coming out of established institutions. Extend is laying the foundation for the next generation of growth for major banks,” Sumant Mandal, co-founder and managing partner of March Capital, said in an Oct. 27 news release.
Extend’s offerings include what the startup calls the first platform-as-service for virtual cards.
“While competitors require a customer to switch bank partners and open a new account, and existing virtual card offerings have only been accessible at an enterprise level, Extend is the first to deliver an issuer-agnostic solution for [small and midsize businesses] at scale,” the company said in the news release.
Extend also offers several API services for banks and third-party service providers. The company says these services can open the door to new offerings, such as BNPL features. In addition, the API connectivity can enable embedded payments in third-party platforms, such as travel booking websites.
Close to 2,000 business customers currently use the Extend platform.
With the new funding, Extend is plotting an expansion of its offerings. For instance, it wants to provide virtual card capabilities directly to consumers.
In a report last year, Juniper Research predicted the volume of virtual card adoption will soar from $1.6 trillion in 2020 to more than $5 trillion by 2025. The report says B2B cards will account for nearly 80% of the value of virtual card transactions.
Andrew Jamison, co-founder and CEO of Extend and a former executive at American Express, said a customer of his company can obtain a virtual payment card in a matter of minutes.
“Everything is digital, everything is instantaneous today, so the idea that you have to wait for anything just doesn’t feel right anymore,” Jamison told FinLedger.
Jamison said Extend’s technology stands out because it’s layered on top of a customer’s core technology. As such, the startup is innovating “from the inside out.”
“We’ve taken a different path, one where we collaborate with traditional issuers, and we’re not out there trying to issue credit cards and do underwriting and grow our own brand as a payments product,” Jamison said. “We are very much ‘Intel inside.’ We are going to power an ecosystem as opposed to owning it.”
End customers don’t pay for Extend’s technology. Rather, the startup’s partners foot the bill through avenues such as subscription fees and interchange fees, according to Jamison.
As Extend boosts its platform — with 10 card issuers expected to be onboard by the end of this year and 20 by the end of next year — the startup will grow its engineering team and the rest of its workforce, Jamison said. The company employs about 45 people now and envisions employing around 100 by the end of 2022.
Those additional workers are needed to keep pace with Extend’s growth. Jamison said the startup is seeing 30% month-over-month increases in its customer base and transaction volume. That has helped push the company’s run rate past $1 billion, with hopes of approaching the $2 billion mark by the end of 2021.
“We have seen more and more businesses ramp up their use of virtual cards since the start of the pandemic as they looked to digitize their payments processes and increase their use of touchless payments,” Dean Henry, executive vice president of global commercial services at American Express, said in a news release.