A fintech that lets customers pay bills with their credit cards just secured $75 million in funding
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The US-based fintech's Series D funding round was led by B Capital Group and included Kleiner Perkins, Khosla Ventures, Accomplice, and Top Tier Capital Partners, per TechCrunch.
This brings Plastiq's total funding to date to over $140 million. Plastiq allows customers to use their credit cards to make bill payments. To do so, users have to provide their own credit card details, as well as information about the recipient and payment amount.
Plastiq charges a 2.5% fee for the service, and while it initially focused on the consumer market, small- and medium-sized businesses (SMBs) now account for 90% of its revenue. It will use the fresh funding to build out new features for SMBs, including payments and processing.
Plastiq's revenue grew 150% from 2018 to 2019, and it now has a revenue run rate of nearly $100 million. There are over 1 million users on its platform, and Plastiq is on track to make over $2 billion in transactions. It seems likely that by adding more products to its offering, Plastiq will be able to further increase its user base and keep its existing customers engaged with the platform overall, helping to boost revenue.
The fintech's offering could be an attractive alternative to loans, but Plastiq should now think of ways to support businesses and consumers through the coronavirus pandemic.
Plastiq allows customers to use their credit cards for all payments, which would typically make it attractive under normal circumstances. Not every recipient accepts credit card payments: Landlords, for example, often prefer to be paid by check or other peer-to-peer (P2P) payment options, like Venmo.
Using Plastiq helps customers bypass such restrictions, which can be helpful when experiencing temporary cash flow issues, which credit cards can cover. SMBs could therefore use Plastiq during an off season or when they have to pay a supplier in advance. However, some lenders are offering repayment holidays during the coronavirus crisis, which could be a cheaper alternative for SMBs and consumers at the moment.
To offer customers a more rounded product, Plastiq should look into offering loan options via partnerships - especially during the pandemic. For the existing product, customers should be aware of the high fees they can incur if they don't pay off their credit card debt in full every month - and during longer cash flow issues, credit card providers' late fees would stack up over time, making Plastiq's services less useful during those periods.
In such cases, turning to a lender for longer-term loans is likely a more affordable option to cover bills and payments. Many SMBs and consumers will struggle to cover their bills and payments during the ongoing pandemic, with many businesses closing shop and consumers losing jobs. Plastiq should look into offering access to different loan types via its platform to provide appropriate services during this time - and it could team up with alt lenders to do so.
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