Three-year-old fintech Ramp is the latest startup aiming to cash in on the buy now pay later boom—adding a similar service for business-to-business payments to its flagship corporate card and spending management platform. Under the new offering, Ramp pays vendors up front, but the business that owes the bill can defer its payment for as much as 90 days.
Announced on Tuesday, Ramp’s new Flex service charges business users a small fee to finance invoices and then pay back the funds in 30, 60 or 90 days—akin to what firms like Affirm, Klarna and AfterPay have done for consumer purchases of everything from clothing to laptops. In an interview, Ramp CEO Eric Glyman said the fees will range from around 1% to 2% for a 30-day period. Some clients could be able to offset part of that fee with discounts their vendors offer for quick payment. Like Ramp’s cards, limits will depend on a customer’s creditworthiness.
The offering builds upon Ramp’s Bill Pay service, which automates payments by using artificial intelligence to process email invoices in seconds and then approve payments via credit card, ACH or check. Glyman notes Bill Pay is Ramp’s fastest-growing offering yet. After launching last October, it took just six months to surpass $1 billion in annualized volume, less than half the time it took Ramp’s cards to cross that threshold. Credit cards are still Ramp’s most popular product, with more than $5 billion in annualized transaction volume, but Glyman says at the rate Bill Pay is growing, it could surpass card volume as soon as next year.
The buy now, pay later market has exploded in popularity over the past decade, and increasingly so in recent years. Sales financed by players like Affirm and Afterpay are projected to hit $181 billion this year, nearly doubling from $93 billion in 2020. Adoption in the business-to-business realm, however, has not been so swift, Greylock investor Corinne Riley wrote in a recent post, adding that the paper-intensive payment process that exists in B2B commerce is still “cumbersome” and bogged down by “laborious” financing methods.
Riley notes a number of venture-backed startups—including Balance, Slope and Vartana—have started to tackle B2B buy now, pay later. But she describes the market as still “in the early innings” and expects adoption to grow as businesses increasingly shift payments online.
Glyman says the opportunity seems vast to Ramp, which was named to Forbes’ Fintech 50 in June for a second consecutive year. He notes only $1.5 trillion of the roughly $120 trillion in annual B2B payments are processed on credit cards, and he foresees the new Flex offering being particularly useful for companies in the e-commerce, construction, and manufacturing industries, which often must pay loads of money up front to scale up operations and have limited options to finance those upfront costs.
At a time when companies are increasingly worried about the gloomy economic outlook, the feature marks a new revenue stream for Ramp, which makes money from taking a small share of credit card merchant fees. Fintechs in particular, like much of the broader technology sector, have struggled, with shares of companies like Affirm and Upstart tumbling as much as 80% this year.
Glyman notes companies are spending more and more, but habits are quickly changing. Ramp customers spent nearly 60% more on lodging in the first quarter, compared to one year prior—reflecting resurgent travel demand, Glyman says. But spending on advertising fell by 14% in a potential sign of cost-cutting measures. Electronics spending has also tumbled—potentially indicative of firms cutting back on hiring and onboarding, he adds.
As for Ramp, Glyman says it isn’t slowing down. The company, which landed an $8.1 billion valuation after a funding round in March, posted one of its biggest months on record in June, with business climbing 38% from May thanks in part to a three-fold increase among enterprise customers. Ramp won’t disclose revenue but now counts more than 7,000 businesses—including real estate giant Douglas Elliman, fintech Marqeta and software companies Anduril and Webflow—as clients, more than triple the count one year ago. In the same period, Ramp’s employee headcount has surged from 150 to about 370.
Glyman boasts the company launched successfully during the early days of the pandemic and can continue to do well in uncertain times because it saves businesses money. To hear Ramp tell it, its spending management platform has saved $200 million for clients with its recommendations. “Our value proposition of saving money and saving time became more relevant during the pandemic, and it’s always mattered, but it’s taking on another special importance as the market becomes a lot more volatile,” he says.