Fintech Ramp dives into ‘Buy Now, Pay Later’ market with new ‘Flex’ offer for businesses

TThree-year-old fintech Ramp is the latest startup aiming to cash in on the buy-now-pay-later boom — adding a similar business-to-business payments service to its flagship corporate card and expense management platform. Under the new offer, Ramp pays suppliers in advance, but the business that owes the bill can delay payment for as much as 90 days.

Ramp’s new Flex service, which was announced on Tuesday, charges business users a small fee to fund invoices and then repay the money within 30, 60 or 90 days – similar to what firms such as 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 about 1% to 2% in a 30-day period. Some customers may be able to offset part of this fee with discounts that suppliers offer for prompt payment. Like Ramp’s card, the limits will depend on the customer’s creditworthiness.

The offering builds on Ramp’s Bill Pay service, which automates payments by using artificial intelligence to process email invoices in seconds and then authorize payments via credit card, ACH or check. Glyman notes that Bill Pay is Ramp’s fastest growing offering yet. After launching last October, it took just six months to surpass $1 billion in annual volume, less than half the time it took Ramp’s card to cross that threshold. Credit cards remain Ramp’s most popular product, with more than $5 billion in annual transaction volume, but Glyman says as Bill Pay grows, 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 in recent years. Sales funded by players such as Affirm and Afterpay are projected to reach $181 billion this year, nearly doubling from $93 billion in 2020. However, adoption in the business-to-business space has not been as rapid, Greylock investor Corinne Riley wrote in a recent post, adding that the paper-intensive payment process that exists in B2B commerce remains “cumbersome” and bogged down by “labor-intensive” financing methods.

Riley notes that a number of venture-backed startups — including Balance, Slope and Vartana — have begun tackling B2B buy-now, pay-later. But she describes the market as still “in the early stages” and expects adoption to grow as businesses increasingly move payments online.

Glyman says the opportunity seems huge for Ramp, who was named to Forbes’ Fintech 50 in June for the second year in a row. Noting that only $1.5 trillion of the roughly $120 trillion in annual B2B payments are processed by credit card, he envisions the new Flex offering to be particularly useful for companies in the e-commerce, construction and manufacturing industries, which often have to pay a lot of money upfront to scale up operations and have limited options to finance these upfront costs.

ONEAt a time when companies are increasingly worried about the bleak economic outlook, the feature marks a new revenue stream for Ramp, which makes money by taking a small share of credit card merchants’ fees. Fintechs in particular, like much of the wider technology sector, have struggled, with shares in companies such as Affirm and Upstart falling as much as 80% this year.

Glyman notes that companies are spending more and more, but habits are changing quickly. Ramp customers spent almost 60% more on accommodation in the first quarter compared to a year earlier – reflecting resurgent travel demand, says Glyman. But advertising spending fell by 14% in a potential sign of cost-cutting measures. Electronics spending has also fallen — potentially indicative of companies cutting back on hiring and on-boarding, he adds.

As for Ramp, Glyman says it’s not slowing down. The company, which was valued at $8.1 billion after a funding round in March, posted one of its biggest months ever in June, with business up 38% from May, thanks in part to a tripling of business 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 number a year ago. In the same period, Ramp’s employees have increased from 150 to around 370.

Glyman boasts that the company launched successfully in the first days of the pandemic and can continue to do well in uncertain times because it saves companies money. To hear Ramp tell it, the expense management platform has saved clients $200 million with its recommendations. “Our value proposition of saving money and saving time became more relevant during the pandemic, and it has always been important, but it takes on a different special meaning as the market becomes much more volatile,” he says.