This analysis was first published in SvD Näringsliv, in Swedish, on November 26th, 2021.
Eurocard and American Express have long dominated the Swedish corporate card market. Now the next generation is coming for them. Dressed up as tech companies, they are fighting for the billion-kronor market that corporate card spending represents.
Wedged between a gas station and an on-ramp to the Bay Bridge sits South Park — a small oasis in San Francisco’s SOMA district. The area is best known for having housed countless venture capital firms and Instagram’s first office.
As one of the few green spaces nearby, it is also a popular lunch spot. The restaurant South Park Café is a local classic that has been there for 34 years. But in 2019 it was taken over by a new and slightly unexpected owner: the credit card company Brex, which had its own offices around the corner. The restaurant stayed open, but the floor above was turned into a kind of office lounge for cardholders called the “Oval Room” (Silicon Valley has never been shy about grand associations). A local institution had been reshaped by a company founded just two years earlier.
Offering exclusive perks to cardholders is a familiar idea — but mostly for wealthy private individuals. The difference this time is that it is not personal cards being used, but corporate ones. When a company picks a credit card today, factors like add-on services and the perks on offer matter far more than they used to, both for the company itself and for its employees.
The trend is driven from the US, where companies like Brex and Ramp have become popular with startups and quickly reached billion-dollar valuations. The explanation is SaaS — software as a service — cloud services that do not require any hardware. They all rely on card payments to collect money from their customers quickly. And because startups use so many different SaaS tools, the payment volumes on cards add up fast. The fact that the US still often pays invoices by mailing a physical check makes cards look, by comparison, like a fast and simple solution.
The same phenomenon exists in Sweden, but with a slightly less glamorous framing so far. Here it is mostly about minimizing paperwork and simplifying expense management. With add-on services, for example, bookkeeping can happen faster and the overview of employee spending can become clearer. In this category you find card companies like Danish Pleo and Swedish Mynt. The underlying business model, though, is the same as before: give companies a card, and make money on all the purchases made with it.
As competition tightens, the services are getting more and more specific. The Swedish company Juni has targeted companies that do digital ad buying — something that often needs to be paid for by card. By integrating with ad sellers like Facebook and Google Ads along with store platforms like Shopify, the company can give customers a clearer picture of where the money is going and how well their marketing is actually working. The space is hot among investors, and Juni’s valuation grew 900 percent in just eight months.
For these card companies there is also value in owning all the payment data in one place. Whoever has the most relevant data is probably best positioned to make an accurate risk assessment. That can in turn be used to offer things like short-term credit or loans. There is a running joke in the industry that you have to win over the company’s CFO, since they usually decide which card provider to use. Solve the CFO’s headache and you are well on your way.
The underlying business model is one we recognize from companies like Eurocard and American Express. Get a credit card, buy services and ads with it, and the company makes a little money on every transaction. Those are also the companies squarely in the crosshairs of this new generation. But when big incumbents try to build services it tends to take a long time and not go very well. Expect several large acquisitions in this area — as soon as the incumbents realize they cannot build the surrounding services as well as the upstarts.