Brex Pursues Bank Charter Approval

Brex, a prominent fintech company, has recently submitted an application to become a chartered bank.

Application Details

The company, currently offering a startup-focused credit card through a partnership with Emigrant Bank, announced its application to both the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions (UDFI) on Friday.

The proposed Brex Bank will be situated in Draper, Utah, functioning as a fully owned subsidiary of the existing Brex organization.

Leadership Appointments

To lead this new venture, Brex has appointed Bruce Wallace, a former executive from Silicon Valley Bank (SVB). Wallace held multiple key positions at SVB, including COO, chief digital officer, and head of global services.

Jean Perschon, previously the CFO of UBS Bank USA, has also been named as the CFO for Brex Bank.

Recent Funding

In May of the previous year, Brex secured an additional $150 million in a Series C extension. This funding round included participation from existing investors such as DST Global and Lone Pine Capital.

This investment brought the total venture capital funding raised by Brex, co-founded by Henrique Dubugras and Pedro Franceschi, to $465 million.

Expansion of Financial Services

According to a company statement, Brex Bank aims to broaden its current range of financial products and business software. It will offer both credit solutions and FDIC-insured deposit products specifically designed for small and medium-sized businesses (SMBs).

Trend of Fintechs Offering Banking Services

Providing credit products to small businesses has become a significant revenue stream for technology companies serving entrepreneurs. Examples include Shopify and Square within the e-commerce sector.

Similarly, the development of business-focused bank accounts, like Shopify Balance, demonstrates this trend. Shopify Balance is slated for launch in the U.S. later this year.

These financial offerings can generate additional revenue through interest and borrowing costs. Companies may possess a superior understanding of the risk profiles of the businesses they serve compared to traditional financial institutions.

Synergistic Operation

“Brex and Brex Bank will operate collaboratively to empower SMBs and facilitate their growth,” stated Wallace.

Company Background

Headquartered in San Francisco, Brex’s investors include Kleiner Perkins Growth, YC Continuity Fund, Greenoaks Capital, Ribbit Capital, IVP, and DST Global. Notable individual investors include Peter Thiel and Affirm CEO Max Levchin.

Currently employing over 400 individuals, Brex underwent restructuring and workforce reductions in mid-2020. However, the company attributed these changes to organizational realignment rather than financial hardship.

Other Fintechs Seeking Charters

Other fintech companies pursuing bank charters include Varo Bank, which recently raised $63 million, and SoFi, which received preliminary approval for a national bank charter last October.