Highnote Raises $54M to Compete with Marqeta in Card Issuing

Fintech Disruption and the Rise of Highnote

The financial services landscape is undergoing a significant transformation, driven by fintech startups. These companies are developing more adaptable, affordable, and user-centric tools for both businesses and individual consumers. Consequently, traditional financial institutions are experiencing a shift in customer loyalty as users gravitate towards these innovative providers.

Highnote Launches with $54 Million in Funding

In a recent development, Highnote, a new startup, has emerged with the goal of revolutionizing the card issuing industry. The company aims to simplify the process of providing virtual payment cards to customers for businesses of all sizes. Founded by former PayPal executives, Highnote is officially launching today and has secured $54 million in funding to initiate its operations.

Investment Details

This funding round encompasses both a Seed round and a Series A investment, with Oak HC/FT leading both stages and co-leading the Seed round alongside Costanoa Ventures. Additional investors include XYZ, SVB Capital, and WestCap, as well as prominent figures like Bill Ready, former COO of PayPal and current president of commerce and payments at Google, and Renaud Laplanche, CEO of Upgrade.

The Evolution of Branded Payment Cards

Own-branded payment cards, coupled with loyalty programs, have been a staple in the retail industry for decades. Furthermore, successful startups like Marqeta have already demonstrated the potential of democratizing access to this capability.

Highnote's Differentiator: Speed and Flexibility

Highnote distinguishes itself by asserting that existing solutions often involve lengthy provisioning times and lack innovative product design. The company envisions a market opportunity to virtualize the process, similar to the Apple Card model, making it accessible to businesses of any scale. This approach also introduces greater flexibility in how credit is extended to consumers.

Founders' Vision

“A purpose-built platform is needed today to capitalize on the incredible opportunity for embedded finance,” stated John Macllwaine, co-founder of Highnote and former GM of PayPal subsidiary Braintree, alongside Kin Kee, Braintree’s former director of architecture. “Marqeta has successfully highlighted the possibilities, but its platform was created a decade ago for a specific use case.”

The Power of Embedded Finance

The growing trend of embedded finance – integrating complex financial services through APIs – is central to Highnote’s strategy. Traditionally, card services have been relatively limited in scope.

Traditional Card Models

Retailers typically use cards to incentivize increased customer spending within their own stores. Non-retail entities, such as airlines, often link cards to loyalty programs offering redeemable rewards. These cards generally involve payment limits, interest charges, and a lengthy application process culminating in a physical card delivered by mail.

Highnote's Innovative Approach

Highnote aims to leverage embedded finance to broaden the functionality of “payment cards” and simplify their procurement for businesses.

Features and Capabilities

The company currently offers virtual, physical, and tokenized cards, along with tools for customers to manage their finances effectively. This includes features like opening bank accounts and monitoring card usage. Businesses also gain enhanced control over spending across their networks.

Future Potential

Looking ahead, Highnote envisions integrating additional services at the point of sale, such as buy now, pay later (BNPL) options and other flexible payment methods. While BNPL companies and payment providers are expanding into credit products, Highnote offers a distinct approach.

Reclaiming Ownership of Transactions

Brands have increasingly become disintermediated from online transactions, often outsourcing the process to marketplaces like Amazon or relying on third-party payment processors. Highnote aims to empower brands to regain ownership of these transactions and the associated data.

Investor Confidence

The founders’ extensive experience in the payments industry, and their understanding of the evolving landscape, have attracted significant investor support.

Oak HC/FT's Perspective

“We’ve backed many leading fintech companies, but John, Kin, and their team are truly exceptional,” said Matt Streisfeld, Partner at Oak HC/FT. “We recognize the challenges enterprises face in embedding payments to enhance customer engagement and revenue, and the need for consumers and SMBs to access funds quickly. We believe Highnote is poised to solve this problem, and we are excited to support their continued growth.”