PEX Card gets $3.2M to offer smart prepaid cards to small businesses

By Michael Carney , written on October 23, 2012

From The News Desk

As consumers gain more sophisticated tools to monitor and control their spending, small business owners are in search of the same technical solutions. Gone are the days when it’s acceptable to wait for a wire transfer or an expense reimbursement check to clear. Smart prepaid card company PEX Card eliminates these issues by allowing businesses to deposit funds into a central account and then dynamically set per-card balances and spending rules for each employee in seconds rather than minutes.

Today, PEX Card is announcing $3.2 million in Series B financing led by existing investor iNovia Capital and new investor Bluff Point Associates, with participation from Augury Capital and additional private investors. The new round brings the company’s total financing to $5 million.

Card-based expense management solutions have only been available to the largest companies in the past, says newly appointed Chief Marketing Officer Michael Noles. Noles has the industry experience to know, having joined PEX from payment card company FleetCor, following senior management roles in the card services divisions of JP Morgan Chase, Citibank, and Advanta.

PEX prepaid cards are Visa-branded and administered through the Bancorp Bank. The three-year-old New York City startup services businesses in all 50 states, and shared a number of milestones alongside the financing news. Notably, since 2009 the company has processed over 1 million transactions and has seen transaction volume increase by 65 percent year-to-date.

There are no transaction fees and no interest charges associated with PEX Cards. Instead, users pay a per-card monthly fee of $7.50, with the fees waived during any month that a business spends more than $50,000 in PEX Card transactions. For small- and medium-sized businesses (SMBs), the cards also eliminate the expense of wire transfers and unexpected overdraft fees, not to mention the significant administrative expense of managing cash advances or expense reimbursements.

“[Customers] told us banks were missing a product that met their cash distribution management needs the way PEX Card [does],” says iNovia Partner Geoff Judge.

PEX Card plays into two recurring themes in startup-land. The first is that businesses are demanding access to the same simple yet powerful tools available in the consumer space. Similar products have long been available for parents to manage the spending of their children.

Along the same lines, but at the other end of the spectrum, is the theme of small businesses demanding their own versions of the tools available to large corporations, priced and structured to meet their unique needs.

Unfortunately, as much as these solutions are in demand, SMBs are notoriously difficult to reach and service. As many companies have found out in the past, the small rewards from each SMB sale often require as many resources to capture as do the massive spoils of bagging an enterprise giant. PEX will be challenged to continue its rapid growth once the “low-hanging fruit” has been picked and the inevitable competitors enter the market – especially if those competitors are banking giants.

The company has nestled into a comfortable niche in the SMB expense management sector, and with new capitalization and senior management, is doubling down on growth and product development. The next phase of the business is the land-grab, and the more market share it can bank, the better control it will control its destiny.