
Brex wants to replace startup bank accounts with Brex Cash - tempsy
https://techcrunch.com/2019/10/02/brex-cash/
======
pedrofranceschi
[Brex co-founder]

We’re incredibly excited to announce Brex Cash!

Since we started Brex, my co-founder Henrique and I had much bigger plans than
only corporate credit cards. Business bank accounts are a pain for virtually
every company for a long time, and for the last 18 months we embarked on a
journey to build a banking experience that, coupled with the Brex credit card,
is 10x better than anything out there.

Alan Kay used to say that if you’re serious about software, you should make
your own hardware. In fintech, I believe the equivalent analogy is: if you’re
serious about financial services, you should build your own infrastructure. At
Brex, we have a strong belief that great financial products innovate at the
core, and not only at the UI layer. So instead of relying on existing banking
systems to build Brex Cash, we took the approach of building our core systems
from scratch, building directly on top of the payment rails (NACHA and
FedWire). This level of autonomy with the technology stack enables us to do
amazing things like instant onboarding, making funds available instantly,
charging no fees on wires/ACH (given our more efficient cost structure), and
deeply integrating with the Brex card. And at the UI layer, we packed all of
this into a user experience that is minimal, polished and designed to save
companies time and get them back to running their business.

We also wanted to make business banking better in all aspects - not only on
software. We noticed our customers raised millions of dollars and kept the
money parked in their checking accounts, earning no interest. A 10x better
experience meant offering the highest yield on their money and, to achieve
that, Brex Cash became not only a complex technical challenge, but also a
financial/regulatory one. The way most fintechs offer banking services without
having to be regulated as banks is by “reselling” another bank’s products and
bolting a UI on top of the bank’s checking/savings account. But because
traditional banks separate checking and savings accounts, customers earn a
lower yield on their money as a whole. Instead, we chose a different
structure: customers put their cash into Brex Treasury LLC, a registered
broker-dealer affiliate of Brex Inc., that invests the cash in low-risk
securities, such as U.S. Treasuries.

The reactions of our early Brex Cash customers have been overwhelmingly
positive, and we believe we’re on the path to build the best bank account
replacement, not only for startups but for any business in America.
Personally, I’ve been dreaming about this product since I was 16 years old
building my first company in Brazil, and I’m incredibly proud of the Brex team
for their hard work to make this dream a reality :)

We’d love to hear your feedback!

~~~
gnicholas
I’m pleased to hear about the 1.6% return. I posted a while back asking HNers
what they do with their business cash, and no one had a good recommendation.
It kills me to have cash sitting in a bank account earning zilch (unlike my
personal cash, which earns 2%).

I’ll take a look at this new offering and likely move a bunch of cash over if
everything checks out.

~~~
ritikm
[PM on Brex Cash]

Thanks for the feedback! Let us know if you have any questions by emailing
support@brex.com or visiting [https://brex.com/cash](https://brex.com/cash)

------
nlh
So this is cool, and I hate my current business bank (Bank of America). I've
been waiting for someone to tackle the "banks suck" problem.

But FTA:

\--

 _" It’s not a bank, but in practice, it can replace a bank"...Brex now has
many similarities to a bank...Brex Cash is backed by the Securities Investor
Protection Corporation (SIPC), a nonprofit agency overseen by the U.S.
Securities and Exchange Commission that insures up to $500,000 and specializes
in protecting customers of brokerage firms from the loss of cash and
securities._

\--

Can you guys elaborate on this in non-marketing/PR speak? If it looks like a
duck and walks like a duck...

Yes - I understand that legally a "bank" is a very specific and highly-
regulated thing, so what this sounds like to me is that it's hard to expensive
to launch a bank, but if you launch something that's basically a bank without
calling it a bank (but in partnership with a bank) you can get around the
regulations.

Do we want you to be getting around the regulations? Are those regulations in
place to hurt or help us (the business owners)?

I'm genuinely curious here -- I am seriously excited about a real, digital-
first, intelligent, non-physical business bank. But I'm immediately concerned
that you're trying to "move fast and break things" and frankly I don't really
want that when it comes to my business checking account.

Thoughts?

EDIT: I'd missed Pedro's post when I wrote this. To quote:

 _...because traditional banks separate checking and savings accounts,
customers earn a lower yield on their money as a whole. Instead, we chose a
different structure: customers put their cash into Brex Treasury LLC, a
registered broker-dealer affiliate of Brex Inc., that invests the cash in low-
risk securities, such as U.S. Treasuries._

This sounds..."clever". Do I want my corporate card to be clever? Totally! Be
clever. Do your thing and put Amex into the ground.

Do I want my bank to be clever? I'm not so sure...

~~~
ritikm
[PM on Brex Cash here]

Thanks for the response, all great questions. Answers below:

> Can you guys elaborate on this in non-marketing/PR speak? If it looks like a
> duck and walks like a duck…

Brex Cash functions like a checking account, but the structure behind it is
different. Traditional banks separate checking and savings accounts, which
means customers earn a lower yield on their money as a whole. To be able to
offer yield in all of the funds, we use a different structure: customers put
their cash into Brex Treasury LLC, a registered broker-dealer affiliate of
Brex Inc., that invests the cash in U.S. Treasuries through a money market
fund. This means that while we don’t offer FDIC insurance, funds are held in
low-risk securities backed by the U.S. government.

> Do we want you to be getting around the regulations? Are those regulations
> in place to hurt or help us (the business owners)?

Brex Cash is regulated as a broker-dealer, by FINRA. This is a well known
structure used by Fidelity and other large financial institutions to offer
similar products offering higher yield cash accounts.

> I’m genuinely curious here — I am seriously excited about a real, digital-
> first, intelligent, non-physical business bank. But I’m immediately
> concerned that you’re trying to “move fast and break things” and frankly I
> don’t really want that when it comes to my business checking account.

Totally understand the concern, and this is top of mind for us as well. We’ve
spent over a year building the right technical, regulatory, and financial
foundation to make sure we can scale this product. This is a product that we
have built to be resilient and not to move fast and break things -- when it
comes to customer’s money, we simply don’t do that. We’ve been working with
customers for months to make sure the product functions well. Lastly, we’re
rolling it out __slowly __, starting with an early access program for existing
customers. Our motto internally is: “The Brex Cash rollout should be boring”
:).

~~~
tempsy
IIRC this is what Robinhood did when they tried to launch their 3% APY
account. I guess where they went wrong was calling it a “checking and savings
account”? I thought they also got in a bit of hot water with the SIPC because
the insurance isn’t meant to insure “checking account” like products, which is
essentially what this is, no?

~~~
perl4ever
Based on what I read, the problem was not which magic words were used, but the
nature of the product.

~~~
tempsy
Ok, so how is Brex different in this case? Both are effectively checking
accounts, except one is for businesses and the other was for retail customers.

~~~
perl4ever
I don't know how Brex is different, that's pretty much the theme of my
comments in this thread.

------
exabrial
> Brex tells us they’ve built the core banking infrastructure from scratch

Unless they're getting a bank charter and issuing cards without
visa/mastercard I don't see this as anything but more lipstick on a pig.

~~~
onion2k
It sounds like they're an American version of Monzo. Monzo started out by
issuing Mastercard credit cards with a cool app but have since been granted a
proper banking license and are now a proper bank. Monzo also wrote their own
software.

In other words, Brex may not be a bank _yet_ but don't wrote them off as smoke
and mirrors either.

~~~
exabrial
Ok fair enough. I just want someone to break the stupid deathgrip
Visa/Mastercard have.

Things I want:

* Require a password or OTP to withdrawl money from my bank account, or use my credit card/debit card

Things credit card issuers want:

* Reduce fraud

Things that confuse me:

* Why hasn't this option been offered to consumers

~~~
ritikm
[PM on Brex Cash]

We require all users of Brex Cash to have 2FA enabled on their account. Adding
2FA checks to withdraw/send money is on our roadmap for Cash!

~~~
exabrial
That sounds incredible! Please don't do this over SMS though.

------
DVassallo
FYI, for Brex, the definition of "a startup" is a company with $500K cash in
its checking account:
[https://twitter.com/dvassallo/status/1179520756905955328](https://twitter.com/dvassallo/status/1179520756905955328)

~~~
PopeDotNinja
Basically it means you have runway, whether you're funded or bootstrapping w/
lots o' savings.

~~~
maximente
is that right? because FTA:

> Now, any startup, regardless of funding, can create a Brex account to store
> cash, explains Dubugras, and all companies using Brex Cash will be
> immediately issued a Brex corporate credit card

so is the article correct, or is the email correct? because to me "regardless
of funding" reads "we don't care how much you have on hand" but that does not
seem consistent with the gmail exchange.

~~~
DVassallo
Interesting. My email was from 2.5 months ago, so maybe this changed recently.

------
notyourday
So you... have invented a ZBA with an automatic sweep to a money market/bond
fund? A treasury management of every single regional and above bank can do it
on balances above $10k. They can probably do it for less but the transaction
costs are a killer (and if you tell me that you don't have those transaction
costs I'm going to look at you really funny)

I mean the ultimate job of a CFO of a company with a pile of cash is to make
sure that the pile of cash at the fed close is nearly the same (preferably
exactly the same) at the fed open the next day, which is why treasury
management is not popular below companies of a certain size with gigantic
finance departments. One can make a respectable amount of money collecting
customer's cash investing it for 10-30-90 days before redistributing it to
some other customers a-la AirBnB but that requires people that otherwise would
be working for Goldman to be on a payroll, and their total compensation makes
all non-FAANG engineers cry.

So if my startup has $800k split between four banks because I know about
coverage limits, what are you doing that's better?

~~~
ritikm
[PM on Brex Cash]

It’s true that banks are able to offer money market fund sweeps, however, they
are incentivized to hold funds as deposits (better for their bottom line),
which often results in limitations on account activity, and checking account
interest rates near 0%.

We built Brex Cash to give startups their time back -- so customers can spend
time building their businesses, instead of optimizing deposits and spending
across multiple bank accounts. Within the Brex Cash account, our goal is to
provide startups with a safe and liquid place for their funds, with benefits
of yield that larger companies are offered.

------
JaimeThompson
What protections are in place to protect customers financial transaction
information and will that information be sold, lent, or shared with any
outside parties?

~~~
cosn
> What protections are in place to protect customers financial transaction
> information and will that information be sold, lent, or shared with any
> outside parties?

[I work at Brex]

Data privacy is something we’re really passionate about. We’ve had strong
stance internally since we launched the Brex card, and a few weeks ago we made
that publicly available, in a very transparent way
([https://brex.com/privacy](https://brex.com/privacy)). Tl;dr: we do not and
will not sell any personal information.

You can read more about it here: [https://brex.com/blog/privacy-policy-
update/](https://brex.com/blog/privacy-policy-update/)

~~~
otterley
> Tl;dr: we do not and will not sell any personal information.

Ok, you won't _sell it_ ; but will you _give it to third parties_ (even
without payment) without the consent of the subject beyond the extent required
by law?

(BTW, this was the weasel-language used by Facebook. They didn't _sell_
information to Cambridge Analytica, but they conveyed it to them anyway, where
it was misused.)

~~~
cosn
> Ok, you won't sell it; but will you give it to third parties (even without
> payment) without the consent of the subject beyond the extent required by
> law?

[I work at Brex, and I’m not a lawyer :)]

Yes, you’re right in that we work with a small number of 3rd party systems
which go through a rigorous screening, much of it focused on how they store
and secure data. These systems are either for internal monitoring (e.g.,
system logging), or for running the business (e.g., KYC).

~~~
justincarrao
[I also work at Brex]

One more thing worth mentioning about 3rd parties: our contracts explicitly do
not allow them to use your personal information for their own purposes or for
marketing.

------
Osiris30
CBW Bank - founded by an-Ex google engineer and an ex-Wall Streeter has been
doing this (created a bank from bottom Up - including purchasing an actual
bank and creating the software) geared towards startups) since 2014. Don’t
know how well they are doing now.

But they wouldn’t have had the in-built In go-to-market strategy, or the
prestige/visibility in the funding community, of a YC Alum.

1\. 2016 - Why Fintech Startups Are Flocking to a 124-Year-Old Bank in Kansas
[https://fortune.com/2016/08/24/fintech-
bank/](https://fortune.com/2016/08/24/fintech-bank/)

2\. 2014 - Small Bank in Kansas Is a Financial Testing Ground

[https://dealbook.nytimes.com/2014/12/13/small-bank-in-
kansas...](https://dealbook.nytimes.com/2014/12/13/small-bank-in-kansas-is-a-
financial-testing-ground/)

------
rahimnathwani
On a related note, I just moved to the USA yesterday and am not sure where to
open a bank account.

I don't need anything fancy, but looking at Nerdwallet it seems the
traditional banks each have different drawbacks (one or more of: monthly fees,
high fees for ACH transfers to other people, fees for incoming wires, poor
customer service etc.).

I see that N26 now offers a US bank account, but it's via a partner bank I've
never heard of.

Where would you open your first US bank account in 2019?

~~~
pkaye
Are a business or as an individual? As an individual, I always prefer a credit
union which is like a not-for-profit bank. With a sufficient amount in your
account, you shouldn't have to pay monthly fees. Credit unions tend to have
lower fees than the big banks in general.

~~~
rahimnathwani
Individual. Any credit union to recommend for someone living in San Francisco?

~~~
notyourday
Caution:

As a foreigner you may have a problem joining a credit union unless you have a
green card. I know a few of credit unions that have these kinds of
restrictions.

I say go to those that know how to deal with foreigners. (The last thing that
you want is to have your account locked out because a small bank/credit union
did not know what to do with you, opened an account and it was flagged down
the line - maybe 6 months later).

Those would be:

1) Big national banks

2) Big international banks such as HSBC

3) If you are by Chinatown, look for banks servicing Asian population

After you open one account open a second account in a different bank. You do
not want to keep all your eggs in one basket, especially as a non permanent
resident. Dealing with an account lock out is especially annoying without a
network in a country.

~~~
rahimnathwani
Thanks for that. I'm still waiting for my physical green card; apparently it
can take up to 3 months for it to arrive. But SSN takes just a few weeks
apparently.

Good tip about Chinatown. I don't live that close, but don't mind going there
to open an account.

------
nathan_f77
I just received my Mercury.co debit card in the mail, and now I'm planning to
move all my money from SVB into Mercury and close my SVB account. I already
use Brex for corporate credit cards, and they've been awesome. It looks like I
will need to "request early access" for Brex Cash (and I probably don't meet
their requirements since I'm not VC funded), so I'm not going to wait around
for that.

However, Stripe is the very core of my business. They already offers corporate
credit cards, but I've never thought about switching or adding new cards,
because I'm very happy with Brex. I use Brex virtual cards for everything now,
and I recently received a physical card that I can use for flights and hotels.

However, if Stripe ever offers a bank account in the future, then I'll
immediately close my Brex and Mercury accounts and just migrate everything
into Stripe. Nothing would beat a single login where I have my bank account,
debit cards, credit cards, and all of my customer payments. Also Stripe is
much bigger and I have much more trust in their security and engineering
teams.

~~~
ritikm
[PM on Brex Cash]

Glad to hear that you’re having a good experience with the Brex card! We would
love to hear your feedback on the card, and what you would like to see in Brex
Cash. We are doing a limited roll-out for Brex Cash, however, as YC alumni
ourselves, we are prioritizing this community and would like the opportunity
to show you the product and let you see for yourself if it’s a strong fit for
your business. Shoot me an email: ritik [at] brex.com

------
toomuchtodo
Is offering Brex's financial infrastructure as a service similar to the
Bancorp Bank's offering on the roadmap (similar to Stripe considering itself
financial infra)? As Pedro mentions in his top comment, "we took the approach
of building our core systems from scratch, building directly on top of the
payment rails (NACHA and FedWire)"; it would seem to me that this would be a
superior foundation than fintech startups could acquire through traditional
white label providers (ie Bancorp).

~~~
ritikm
[PM on Brex Cash]

Great question -- not on the roadmap as we're laser focused on building a
resilient and delightful Brex Cash product for our customers.

~~~
toomuchtodo
Thanks for taking the time to reply. I'd just like to note my interest in
building a narrow bank type credit union for individuals on top of Brex if
enough core functionality is exposed programatically. Might end up at Bancorp
in the interim though.

~~~
ritikm
Got it, good to know and will keep in mind for future planning. Thanks for the
feedback here!

------
krallja
How is this different from the “it’s not a checking account” Robinhood offered
outside of regulatory compliance?

------
ctdean
Good job Brex and Radius Bank! This is a great product and a great user
experience.

------
privateSFacct
Some questions:

\- checks are still a thing in business, what is remote deposit story?

\- ACH fraud a big thing - do you have ACH positive pay? Ie originator ID and
limit?

~~~
ritikm
[PM on Brex Cash]

> \- checks are still a thing in business, what is remote deposit story?

You’re absolutely right - which is why are in the process of adding the
capacity to send and receive checks. Remote deposit capture is what we're
looking into for the "receive checks" piece.

> \- ACH fraud a big thing - do you have ACH positive pay? Ie originator ID
> and limit?

Yes, we are able to offer ACH positive pay. Generally, per the payment network
(NACHA) guidelines, if a fraudulent transaction is identified by Brex or by a
customer, we are able to return it to the originating bank. This helps to
prevent customers from ACH debit fraud, and allows us to keep track of
potentially malicious activity for future transactions.

------
smnrchrds
I wish this were available in Canada! I know it's never gonna happen, but one
can wish.

~~~
ritikm
[PM on Brex Cash]

This may not solve your problem, but if you have a company entity registered
in the US, we can support you no matter where you live or have your
headquarters domesticated!

------
chiph
How do you plan on making money?

~~~
cosn
> How do you plan on making money?

[I work at Brex]

Brex earns fees, including distribution/referral fees (also known as 12b-1
fees) from money market mutual funds that are included in the Brex Cash sweep
program.

------
giacaglia
Congrats!! This looks great!

~~~
dang
We detached this comment from
[https://news.ycombinator.com/item?id=21141438](https://news.ycombinator.com/item?id=21141438)
and marked it off-topic.

------
ganitarashid
Brex is starting to sound like WeWork

~~~
styren
Please elaborate

~~~
thoughtstheseus
Seems like this is just a money market fund, any decent CFO can have this set
up in less than a day.

------
brtknr
Poor choice of name because Brexit

~~~
captainbland
I've read it twice now as "brexit crash".

~~~
sgt
It's one of those cases when you can't succeed due to a poor name.

