For decades, corporate credit cards were a boring industry,dominated by money-colored AmExes, the default choice for powerlunches and client dinners around the world.

Now, a fleet of richly funded startups wants to change that.Venture capitalists and other investors have poured big money intoa growing group of companies that make credit cards for businesses.That includes more than $1 billion in funding and debt for justthree startups: Ramp, Divvy, and three-year-old Brex Inc., whichwas valued last summer at an eye-watering $2.6 billion, accordingto PitchBook data.

The fresh interest in the industry comes as American ExpressCo.—the undisputed leader in the market—revamps its corporate cardportfolio, raising the fees on its cards this week after addingbenefits for Uber rides and Hilton stays. Accenture estimates thatoverall spending on business credit cards in the United States willclimb to $1.1 trillion in 2024, from $625 billion in 2019.

AmEx, with a $92 billion market value, is the largest issuer ofcommercial cards in the world, and has relationships with almosttwo-thirds of the Fortune Global 500. It's also the largest issuerof cards to small businesses in the United States. "Obviously, AmExhas a massive stronghold," said Lisa Ellis, an analyst atMoffettNathanson. "I'd characterize the new players now as on theradar screen but not of concern to AmEx yet."

Brex, founded in 2017, started by introducing a product aimed atother startups. New companies, it said, often had a hard timegetting traditional corporate cards due to their lack of credithistory. Instead of credit histories, Brex monitors how much moneyits customers have in their bank accounts on a daily basis. Ifthey're well-funded with cash on hand, Brex believes, they'relikely to be able to pay off their credit card debt.

Brex.  Though Brex has goneafter a relatively niche slice of the market, it wants to take onAmerican Express directly. "We've always competed with AmEx," saidHenrique Dubugras, Brex's 24-year-old co-founder. Dubugras and hisinvestors, which include Peter Thiel and Kleiner Perkins DigitalGrowth Fund, believe tech-savvy competition could loosen thecompany's hold on the market. "We don't underestimate AmEx though.We're aware, we're measuring, we're looking."

Dubugras explained his company's strategy at a meeting earlierthis year in a café Brex has leased and operates in San Francisco'sSouth Park, a venture capital hub. Wearing a Brex-branded T-shirt,Dubugras said that while the bulk of its customers are startups,it's tried to make further inroads with e-commerce and lifesciences companies. Even the café is an example ofdiversification.

Brex—which has raised about $317 million in venture capitalfunding, according to PitchBook data, and more in debt capital—haddrawn some questions about its decision to dabble in food services.The café menu includes ingredients like "smoked grapes" and"béarnaise aioli." But Dubugras noted that AmericanExpress also operates lounges in airports, and Capital OneFinancial Corp. has cafés in a number of their branches. "We servestartups, and this is the core of the startup community in SanFrancisco, so having a lounge and café here made sense," Dubugrassaid. (The company poached the head chef from payment startupStripe Inc.)

Ramp.  Brex is the one of themost valuable venture-funded card startups at the moment, but it'sfar from the only one. Ramp, based in New York, is only a year oldand recently attracted about $25 million in funding from FoundersFund and others. In addition to offering corporate cards, Ramp canuse payments data to find redundant spending at the companies itworks with —such as extra software subscriptions or paying forseparate document storage accounts. "Anyone at a large company cantell you that there is a lot of waste," said Ramp co-founder EricGlyman, 29.

Divvy.  Based in Lehi, Utah,Divvy raised $200 million last April from New EnterpriseAssociates, Insight Partners, and others, and has secured millionsmore in debt capital. In addition to its corporate cards, Divvyoffers additional expense tools that make it easier for employeesand people in charge of a business's accounts to keep track ofspending.

The AmEx Response

American Express has taken notice of the uptick in competition."We definitely see these new startups," said Anna Marrs, presidentof the firm's global commercial services unit. "That reminds usthat we need to keep innovating."

In October, American Express introduced a new card program madefor startups. Like Brex, it has begun using technology that allowsit to see a company's bank balance as part of its underwritingprocess. And the credit card giant is rolling out new systems forautomating a small business's payments to suppliers—a process thatnormally involves writing checks and tracking down invoiceinformation.

See also:

• Failure to Launch
• Future-Proof Your Payments Toolkit
• Improving Efficiency of Global TravelSourcing
• Harnessing Analytics to Minimize Debit-CardFraud

As credit card startups ascend, competition is working asintended, said Frank Martien, a managing director at Accenture. "Weactually see a competitive answer from the large players," he said.That will ultimately mean more options for small companies, andmore clashes ahead for American Express and its upstart rivals.

American Express may not be in a position to worry right now,but Dubugras predicts the day will come. "I don't think they likeus very much," he said.

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