| By Jim Bruene on September 11, 2008 5:59 PM | Comments (1) |
Like Rate Surfer, which we wrote about yesterday, Expensify launched its new employee expense-management system from the TechCrunch50 DemoPit this week.
The San Francisco-based startup (note 1) combines a payment card with a Web-based expense manager and uses cellphone cameras to upload pictures of receipts to match against purchases. It's a banking triple play: card, online, and mobile.
The target market is smaller businesses that want to automate expense report preparation, approval, and reimbursement to their employees.
How it works
The heart of Expensify is a prepaid, decoupled credit card. I know that doesn't make sense, but here's how it works:
- Sign up for an Expensify MasterCard prepaid debit card.
- Load it with value from any credit or debit card, Visa, MasterCard, or American Express.
- Make purchases with the Expensify MasterCard.
- As each purchase clears, the prepaid balance is lowered, triggering an automatic "top off" charge of an equal amount to the consumer's credit card, thereby returning the prepaid balance back to the original level.
Metabank is the issuer; here are terms and conditions.
Analysis
At first blush Expensify sounds pretty amazing. An expense management card that rides on top of your regular card, with mobile and Web-based integration. Brilliant, until you start thinking about costs. There's that pesky thing called interchange. What Expensify has done is create two card transactions instead of one, doubling the amount of interchange paid.
To cover the extra interchange and create some revenue for itself, Expensify levies a 3% transaction fee on the cardholder. Although the card is otherwise relatively fee-free, that's a significant surcharge.
Why would anyone pay 3% extra in order to use the Expensify card when they already have a credit card? The company believes that small businesses will pay the fee in order to get the expense-manager features and to help employees separate business expenses from personal ones. Businesses could have multiple Expensify cards tied to different categories of expenses (see screenshot below).
A business with just $1000/mo in expenditures would pay $360 per year. In addition, the business would tie up several hundred dollars in a prepaid account, because the only charges cardholders can make must not exceed the prepaid balance held in the Expensify account.
I think the expense-management concept is good, especially with the mobile receipt integration, but it's just too expensive in its current format. The founders should try to move to an ACH-based "topping off" process and remove the transaction fees.
But regardless of how this specific product performs, the integration of payments, online and mobile, is a huge trend. If Expensify is nimble enough, they may be able to ride the wave.
Expensify homepage (10 Sep 2008)
Note:
1. Since I didn't see contact info on their website, here's what the founders provided at TechCrunch50: Expensify, 548 Market St. #61434, San Francisco, CA 94104, Phone: 801.745.9064
Hi there, David from Expensify here. Thanks for the writeup and I appreciate all the kind words! I'll update the website to make our contact information more prominent. Thanks for the suggestion!
As for ACH, we completely agree with that option and are definitely considering adding it. We're starting with credit cards as our testing suggests the convenience factor outweighs the 3% surcharge by a handy margin amongst our top users. Essentially: most business purchases today are made on credit cards, so it's easier to go with that flow that than to convince people to both use our card *and* switch to paying out of their checking accounts. Regardless, we agree, ACH is a great idea, and we'll definitely consider it for users who prefer it.
Finally, at risk of tooting our own horn: we're proud to mention we were the 2nd place winner of the demopit (out of about 100 other companies), and thus were the only other demopit company to be mentioned on the main stage at TechCrunch. The reception was huge and the demopit was a ton of fun.
Anyway, thanks again for the writeup and please don't hesitate to drop me a line at dbarrett@expensify.com if you have any additional questions!
-david