Interview with Blake Murray, Founder and CEO of Expense Management platform Divvy

Managing employee expenses is a huge pain. And with more a more services becoming subscription based, a growing number of businesses are finding they need to empower more employees than ever before, with corporate cards.

But handing out a corporate credit card isn’t without its risks, and a bunch of new headaches. Many employers are reluctant to trust their staff with access to company credit, especially junior to middle management. To get around this, and to (in theory) remove admin burdens, it is not uncommon for employees to be expected to fund business expenses themselves off their own personal balance sheet, then charge them back at the end of the month or quarter.

The process is broken, but a few companies are looking to change that. Divvy, a Utah based startup who recently raised US$7M, is one of them. This week I spoke to Blake Murray, co-founder and CEO about the problems Divvy has set out to solve, and the behavioural challenges that go along with upturning the way we currently approach expense management.

First off, tell me a little bit about yourself and why you started the business?

We’re not dissimilar to the way a lot of startups get going – often ideas are born out of selfishness. Not in the negative sense of that word but more in that, ‘I have a problem, so I’ll go find a solution’. Usually this process results in a, ‘shoot, there aren’t many solutions out there, or even any’. And that’s when you think, ‘let’s just go build it then’.

I come from a software startup background, both as an investor and working in startups. And Divvy was a company that, when we were looking at the problem and the solution required, knew we could build. And then when we were looking at the incumbents in expense management today, we realised the core solution is still ‘take a picture of the receipt, and stop stuffing receipts in your pocket’. And we thought, software is so much better than that! So much better than just OCR. The platforms and apps that we use as consumers, and in business, have to be better than just taking a picture of the receipt. They need to handle everything that comes after and before that.

So we thought, how can we create technology that is truly ‘swipe to book’? That is, where anyone in an organisation, the second that they make a purchase, something like Divvy can compile and do the entire expense report for them. So there is the convenience standpoint, but we also think about it from the expense management standpoint as well. Employers should be able to know in real time who’s spending what, where, when and why.

Performance insight is critical too. Today if I want to know how the business is performing in December, I really have to wait until January, because of how reports stream in. But with Divvy, this is all real time. So as a business owner, all of a sudden you can have a real time position of your company.

Now that I’m running my own start-up, expense management is the worst headache I have. The apps just aren’t there yet. I’m guessing you’re familiar with products like Expensify. What differentiates you from these guys and other similar products in the marketplace?

At Divvy, a lot of our IP is around how do we change, manage and control behaviour in a single card product, without exposing the company to massive fraud. Without handing over the reins to every single employee. That’s what we feel like we’ve accomplished. Using our system, you can give every single employee, down to an intern, a card. Because when you give them a card, it has access to $0 on it, and they only get money when they are part of a budget. We also believe you shouldn’t need multiple cards to do different tasks. Today an organisation ends up managing multiple card products, instead of people.

So, let’s say my team are off to a conference. Typically, a business owner in this instance would hand out corporate cards to their team cross their fingers, and hope everyone stayed within budget. The big problem is the budget isn’t enforceable at the point of purchase. But in Divvy, I can directly link the exact budget to the individual employees cards, and release or restrict funds in real time, faster than Venmo, but with a similar user experience. Employers can be specific with budget spend per category, or they can throw money over the fence in a recurring fashion. It’s up to them. The key thing is budgets can now become a strategic arm of a business, instead of something that is held by a few people only.

Ok, so how dynamic is this really? Example being, maybe I’m at the conference, and I want to take a client out for dinner, spur of the moment – something that wasn’t in the budget. 

That’s the great thing about the platform – employees can send and request these sorts of budget extensions in real time. So for these ‘just in time’ requests, they can be sent to an approver, who sees them in the Divvy app, and can release funds if they want. And this isn’t ‘bank’ real time, which sometimes takes 24 hours, this is instantaneous.

So how does this all work from a technical perspective? Does a line of credit underpin this, that management essentially allocates and divvies out?

Yes, Divvy uses credit card rails, which gives flexibility around this credit pool. Rather than a pre-paid card, where $500 loaded is $500 spent, on credit card rails the employee has ‘access to spend’. So if they spend $475, $25 has never left. You can set expiry dates, time limits, and even set policy around this expense related credit to help shape behaviours around the spend.

So is using Divvy more affordable for a business than the traditional corporate credit card way? Is the distribution of cards today actually costly?

The cost of servicing cards is actually pretty low, but they still aren’t used by a lot of organisations. I would posit the main reason cards aren’t more widely distributed by organisations is because of the opportunity for fraud and the misuse of the funds. For example, as an employer, I’m not going to give credit cards, in a traditional sense, to all the new employees on the sales team, because I really don’t want them to have the ‘keys to the house’. I’m going to give them to the people with tenure, hierarchy and who have earned the right.

In our system we firmly believe everyone should have them. The cards are totally free for our users. But more importantly, not everyone should have access to physical cards, but they should have access to virtual cards. A good example is someone in marketing who needs access to a virtual card for Facebook ads, or Hubspot for subscription payments.

For these sorts of uses, the system can create a purpose driven virtual card, and brand it Hubspot. If Hubspot ever gets hacked and those card details are compromised, then the card shuts down, the system regenerates a brand-new, 16 digit card, and limits can be put in place again that are specific to use on Hubspot only.

So in this way the card element goes deeper than people, it helps manage the subscriptions that are now being used across the business – from dev ops to sales to engineering. Everyone is using their different platforms to support the organisation, but traditionally might be using one or two Amex cards for example across all of these. This is a distinct vulnerability for a business, if that one card is compromised or an entity like Equifax is hacked. Creating merchant and vendor locked virtual cards is a great way of protecting payment data but also gives flexibility to employees that might not need a physical card.

It’s interesting to think of a similar related scenario, when employees are expected to use their personal card on these business subscription services. What if a Hubspot platform gets compromised and you are out of pocket because your personal card data is stolen – could you sue your employer for exposing you to risk? That is an interesting thought experiment…

The pressing conversation between employer and employee is that you shouldn’t be asking your employees to float for your company. You shouldn’t be asking them to take on debt for the company, not knowing if some of it or any of it will be reimbursed. From that side, we feel the business should be doing that. With Divvy, the business gets the value add of all of the reporting and the convenience of being able to do this. You can’t have this in a BYO card scenario.

One other element of that is even if an employee is using their personal card on company purchases, it still creates an environment of ‘swipe first and ask for forgiveness later.’ Meaning that, I may go on a business trip, and get an expensive sushi dinner, because I love sushi. But then I go back and have the ‘what were you doing’ conversation with my manager. This out of policy expense might be let go after the fact, but in Divvy we can stop this from happening from the get go, through that real-time view.

You have a partnership with WEX Bank. What does this look like and how does it work?

When you partner with a bank, it’s to get access to bank products. Otherwise, for a business like Divvy, we’d have to become a bank ourselves. So for us, the path of least resistance was to find a bank, or banks, who have an appetite for this and can work with us on the issuing side. The reason banks like WEX look to partner, is most banks today are all stuck selling commodities – cash back rewards, mortgages, loans etc. We come to the table offering a robust software solution that ends up being an incredibly attractive way for them to generate transaction volume and new customers through a differentiated offering.

We had our pick of the litter when it came to bank partners. We landed on WEX because they are so forward thinking in their ability to innovate. Some of the larger, more brand name banks, wanted us to be a white-label solution, just for them, which would have been interesting and which we considered. But we felt we had an opportunity to take the Divvy brand out there, and expand beyond just a single bank’s brand.

WEX issue the cards but we still send them out and brand them, ensuring it’s a Divvy experience for the customer. For the virtual cards, these are created in our interface, using APIs into the WEX issuing infrastructure.

Is it unusual for a startup to be based in Utah?

Utah now, for the third to fourth year running, has landed a third to a fourth of all venture capital money. Its nickname is Silicon Slopes, and it has a very robust and strong start-up community. It also has several of the new unicorns in the US startup space, and is courted heavily by the traditional venture capitalists.

From a distribution perspective, what is the model. How are you going to get the product into the hands of customers?  

It’s very advantageous for us to partner with groups that are selling commodities and have a hard time getting a competitive edge against their competition. They see Divvy and see us as an opportunity to latch us on to their existing offering.  So we have partnerships with large HR groups and large payroll service groups, as one example. Referrals are also huge for us.

Going back to your earlier point about being based in Utah, one other thing to understand is that sales is the bread and butter of Utah. The reason why is the Mormon community here – and I have no problem talking to that because I am one. What happens is you get all these young men and women coming back from their Mormon missions, who for two years, have been preaching about religion, but who have essentially obtained some really incredible sales skills. On top of that you also have 4 universities here, which generates a lot of incredibly smart and ambitious graduates. So this all results in Divvy being able to build a very strong sales team, that closes at a very high rate.

That’s interesting. Because I guess you are trying to address a behavioural problem, so I think you’ll really need that sales arm. On the partnership side, what is the commercial model?

We collect interchange – that’s how we make our money. We share some of that interchange with our partners, for the customers they bring to the table, and it’s proved to be a very strong funnel for us, plus sticky and attractive for the partners.

Thanks Blake, super excited to hear what you guys are doing – please bring it to Australia soon!

Divvy is certainly one to watch. Down under we have our eye on Verrency, another player in the market looking to do something similar. But with Divvy up and running, and with global expansion plans, they are certainly one to watch. And if the passion and enthusiasm of their CEO and Founder Blake has any correlation with the trajectory of the business, I’d say the only way is up.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

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