Businesses, both B2B and B2C, started accepting credit cards as a form of payment long ago. However, credit card acceptance comes with a fee – typically 2% to 3 % of the transaction – which can significantly dent profits, especially for small businesses. The fees are even higher for online transactions. For these reasons, most companies choose not to accept credit cards.
Thus, it creates a unique opportunity for startups like Plastiq to come in and fill the void. Plastiq is a San Francisco-based payment processing company that allows users to pay for anything with a debit or credit card – even if the merchant doesn’t accept plastic. Eliot Buchanan and Dan Choi founded the company in 2012 with an initial seed funding of $2.4 million.
According to Crunchbase, the company has raised $141.8 million in nine rounds of funding from 23 investors. The latest quantifiable financing round was in March 2020, when it raised $75 million in Series D, led by the B Capital Group. Plastiq disclosed its valuation in 2019, last pegged at $495 million.
Plastiq found success in a niche market, but it’s not the only company of its kind. This space has a few competitors, each with a twist on the business model. While most focus on the merchant, some focus on the consumer, and others offer financing options in addition to payment processing.
According to a January 2021 Nilsen report, credit card transactions will increase by 41.4% hitting 642 billion from 2020 to 2025. While these stats are good for Plastiq, they also spell opportunities for its competitors. This Plastiq competitors analysis looks closely at some companies eating into Plastiq’s market share. We’ll analyze their financials, competitive advantages, and key marketing strategies.
Bottom Line Up Front
Plastiq offers a unique solution to a problem that most businesses face. However, most payment processing companies haven’t yet cottoned on to this opportunity. The market is still relatively nascent, and Plastiq doesn’t have too many direct competitors. Melio is Plastiq’s most direct competitor.
List of Plastiq Competitors
Plastiq’s Business Strategy and Revenue Model
As part of its growth strategy, Plastiq announced plans to go public on August 4, 2022, by combining forces with Colonnade Acquisition Corp, a special purpose acquisition company. Going public means Plastiq will access more Capital to help it grow its customer base and merchant network. The combined company will have an implied estimated value of $480 million, significantly lower than its last disclosed valuation of $495 million in 2019.
While that has a lot to tell about Plastiq’s growth prospects, revenue-wise, the company relies on transaction fees and subscriptions. Plastiq operates on a simple business model. It offers two main products:
- Plastiq pay
- Plastiq accept
Plastiq Pay allows businesses to pay suppliers with credit cards for services or goods that normally require a bank transfer or a check. The company facilitates these payments and charges 2.85% for credit cards and 1% for debit card processing fees. Unlike other card arrangements where merchants have to pay the card company a fee for every credit card transaction, Plastiq charges the purchaser.
By allowing businesses to pass on the fee to their customers, Plastiq opens up the possibility of card acceptance for companies that otherwise shy away from it. The Plastiq accept product is geared toward merchants who want to accept credit card payments from their customers. The company doesn’t charge merchants any fees.
However, it charges a subscription fee applicable to both products. The fee gives the users access to its proprietary software. The starter package is free, while the professional and enterprise plans go for $59/month and $119/month, respectively.
Plastiq Competitors Analysis
Plastiq competitors are not necessarily companies that facilitate credit card transactions for businesses that don’t accept them. Any company that helps businesses make or accept payments can be considered a competitor. However, we’ve analyzed companies with a business model and target market closer to that of Plastiq.
Below is a detailed Plastiq competitor analysis
Melio is a New York-based fin-tech company that provides an invoicing and payments platform for small businesses. Founded in 2018 by Matan Bar, Ilan Attias, and Ziz Paz, the company makes it possible for businesses to pay their suppliers and invoices with a credit card, even if the supplier does not accept credit cards. Melio charges a 2.9% transaction fee for both credit and debit cards.
Considered one of the fastest-growing fin-tech companies, Melio raised $16 million in its first round of funding in 2019. Its growth to become one of the top competitors of Plastiq is due mainly to its focus on small businesses. As a B2B platform, Melio has built a product that is simple to use and offers companies the ability to get paid faster.
In 2021, the company raised $250 million in Series D funding, led by General Catalyst and Thrive Capital. The new round of funding tripled Melio’s valuation to $4 billion, making it one of the most valuable fin-tech startups in the US. So far, the company has $504 million in funding.
Competitively, Melio has better financials than Plastiq. While both platforms don’t release their yearly financials, we can see from an investor’s perspective that Melio has grown its revenue and user base much faster. We can’t say for sure if Melio is profitable, but from the looks of it, the company is doing much better than Plastiq.
Moreover, Melio recently appointed Tomer Barel, ex Meta, and Paypal executive, as its COO. Tomer brings a lot of experience in the payments industry, which will help Melio grow even faster. Plastiq’s competitive advantage over Melio is its plans to go public and its expertise in the space. Going public will give Plastiq more visibility, and the company’s experience will help it navigate any challenges.
Bill.com is a leading provider of financial process automation solutions for small and medium businesses. Founded in 2006 by Rene Lacerte, the company makes it easy for businesses to pay their bills and get paid on time. It provides flexible payment options, including the ability to pay by credit card. Bill.com charges a 2.9% transaction fee that applies to the payer for credit card payments.
The company went public in December 2019 in an IPO that saw its valuation hit $1.6 billion. Before going public, the company had raised $279.7 million from 24 investors after 11 rounds of funding.
As one of Plastiq’s main competitors, Bill.com has a similar target market and business model. The company’s primary focus is on small businesses, and it offers a suite of financial automation solutions to help them run its business more efficiently.
What sets Bill.com apart from Plastiq is its comprehensive product offering. In addition to payments, the company also offers invoicing, accounting, and cash management solutions. These solutions make it a one-stop shop for small businesses looking to automate their financial processes.
Bill.com is also a much larger company than Plastiq, with over 3.2 million network members against Plastiq’s over one million. Bill.com’s 2021 revenue was $232.265 million, up from $157.6 million in 2020. The company isn’t profitable yet and registered a net loss of $98.72 million in 2021.
Tipalti is a global payables automation solution that makes it easy for businesses to pay their suppliers on time. The company offers many features to streamline the accounts payable process, from invoice processing and payment approvals to supplier onboarding and payments. The main difference between Plastiq and Tipalti is that Plastiq offers both receivables and payables solutions, while Tipalti focuses solely on payables automation.
Founded in 2010, Tipalti has its headquarters in San Mateo, California. The company has a team of over 200 employees and serves thousands of customers worldwide. In 2021, the company announced it had exceeded $11 billion in annualized transaction value processed on its platform. Since its founding, the company has raised $565 million in funding from 14 investors, including Durable Capitals, Greenoaks Capital and Zeev Ventures.
In December 2021, Tipalti raised $270 million in a Series F that saw its valuation hit $8.3 billion. Focusing only on accounts payables and hitting such a valuation so quickly is a strong indictment of the competition in the space. Given that Tipalti doesn’t have the same total addressable market as Plastiq (receivables included), it will be interesting to see how the two companies stack up in the coming years.
Competitively, Tipalti is in a better position than Plastiq. The company has more funding and a higher valuation and is growing faster. It also has a narrower focus, which gives it more room to grow in the accounts payable space. We expect Tipalti to be a major player in the accounts payable automation space in the coming years.
PaySimple is a leading provider of payment solutions for small businesses. Founded in 2008, the company offers a suite of payment solutions, including credit card payments, ACH processing, point of sale solutions and invoicing. PaySimple founders built the system to enable business owners to get paid faster and reduce the time spent on back-office tasks.
While it doesn’t have the same offerings as Plastiq, PaySimple has some key features that make it a competitor. It allows users to pay bills by credit card, which can help businesses earn rewards points or take advantage of cashback programs. It also offers a mobile app for on-the-go payment processing.
PaySimple and Plastiq aren’t wide apart in funding. Since its founding, PaySimple has raised $145.3 million from two investors. It hasn’t revealed any plans to go public or raise additional funding. Plastiq, on the other hand, has raised $141.8 million from 23 investors and is planning to go public through a SPAC merger.
PaySimple is a competitor to watch in the coming years. However, Plastiq has better growth prospects given its receivables solutions and plans to go public. We expect the two companies to duke out market share in the coming years.
Plastiq’s SWOT Analysis
Below are the strengths, weaknesses, opportunities and threats of Plastiq.
- Excellent customer service makes it easy to get started with the service
- The company has an innovative product that gives it a competitive edge
- An extensive network of satisfied customers creates a barrier to entry for competitors
- Plans to go public through a SPAC merger will provide it with access to more capital
- Backing from big venture capitalists gives it the resources it needs to scale
- Lack of brand awareness limits its reach
- The company doesn’t have enough funding to sustain its growth
- It only has two products, which limits its growth potential
- High fees make it unattractive for some customers
- The receivables space is underserved, providing Plastiq with an opportunity to grow
- Businesses can use the company’s technology to automate other back-office tasks
- Going public will give it the resources it needs to accelerate its growth
- expanding into other countries will help it tap into new markets
- Competitors are slowly encroaching on its turf with similar products
- The company’s business model is vulnerable to changes in the payments landscape
- A recession could hurt its growth prospects
Plastiq Competitors Analysis (FAQs)
Question: Why do people use Plastiq?
Answer: Most people use Plastiq because it’s an easy way to pay bills, invoices, and other expenses with a credit card in situations where credit card payment isn’t an option. The service can also help people earn rewards points or take advantage of cashback programs. Once customers link their credit card to Plastiq, they can pay any bill or invoice with a few clicks.
Question: Does Amex work with Plastiq?
Answer: Plastiq works with all major credit cards, including Amex. Other cards it accepts include Visa, MasterCard, Diner Club, and Discover. The company also offers ACH payment processing for customers who don’t want to use a credit card.
Question: How does Plastiq make money?
Answer: Plastiq makes money by charging transaction fees and offering a monthly subscription service. It charges 2.85% for credit card transactions and a 1% fee for Debit cards. The company’s monthly subscriptions go for $59/month for the professional plan and 119/month for the enterprise plan.
Question: Is Plastiq going Public?
Answer: On August 4, 2022, Plastiq announced plans to go public through a SPAC merger. The company will merge with Colonnade Acquisition Corp (CLA), a special purpose acquisition company, in a deal that values Plastiq at $480 million. The move will give Plastiq access to additional capital to help it accelerate its growth.
Plastiq doesn’t have as many competitors as one might think. Most companies in the payment processing space don’t offer the exact payable and receivable solutions as Plastiq. However, the company does face competition from other receivables companies like PaySimple.
The closest competitor to Plastiq is Melio, which offers similar receivables solutions. Plastiq has the upper hand, however, given its plans to go public through a SPAC merger. Other players providing services closer to Plastiq include Tipalti and Bill.com.