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While it's great to maintain good enough unit economics to not have to pull stunts like this one, it's not necessarily always a plus from a customer perspective

While it's great to maintain good enough unit economics to not have to pull stunts like this one, it's not necessarily always a plus from a customer perspective. Comparing Mercury and Brex/Ramp specifically, Mercury is notably missing rewards on transactions, while Ramp has unlimited 1.5% cashback, and Brex has a bunch of multipliers ranging from 7x to 1x points. If I have access to all of the options above, it would be financially irresponsible for me to spend through Mercury. Would like to see Mercury get more competitive here even at the cost of less cushy unit economics. EDIT: Some of the replies here seem to think Brex is shutting down entirely? Please read the actual article and the founder response above. They're only shutting down operations for small businesses, presumably because that's the only segment that doesn't have sustainable unit economics. % rewards on spend from interchange revenue has been around for decades. The model works, given the right set of customers and credit risk profiles.

immad 4y ago
This comment is so ironic. Love it.
- eins1234 4y ago
  Nice to see you taking feedback seriously.
  - immad 4y ago
    Okay. We don’t have a credit card right now, only debit. For small businesses doing high reward credit cards is not a sustainable business. Which is why Brex is shutting them down.
    - eins1234 4y ago
      That's totally understandable, for the small business segment. I was just saying that for a VC-backed tech startup, the lack of rewards is a huge turn-off, compared to some of the other options for spending available to us.
      - sebmellen 4y ago
        I don’t know of many banks that offer high reward debit cards. IMO Mercury has almost perfected the banking experience, and I am perfectly happy with that. If I want a high-reward card I’ll get an Amex Platinum (a credit/charge card) and stick with Mercury as my bank.
        eins1234 4y ago
        That's a perfectly valid choice! FWIW, I actually do like Mercury's UX marginally better than Brex. I would just prefer to have my banking and spending in 1 place, and if I did that with Mercury, I'd be sacrificing 1%+ rewards, which I would not consider a financially responsible option when Brex exists and has a good enough banking experience. Wouldn't it be nicer for everybody if there were more options that had both a great banking experience and credit-level rewards that all competed for our business? That's all I was trying to encourage with my feedback, but the fanboyism in this thread has proved to be too strong for that message to get through.
        sebmellen 4y ago
        Personally I would much prefer to keep my banking (cash storage) separate from my credit. To me, it is nice to have a barrier between the two. This way, your credit provider won't randomly decide to shut you out of your bank because you're too small! I see your point, but I am not of that opinion.
      - immad 4y ago
        Agreed. We would need a credit card to target that spend. Appreciate the feedback.
  - rfrey 4y ago
    Your feedback was literally, "I don't like you because you're not doing the thing that <company that's kicking everybody to the curb> is doing." Ironic is exactly the word for your feedback.
mtlynch 4y ago
I'd guess that a factor in Brex's shutdown was that these rewards are unsustainable. That seems like a good reason for Mercury not to adopt the same practices.
trhway 4y ago
> Brex has a bunch of multipliers ranging from 7x to 1x points. sounds like Brex has been losing money on unit economics while making it up on volume, and now with VC money tightening ... Wrt. small business vs. startup - i'd guess that any company older than 3-5 years which hasn't become big enough (in spending or revenue) and not showing fast growth can be considered a small business :)
- eins1234 4y ago
  If I had to guess, I'd say the biggest contributor to poor unit economics for small business vs startups is credit losses. Startups usually have tons of cash in the bank to underwrite against, which made them actually very safe to lend to, unintuitively enough (that underwriting model was Brex's original innovation, remember?). Whereas small businesses usually don't, but still need a reasonable credit limit to spend with, so they end up having to underwrite using traditional data sources like credit scores and whatnot, and they probably haven't been able to develop a sophisticated enough model quickly enough to curb losses, and the recession certainly isn't going to make things any easier. So, anticipating further accelerated credit losses down the line, this is them throwing in the towel on that whole experiment.
  - aaaaaaaaata 4y ago
    > Startups usually have tons of cash in the bank to underwrite against What city do you live in? Can we be friends?
friendzis 4y ago
> The model works, given the right set of customers and credit risk profiles. Sooo... The model only works if you carefully cherry pick the customers?
- eins1234 4y ago
  Yes exactly. That's exactly how lending works.

immad 4y ago

This comment is so ironic. Love it.

eins1234 4y ago
Nice to see you taking feedback seriously.
- immad 4y ago
  Okay. We don’t have a credit card right now, only debit. For small businesses doing high reward credit cards is not a sustainable business. Which is why Brex is shutting them down.
  - eins1234 4y ago
    That's totally understandable, for the small business segment. I was just saying that for a VC-backed tech startup, the lack of rewards is a huge turn-off, compared to some of the other options for spending available to us.
    - sebmellen 4y ago
      I don’t know of many banks that offer high reward debit cards. IMO Mercury has almost perfected the banking experience, and I am perfectly happy with that. If I want a high-reward card I’ll get an Amex Platinum (a credit/charge card) and stick with Mercury as my bank.
      - eins1234 4y ago
        That's a perfectly valid choice! FWIW, I actually do like Mercury's UX marginally better than Brex. I would just prefer to have my banking and spending in 1 place, and if I did that with Mercury, I'd be sacrificing 1%+ rewards, which I would not consider a financially responsible option when Brex exists and has a good enough banking experience. Wouldn't it be nicer for everybody if there were more options that had both a great banking experience and credit-level rewards that all competed for our business? That's all I was trying to encourage with my feedback, but the fanboyism in this thread has proved to be too strong for that message to get through.
        sebmellen 4y ago
        Personally I would much prefer to keep my banking (cash storage) separate from my credit. To me, it is nice to have a barrier between the two. This way, your credit provider won't randomly decide to shut you out of your bank because you're too small! I see your point, but I am not of that opinion.
    - immad 4y ago
      Agreed. We would need a credit card to target that spend. Appreciate the feedback.
- rfrey 4y ago
  Your feedback was literally, "I don't like you because you're not doing the thing that <company that's kicking everybody to the curb> is doing." Ironic is exactly the word for your feedback.

mtlynch 4y ago

I'd guess that a factor in Brex's shutdown was that these rewards are unsustainable. That seems like a good reason for Mercury not to adopt the same practices.

trhway 4y ago

> Brex has a bunch of multipliers ranging from 7x to 1x points. sounds like Brex has been losing money on unit economics while making it up on volume, and now with VC money tightening ... Wrt. small business vs. startup - i'd guess that any company older than 3-5 years which hasn't become big enough (in spending or revenue) and not showing fast growth can be considered a small business :)

eins1234 4y ago
If I had to guess, I'd say the biggest contributor to poor unit economics for small business vs startups is credit losses. Startups usually have tons of cash in the bank to underwrite against, which made them actually very safe to lend to, unintuitively enough (that underwriting model was Brex's original innovation, remember?). Whereas small businesses usually don't, but still need a reasonable credit limit to spend with, so they end up having to underwrite using traditional data sources like credit scores and whatnot, and they probably haven't been able to develop a sophisticated enough model quickly enough to curb losses, and the recession certainly isn't going to make things any easier. So, anticipating further accelerated credit losses down the line, this is them throwing in the towel on that whole experiment.
- aaaaaaaaata 4y ago
  > Startups usually have tons of cash in the bank to underwrite against What city do you live in? Can we be friends?

friendzis 4y ago

> The model works, given the right set of customers and credit risk profiles. Sooo... The model only works if you carefully cherry pick the customers?

eins1234 4y ago
Yes exactly. That's exactly how lending works.