- Through its latest platform upgrade, Rho, a 2-year-old business banking startup, is broadening its target client base beyond small companies. The challenger is now positioning itself as a banking product suite for a range of customers, from early-stage venture-backed startups to publicly listed companies worth $1 billion or more. The company is backed by Inspired Capital, a venture capital firm led by LearnVest founder Alexa Von Tobel.
- Rho’s platform upgrade, which it calls Global Enterprise Services, launched Thursday. It includes a series of new capabilities designed to accommodate larger companies with more complex transactions, including SWIFT integration for free global U.S. dollar transfers; low-fee foreign exchange transactions for 36 currencies; and 1% cash back rewards on corporate cards. Rho is also allowing support for multiple tax entities under one user login. It’s adding enhanced customization capabilities for teams, including account permission options and the ability for employees of clients to transact across business entities that are part of the same company.
- Rho counts direct-to-consumer furniture company Burrow, collaboration software company Popular Pays and gifting company Gesture as clients. As the company scales, it will launch features to support older, more traditional businesses, co-founder Alex Wheldon told Banking Dive. "The shift in volume has been from larger businesses that are a little bit older," he said. "They’re coming from a place where the focus is much more on security-oriented functions; they would like to have access to global payments, the ability to add multiple team members, and our budget features and our corporate cards, all in one place."
Rho’s pitch to clients is a digital, platform-based model, complemented by human assistance. It partners with a network of banks, including Evolve Bank & Trust. Through its tech layer, Rho customers can look after their financial commitments and sync with department budgets for automatic expense reconciliation. Rho also allows for API-based connectivity to workplace software platforms, including QuickBooks. Rho doesn’t lend to clients, but connects them to a network of lenders with which it partners.
Rho said its growth during the pandemic was accelerated in part by the closure of traditional bank branches, pulling clients away from incumbents and prompting them to seek alternatives. Rho said it grew its client base 150% during the pandemic, the majority of which came from incumbent banks.
As Rho isn’t a lender, it developed a portal to help companies connect to a network of lenders with which it partners, resulting in $50 million in Paycheck Protection Program loans for companies that used the portal.
The timing for the launch of Rho’s upgraded platform coincides with a swelling need for assistance among small businesses during the pandemic, said Michael Crumpler, managing principal at Capco. Rho’s comprehensive business banking toolkit, along with human support, is a strong selling point for client acquisition now, he said.
"They have off-the-shelf digital channel enablement. Rho is very focused on speed to market," Crumpler said.
Wheldon said Rho intends to bridge the gap between a banking environment that skews too low and too high: retail consumers and large corporate entities. Hoping to reach a customer segment that’s often ignored by incumbents, Rho said its value proposition derives from its integrated nature and its connectivity to various products and services. "When you come down to pricing, the key problems that larger businesses are experiencing is generally on the finance, approvals, accounting workflow, and the scalability side," he said.
Rho didn’t disclose the amount of funding it has raised to date, but the company in October scored a $4.9 million seed investment led by Inspired Capital. Apart from foreign exchange, Rho doesn’t charge fees and generates most of its revenue from interchange. It faces competition from other companies offering business-to-business banking services and payments, including Andreessen Horowitz-backed Mercury and card and corporate cash management startup Brex. Other digital challengers target freelancers and small businesses, including NorthOne, Joust and Lili.
Wheldon said Rho differentiates on client experience. "We are not the cheapest platform, but we are the most functioning and the most scalable," he said.
Fintechs like Rho have opportunities because incumbent banking offerings for small to medium-sized enterprises (SMEs) are often clunky and difficult to use, with clients having to jump through onboarding hoops that aren’t easy to navigate, said Puneet Kakar, a partner at Deloitte.
"SMEs would say, ‘I'm not an expert in terms of what my banking needs are; don’t give me generic advice. Give me insights that matter to me," he said. Features like real-time foreign exchange conversions help simplify the experience for a business clientele, he said.
Incumbents have been dedicating more resources to this customer segment, including offerings like Bank of America’s digital financial dashboard Business Advantage 360. Despite these advances, traditional banks still lag on actionable insights to business owners based on a 360-degree view of their financial picture, Crumpler said.
Rho’s strategy to move upmarket could help it build a niche among digital challenger banks, said Christine Barry, a research director with Aite Group. But the company will need to keep a pulse on client pain points as they evolve.
"The challenge is going to be the complexity of the market, demonstrating an understanding of corporate customer needs, and security," she said.