Cardless swipes up $30M to build new generation of co-branded credit cards

More than a quarter of all US residents use co-branded credit cards today to get discounts and more from the companies they use regularly, but not all is happy in the world of commercial loyalty. Big brands like Uber, Starbucks and Walmart have all pulled out of such projects in the past years after failing to see the returns they expected. Now, by moving into the innovation of embedded payments, a startup called Cardless believes it has figured out how to make card schemes work better.

Today, it’s announcing $30 million in funding to expand that business. Active Capital, a previous backer, is leading the round, with Mischief (a fund co-founded by Plaid’s Zach Perret), Industry Ventures, Thayer Ventures, Assurant and strategic backer Amex Ventures also participating.

Cardless is not disclosing its valuation for this round – nor does it give an indication of whether it is flat, up or down from its previous valuation. In another context, when it last raised money – $40 million in 2021 – the amount was more than $350 million.

Meanwhile, the San Francisco startup is growing. The company, which offers options for Visa, Mastercard and American Express cards, said revenue – exact numbers not disclosed – grew fivefold in the past 12 months, which was on par with its growth rate a year earlier. The company’s target market is the US – there are no plans to go abroad yet – although it works with global companies to reach end users, as well as large and small brands based in the US itself. Recent customers have included Qatar Airways and Alibaba, and the latest services are aimed at small and medium-sized businesses in the US that use Alibaba to buy goods they use or resell.

Cardless’ unique selling point isn’t that it helps companies create branded cards. There are plenty of companies, from tech startups like Marqeta to incumbents like traditional banks, that already offer that.

Instead, Cardless’s pitch is that it does this in a highly efficient environment, where the brands in question can create customized card experiences for subscribers and users within weeks between planning and execution, creating rewards, and later managing how to look. those products work.

“The credit card space is everywhere from a consumer perspective, but from a product perspective, it’s ripe for disruption,” said Michael Spelfogel, president and founder of Cardless, who said 11 banks today operate “big banks.” the majority” of credit cards combined into a $77 billion industry.

Features include the ability to set up card applications within existing applications, and then integrate card management into those applications.

Once created, rewards and other marketing can be integrated and adjusted through a dashboard. Fraud detection and security are integrated into the platform, along with usage statistics to help product managers understand what’s working and what isn’t.

There are also additional features such as lending, which also opens the door to Cardless which may also introduce services such as buy now, pay later down the line. Likewise, it will be interesting to see what Cardless develops with future products, given the US’s signature plans for new tariffs imposed on goods from certain countries. Since SMBs are one of the company’s main focuses, will there be an opportunity to account for tax and other financial instruments in the future?

Spelfogel said today, most of its business is “new”, meaning companies that have never issued cards before. He added that he expects that in the long run it will be about convincing existing card companies to switch from cardholders to cardless. So the big question will be whether the market, long term, is interested in disrupting the status quo enough to make that change.

Investors are gambling that the will is sufficient.

“[Credit cards] it’s a really big market,” said Andrew Steele, who led Active’s round. “Co-branded cards are not moving from a derivative position, where you end up with a very small market that can be adjusted…