Businesses Love Rewards Credit Cards. This Startup Is Making Them Easy To Launch.

When Texas-based supermarket chain H-E-B launched a rewards credit card in April, it didn’t go to a big bank or financial giant like American Express
AXP
or J.P. Morgan Chase. Instead, it turned to a three-year-old startup called Imprint, led by Irish founder Daragh Murphy, which partners with consumer brands to launch co-branded credit cards.

Today, the roughly 8 million customers served weekly across H-E-B’s 340 locations have the option to pay for their groceries through Imprint, receiving 5% cash back and other rewards. H-E-B enjoys increased loyalty and spend, with hundreds of thousands of signed-up customers spending hundreds more since launch, Murphy said. And Imprint wins, too, earning annual card fees and taking its cut on the net interest income and fees to cover card processing costs.

Imprint’s pitch is that by adopting a tech-first approach to rewards, they can offer more granular and individualized rewards than typical rewards cards that are offered by traditional banks. H-E-B cardholders, for example, get 5% cashback for the H-E-B branded products — on which H-E-B has the highest margin — versus only 1.5% cashback for brand name products. Around Thanksgiving, cardholders could receive a text or push alert of a special deal on turkeys just for them. The potential, Murphy said, is that these personalized rewards will help increase how much money H-E-B’s customers spend at the grocery store.

These kinds of cards can be incredibly lucrative for businesses: The popular Delta Airlines American Express card alone accounted for nearly 1% of American GDP in spend, the airline’s CEO said in June. But for every company like Delta, which has figured out how to cash in on rewards, there are more brands like H-E-B that hadn’t gotten in on the action, according to Imprint’s CEO.

“What we’re selling the brand is loyalty,” Murphy said. “If you put a card in a person’s wallet, they will come back to your brand more.”

Now, New York-based Imprint has secured $75 million in a Series B funding round, raising its valuation to $240 million from $160 million reached at its series A in late 2021. Fintech specialist Ribbit Capital led the round, with participation from Thrive Capital, Kleiner Perkins and angel investor Lachy Groom, who previously headed up card issuing for Stripe.

A rare (if modest) up-round in fintech, which has seen valuations plummet alongside rising interest rates, the funding will help Imprint expand to bigger corporate customers and build towards a goal of managing more customer rewards. So far, Murphy says Imprint has signed a global “top-ten airline” but declined to specify which.

First popularized in the 1980s by airlines looking to reward frequent flyers with exclusive rewards and perks, the co-branded credit card industry has since expanded across categories, from beauty chains like Sephora to retailers like Walmart
WMT
looking to curry loyalty and higher spend with their customer bases through rewards. The market for powering such cards — an estimated $12 billion in 2022 —is still dominated by American Express and a number of other banks including Chase, Capital One
COF
and Synchrony Bank.

“The bank competition is looking at these cards as financial first products, when the reality is the best merchants, the best brands using this are looking at these as customer experience tools, marketing tools and loyalty products,” said Thrive Capital partner Gaurav Ahuja, who helped incubate Imprint at the firm and serves as its chairman. “We’re going after this massive market hiding in plain sight.”

Murphy hopes Imprint’s edge will be sleek software built on top of its own underwriting and ledgering systems that he said can approve more customers as cardholders and better customize the rewards they receive. Imprint is able to extend smaller credit lines than banks, Murphy said, then gradually raise the limit after observing a customer’s payment behavior. And because it is also not subject to the same regulatory capital requirements as banks, Murphy argued, the startup can deploy more of its money faster.

Imprint pockets revenue from net interest income on the card balances and processing fees, sharing a cut with bank partner, issuer First Electronic Bank and card networks like Visa
V
and Mastercard
MA
. It also covers the cost of rewards for their brand partners.

Since its first customer went live in May 2022, Imprint has reached $20 million in GAAP revenue, a figure that includes fees paid out to its bank partner and card networks. While not profitable, the company maintains low costs, Murphy said, with Imprint still holding most of the funding from its $38 million Series A in 2021 led by Kleiner Perkins with participation from Affirm and Stripe.

Launched after months of tinkering during the pandemic’s early months in 2020, Imprint initially targeted direct-to-consumer companies like beauty brand Glossier or luggage retailer Away but struggled to find product-market fit, a source told Forbes and Murphy confirmed. Imprint hit its stride months later when it shifted focus to regional brands like H-E-B and Westgate Resorts that had flown under the radar of the big banks. Holiday Inn Club Vacations chose Imprint because it was user-friendly and adaptable, chief financial officer Sonya Dixon wrote Forbes in a statement. The hospitality business was able to launch a new credit card within three months, she added.

More recently, Imprint has gone head to head with the banks for increasingly marquee customers. There are growing pains: Imprint lost one opportunity, Murphy said, when the potential customer’s representatives were unimpressed by a visit to its previous office on the second-floor of a building in Chinatown. Imprint is opening a shiny new headquarters in New York’s financial district, in part to serve as a showroom, in upcoming weeks, to help prevent future embarrassment.

“It’s about showing better in terms of looking like a big bank, now that we have continued to graduate out of startup land,” a rueful Murphy explained.

Of course, those banks won’t give up ground to Imprint easily; they can offer longer track records and scale, and in some cases might have already established banking relationships with a prospective customer outside of co-branded cards. Unlike those competitors that have access to cheap funding sources in the form of deposits, fintechs like Imprint or Cardless rely on more expensive credit warehouses to fund the lending happening over their cards.

If Imprint fulfills its mission, consumers might even be able to better take advantage of offers from Imprint’s partner brands, even if they aren’t cardholders of that particular brand, Murphy said. A high-end soap shop, for example, might not make sense as a co-branded credit card for all but the most loyal customers; it could still offer a flash sale to other Imprint cardholders nearby, Murphy speculated.

The core business, however, remains Imprint’s cards, which currently show a customer’s branding on the front, with Imprint’s infinity logo on the back. The startup’s success also depends in part on making such cards a prized possession — or, as one investor noted, at least not a source of embarrassment. “They want to design cards and pick great brands to partner with where if somebody was on a date, they wouldn’t be embarrassed to spend with that card,” said Nick Huber, who led the Series B on behalf of Ribbit Capital.

At Imprint, Murphy didn’t disagree — but he stressed it’s about cash over cool. “The reason we exist is because we want to put better rewards in your pocket,” he said.