While most businesses are increasingly adopting online payments facilitators, Israel’s Melio discovered that trillions of dollars were still being transferred manually in the B2B space via paper invoices and paper checks, particularly among small-to-medium businesses. This identified a gap that the company has since rapidly filled, to growing demand, by providing businesses with a platform to electronically manage B2B payments and cut out paper checks cheaply.
Using electronic bank transfers, debit cards, or credit cards, with Melio, companies can now pay for all their suppliers as instantly as their customers pay for their services and goods. Previously, SMBs had offered their customers Square and PayPal payments services, but didn’t have similarly efficient, digital payments infrastructure for paying their own suppliers. While founded in Israel, the company immediately focused attention on the U.S. market, offering its evolving system that seeks to replace paper invoices, snail mail, and slow bank transfers from business to business. The innovation is a welcome relief for businesses seeking to go increasingly paperless, while finding ways to streamline their payments infrastructure.
In 2020, Melio’s number of active users grew by over 2000%. Users benefit from the company’s single, integrated tool that facilitates transfers between small businesses in an easy way, offering oversight and control over cashflow, mitigating late payment costs, and saving invaluable accounting time for businesses.
Most importantly, Melio offers a low barrier to entry with zero fees when businesses make bank transfers or use debit cards. Only 2.9% fees are charged for the usage of credit cards to make payments, which is tax deductible in the U.S. The low fee structure is a testament to the company’s mission to increase ease and on-hand cashflow for SMBs, embodying its “Buyers keep cash longer, vendors get paid faster” ethos.
Recently, the company closed a $110 million funding round capping a new valuation at $1.3 billion. Leading the round was Coatue with participation from previous backers Accel, Aleph, Bessemer Venture partners, Corner Ventures, General Catalyst, and Latitude. This funding comes after a $130 million round raised in 2020. The company shared that product development will likely respond to the incoming interest from partners to enable B2B payments within their products, not unlike those services offered by QuickBooks and Salesforce.
While plans for global expansion haven’t been announced, it was shared that Melio has always focused on the U.S. market because of how “antiquated” it is when it comes to SMB B2B payments. The clever targeting of this market during a time where payments are rapidly jumping online, is said to be a key reason for investor interest.