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Fintech DiviPay raises $2.3 million, securing backing from big-four bank

Stephanie Palmer-Derrien /

DiviPay

DiviPay co-founders Russell Martin and Daniel Kniaz. Source: Supplied.

Sydney fintech DiviPay has raised $2.3 million in Series A funding for its solution taking the headache out of expenses for small business.

The round was led by ANZi, the corporate venture capital arm of ANZ. Seed Space Ventures also contributed, along with Patrick Tuttle, the former chief of Pepper Money.

Founded last year by Daniel Kniaz and Russell Martin, DiviPay is a virtual platform for managing corporate cards and expenses.

Traditionally, it can be difficult for small- and medium-sized businesses to manage expenses, Kniaz tells StartupSmart.

They often either end up asking staff to use their own funds, to be reimbursed later, or they have one or two company cards that are shared around the office.

Neither of these solutions is particularly efficient.

When dealing with reimbursements, “you never know the financial situation of an individual employee”, Kniaz notes.

And, in the latter case, there are clear security concerns. Kniaz has worked with a business that had photocopied one card, giving the details to about 30 employees.

“You’re susceptible to fraud and wasteful spending,” he says.

DiviPay is designed to reduce the risk and the hassle involved in expenses, giving everyone in the business access to a unique virtual credit card.

The finance team can set strict transaction controls, and integration capabilities with Xero, MYOB and Quickbooks mean payments can be automatically categorised and pushed into the company’s accounting software.

Now, DiviPay has “a couple of hundred customers” on the platform, and thousands of end-users completing thousands of transactions per week.

The number of businesses joining the platform is growing 35% month-on-month, with customers ranging from two-person construction companies to digital agencies to 200-person tech scaleups ⁠— it counts Canva among its clientele.

“Word-of-mouth has been a really powerful driver for us, which shows us that we are genuinely solving a problem in the market.”

The power of a pivot

Kniaz and Martin met while working together in the Westpac innovation team, where they were looking into how to apply disruptive technology within the bank.

But, ultimately, “we thought we could move faster and make a bigger impact by being independent and building these products ourselves”, Kniaz says.

The pair left to join fintech accelerator H2, but it took them a while to find their niche in the market. Initially, they were working on a consumer product providing virtual bank accounts for the purposes of splitting bills and other payments.

They then eventually pivoted to create a single-use virtual, or proxy, card, designed to protect users’ details when shopping online.

“It was actually very difficult to monetise B2C products, particularly in financial services,” Kniaz says.

“Consumers want everything for free when it comes to banking.”

But, customers liked the tech and the platform, and suggested it could be applicable to business. The co-founders looked into the market, and realised the scope of this problem for SMEs.

And then, “we dove in,” Kniaz says.

Confidence and credibility

This funding will be used to expand the DiviPay team, “to help us keep up with our growth and the demand”, Martin tells StartupSmart.

The co-founders will also continue to evolve the product, “to better solve the needs of our customers”.

There are also benefits to having ANZ as a lead investor. According to Martin, the relationship could mean access to additional financial products, particularly in the credit space, giving the startup scope to grow and expand its product offering.

Currently, the DiviPay platform is bank-agnostic ⁠— something the founders say add value.

But, they decided to meet with banks during the capital raising process partly because of the knowledge and products they will be able to tap into, and partly because having a household name on board adds a certain amount of credibility.

It’s “an additional data point on your legitimacy,” Kniaz says.

When you’re dealing with businesses’ finances, “some people are hesitant because you’ve only been around for a couple of years”, he explains.

If they see you’ve been backed by large and well-known institution “it gives them that additional confidence”.

Even with the reputational damage the banking royal commission has inflicted, “the benefits outweigh the negatives there”, he adds.

And, looking ahead, the pair currently have no exit plans involving acquisition by a big bank.

“Short- to medium-term that’s definitely not on the horizon,” Martin says.

“You can never predict what will happen in the future,” he admits.

But, right now, the co-founders are laser-focused on “the problem that we’re solving”, he adds.

“The time has never been better”

This focus is something that has helped the founders along the way, Kniaz says. And its what forms the basis of his advice to others.

“Go deep and don’t get distracted by the shiny new thing,” he suggests.

“As startup founders, or really anyone with an appetite to work at a startup in the early days, you’re going to be really curious and really inquisitive.”

Founders, by their very nature, will be looking for new things that can add value. That means they’re often chasing the next best thing.

“In reality, you have to decide what you want to build,” Kniaz says.

“Do you want to be a business that does 100 mediocre things, or a business that does one thing really, really well?”

In addition, something Martin notes that DiviPay has benefited from is what he calls “modularisation of the banking stack”.

“A lot of financial products are available for a startup to consume,” he explains.

Whether it’s banking products, card issuing products or anything else, startups don’t have to build the core functionalities because they already exist. They can innovate on top of those.

“You can really just focus on what that core customer experience is, and what problem you’re trying to solve for somebody,” Martin adds.

“The time has never been better to work on fintech ideas.”

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Stephanie Palmer-Derrien

Stephanie Palmer-Derrien is the editor at StartupSmart. You can contact her at [email protected].

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