Fintech startup Brex just launched its biggest threat to banks yet. The $2.6 billion startup is now FDIC-insured and has tapped a veteran tech lawyer to lead compliance.

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Brex Chief Legal Officer Katie Biber.

Brex


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  • On Wednesday, $2.6 billion fintech startup Brex announced it was adding FDIC insurance to its bank account-like Brex Cash service for startups, which are hoping to avoid uncertainty in turbulent economic markets.
  • New and existing Brex Cash customers will be able to insure up to $250,000 with the FDIC, as banks do for deposit accounts including checking, savings, and certificates of deposit, Brex cofounder and co-CEO Henrique Dubugras told Business Insider.
  • Brex also announced that Katie Biber, a former lawyer for Airbnb and Thumbtack, will join the startup as  chief legal officer to lead its regulatory and compliance teams.
  • Biber compared Brex’s success to that of a political campaign that hits the right “chord” with voters as she starts to onboard in her new role.
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“Move fast and break things” was a popular motto for startups over the last decade, which happened to coincide with a historically strong economic market and heaps of venture capital flooding Silicon Valley. Now, facing more uncertainty, startups are going back to basics — caution and frugality — to survive.

The rising heedfulness extends to a class of startups, like $2.6 billion fintech company Brex, that largely serve other startups as customers. To offset the growing uncertainty facing its peers, Brex has joined the list of other online banks including Betterment and Varo that have scored approval to make their customer deposit accounts FDIC insured.  This is a step taken by such “neobanks,” which deal directly with customers online, to make themselves competitive with traditional banks that maintain physical offices.

“Regulation is an extremely important part of Brex,” cofounder and co-CEO Henrique Dubugras told Business Insider. “We have an appreciation for regulation because they are just trying to keep customers safe, and we share that objective.”

Brex now maintains deposit accounts much like the way entrenched financial institutions do. It offers FDIC insurance for up to $250,000 in funds held by its customers who use its bank account-like service, Brex Cash. Insured accounts will become the default starting Wednesday for any Brex Cash customer going forward, and existing customers can opt in to the new account feature, Dubugras said. 

“We did have a few customers, especially as COVID started, that they thought Brex was amazing but they wanted to go somewhere that’s FDIC insured,” Dubugras said. 

Before Wednesday, Brex kept funds from its Brex Cash customers in money market accounts, Dubugras said, which he said made it easier to quickly access those funds in a pinch. Although Dubugras said he still feels that method is fairly safe and secure, he understands that startup founders might be looking for additional reassurance given the unpredictable nature of financial markets at present. Now, Brex stores the funds with FDIC-insured bank partners in more traditional accounts, a requirement of the FDIC insurance certification.

“Brex is not a bank, we are a cash manager,” Dubugras said. “To get FDIC insurance, we needed to disperse the funds in accounts that are FDIC insured, so we built systems and integrations that allow immediate access to funds even though they are held with partner banks.”

A new Chief Legal Officer at the helm

The startup also hired tech legal veteran Katie Biber as chief legal officer in a move Dubugras said is proof of how much Brex values its customers’ trust. Biber was a former legal executive at major tech startups like Airbnb, Thumbtack, and crypto startup Anchorage following years of work as a political lawyer.

“I committed to giving the tech industry a 2-year effort and it stuck,” Biber told Business Insider.

Like Dubugras, Biber sees opportunity for Brex and other startups in highly regulated industries like finance, to build trust with customers by working within those traditional bounds instead of breaking them down.

“The market opportunity for Brex is really immense because it has defined a category and now others are rushing to fill it,” Biber said. “It reminds me of a campaign that just hits it spot on. You can have the slickest ads, but if your candidate doesn’t strike a chord with voters you are staring down empty stadiums. I see that all coming together at Brex.”

Dubugras said Biber’s political savvy and experience working in regulatory gray areas like cryptocurrency makes her a multi-faceted player as the lead of Brex’s regulatory, legal, and compliance teams. 

“I’m really just building upon what people have done before and doubling down on the investments made across the regulatory compliance, which has been a minefield for companies in the past,” Biber said. “We all know the same ‘move fast and break stuff’ can’t apply because the stakes are really high when you are managing people’s livelihoods.”

Axel Springer, Insider Inc.’s parent company, is an investor in Airbnb.

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