Dive Brief:

• ZenBusiness, a five-year-old Austin-based company targeting small businesses, launched a payments and invoicing app called ZenBusiness Money on Tuesday. Its rollout is the company’s first financial-services upgrade since it acquired neobank Joust a year ago, and the new product integrates that acquired company’s tools.
• The money-management and invoicing app, which will be available to all ZenBusiness customers, includes capabilities to send and customize invoices, accept credit card and bank transfer payments, and manage income with a dashboard across users’ mobile, tablet and desktop devices.
• The money app is aimed at increasing the 'stickiness' of the company's customer relationships. The payments offering is intended for small businesses and sole proprietors in service-based sectors who prefer to manage all of their operations through a single platform.

Dive Insight:

ZenBusiness customers using the new money app will have a merchant account that allows them to send payments, in addition to a customer relationship management tool. Meanwhile, a dashboard helps them manage invoices, payments and customer relationships.

ZenBusiness positions itself as a one-stop shop for getting new businesses up and running. Through its platform, clients can take care of things like state filing and legal paperwork; operating agreements; accounting assessments and tax filing support; websites and email domain names; and other services. 

With the new invoicing and payments services, ZenBusiness enters a crowded field alongside larger players like Square, Shopify, Intuit and Xero on the one hand, and niche financial companies that serve micro-businesses, including HoneyBook and Lili, on the other hand.

What sets apart ZenBusiness, according to the company’s head of fintech, Lamine Zarrad, is a suite of financial tools — both financial and non-financial — that are tailored for service-based businesses, which make up the bulk of its nearly 200,000 customers.

The company’s customers include software consultants, real estate investment firms, Amazon sellers, and others who run businesses in the trucking, photography and video fields .

For now, the app will be available to existing ZenBusiness users, who subscribe to tier-based bundles of services priced between $49 and $299 per year. Zarrad said in an interview the company will monetize the ZenBusiness Money through fees equal to 2.9% of a transaction value plus a flat fee of 30 cents. ZenBusiness clients pay the fees when they accept payments from their customers.

Later this year, the company plans to add additional features to the new product, including expense categorization, tax deduction automation and tax filing support. The money-management app will initially be available to all paying ZenBusiness users, but the company plans to roll out a free tier with 'à la carte' paid offerings by the fourth quarter of this year, Zarrad said.

ZenBusiness’ financial services offerings are led by Zarrad, who joined the company after Joust, the neobank for freelancers he co-founded, was acquired by ZenBusiness last year. ZenBusiness Co-founder and CEO Ross Buhrdorf was previously chief technology officer at short-term home rental platform HomeAway that was acquired by travel booking company Expedia in 2015.

One of Joust’s prior product offerings that won't be immediately offered is invoice financing, but Zarrad said the company is open to introducing it in the future. “The goal for 2021 and early 2022 is adoption and growth, and we want to get as many people as we possibly can into this product and then iterate on it by providing access to credit,” he said.

The company has so far raised $74.5 million. Zarrad said ZenBusiness benefited from the general growth of the U.S. small-business sector last year, with 150,000 entrepreneurs getting on its platform since March 2020. The growth of ZenBusiness coincides with enhanced momentum for entrepreneurship in the U.S. A recent study from the Peterson Institute for International Economics reported that Americans started 4.4 million businesses last year, a 24% increase over 2019.

Despite ZenBusiness’ growth during the pandemic, the company faces competition from Square and Shopify that are quickly increasing their reach among sellers. Square, for example, which said it serves “millions” of sellers, processed $38.8 billion in seller payments during the second quarter of this year. The company gives sellers a single view of their payments, balances, and spending on their Square dashboard or point-of-sale device. 

With its recently-launched banking services and buy now-pay later capabilities enabled through its recent Afterpay acquisition, Square is growing its product suite for sellers.

Meanwhile, Shopify, which says it “powers over 1.7 million businesses,” reported $20.3 billion in gross payment volume for the second quarter. 

Regardless, Zarrad suggests there is room for ZenBusiness to grow despite the competition, especially given its niche focus on service-based businesses. “I don't think there's going to be a winner-take-all type scenario here, '' Zarrad said.