Melio Notches $110 Million To Digitize SMB Payments

Melio, a digital payments company for small and medium-sized businesses (SMBs), has raised an additional $110 million in funding, putting its valuation at $1.3 billion, the company said in a press release Monday (Jan. 25).

The latest funding round was led by Coatue. Investors from previous rounds include Accel, Aleph, Bessemer Venture Partners, Corner Ventures, General Catalyst and Latitude. In 2020, Salesforce and American Express Ventures had also invested.

The business-to-business (B2B) wholesale payments industry — in which businesses pay their suppliers for goods and services — still often relies on paper invoices. In fact, about 42 percent of B2B transactions in the U.S. are still done with paper checks, the press release said, noting it is a roughly $25 trillion market.

“Melio has identified both the opportunity and duty to help small businesses manage their finance remotely and improve cash flow,” said Michael Gilroy, general partner at Coatue. Due to the pandemic, he said, “physical payments supply chains (have been) interrupted and overwhelmed. Going digital is the only way small businesses can compete against larger rivals and stay ahead of the curve.”

Even before the pandemic, there had been an ongoing shift to digital payments by U.S. businesses. Federal Reserve data shows that their use of checks had declined at a pace of 4 percent to 8 percent annually from 2003 and 2018. The press release said that Melio users have cut their use of mailed paper checks by half.

In an interview, Melio CEO Matan Bar told PYMNTS that “at the beginning of March, as the world experienced or was starting to see the implications of this pandemic, we weren’t sure how this would affect our customers, … our employees, our partners, and us as individuals.”

Bar said that, what has occurred is a huge digitization shift that is still underway — bringing the businesses that did survive to now embrace tech and electronic payments.