The economic system appears to be a relentless supply of dialogue today. Wherever one appears to be like, there’s a brand new report of an enormous financial institution going bust, or a tech firm on the AI hype prepare driving the wave to beforehand unimaginable inventory costs.
Regardless of the case could also be, plainly the monetary expertise house has not been trending in the correct route ever because the closure of Silicon Valley Financial institution, which backed many such tasks.
The newest casualty of the fintech crunch seems to be Plastiq, an organization well-known within the Miles & Factors group each for its enabling of shoppers to pay for absolutely anything (together with taxes and lease) through bank card, in addition to for its beneficiant promotions.
Let’s check out what befell this former titan of the Canadian Miles & Factors scene.
Plastiq Information for Chapter 11 Chapter Safety
Plastiq just lately filed for Chapter 11 chapter safety in Delaware. What this implies is that the corporate is slated to proceed operations, as long as they discover a prepared purchaser – and happily for Plastiq, they have already got one lined up, however extra on that later.
The rationale many Miles & Factors fanatics are prone to keep in mind Plastiq (which both rhymes with drastic or mystique, relying on who you ask) is due to the good worth the corporate has supplied to the group previously.
Plastiq’s success amongst shoppers was as a result of it supplied the flexibility to pay nearly any invoice with a bank card, together with on transactions that have been notoriously tough to pay with a bank card, reminiscent of taxes to the Canada Income Company or lease to giant property corporations.

This meant that it was straightforward for Miles & Factors aficionados to rack up factors by paying for nearly something through bank card, as long as they have been prepared to half with a small transaction price. Over time, this price went up from a low of two.1% just a few years in the past and labored its means as much as Plastiq’s most up-to-date transaction price of two.9%.
Initially, Plastiq usually supplied beneficiant promotions, which included Price-Free {Dollars} (FFDs) for brand new customers and thru referrals. As soon as earned, FFDs could possibly be used to offset the transaction price levied by Plastiq.
This helped us side-step the necessity to pay additional charges to place something on our bank cards, which was a unbelievable strategy to preserve prices down.
And maybe, therein lay the issue. Since Plastiq needed to handle the underlying interchange charges levied on the gross whole of each transaction – charges that could possibly be as excessive as 2.5% – their margins have been enormously skinny, even after charging a 2.9% transaction price that so many people bellyached over.
Effectively, Plastiq remains to be a fintech-style firm, and had monumental overhead prices in retaining and paying their employees, managing their fee platform, and advertising their merchandise.
For instance, for a very long time Plastiq was one of many companions on the American Express Business Gold Rewards Card‘s “Your Three Suppliers” program, which doled out 2 Amex Membership Rewards points per greenback spent at Plastiq.

Clearly, promotions reminiscent of this weren’t sustainable, and the Plastiq group will need to have breathed a sigh of aid when Amex cancelled the program entirely. Nevertheless, regardless of mountain climbing charges and curbing the FFDs the corporate handed out, Plastiq nonetheless has discovered itself ready the place a chapter adopted by acquisition and restructuring by one other agency are vital for its continued survival.
Fintechs Falling from Favour
Once we analyze what’s occurring at Plastiq, we will see that it’s not anomalous to this enterprise. On the entire, fintechs have been struggling for the previous couple of years as rates of interest rise and tech-friendly monetary establishments reminiscent of Silicon Valley Financial institution collapse.
Right here in Canada, two notable examples are the Stack card, which was forced to abolish almost all of its positive benefits and start levying fees earlier than being bought to a personal fairness agency, after which the MogoCard, which famously supplied bitcoin money again earlier than additionally slashing its benefits entirely. Mogo additionally just lately introduced its playing cards will stop operations on June 6, 2023, earlier than recommending prospects transition to EQ Financial institution’s new, more competitive offering.
The newest casualty on this realm is Plastiq. Initially, the corporate sought to bail itself out through a Particular Function Acquisition Firm (SPAC). This advanced course of would have raised capital by merging Plastiq with one other firm already listed on a public trade, thus permitting its shares to be traded on the general public market.
In flip, this is able to have allowed retail traders and different backers to fund Plastiq similar to another public firm.

Sadly, the SPAC route didn’t pan out, although maybe this was for the perfect as SPACs haven’t had the perfect fame over the course of the previous few years. Sir Richard Branson’s failed Virgin Orbit and the notorious Nikola Corp are two examples of SPACs gone terribly improper.
On the upside, Plastiq has obtained a “stalking-horse” acquisition proposal from Precedence Expertise Holdings. For now, which means that its enterprise operations are deliberate to proceed with minimal interruptions, pending regulatory approval of the acquisition.
Which means Canadians with deliberate funds by Plastiq on the horizon won’t be obligated to make use of competing providers reminiscent of Paysimply or Chexy.
Solely time will inform if Precedence Expertise Holdings can flip round Plastiq’s fortunes, however for now, it seems to be one other cautionary story of the ending suffered by many comparable corporations in the course of the previous few years throughout red-hot expertise hypothesis.
Conclusion
Plastiq has filed for chapter safety in Delaware, and has a deal to be purchased out by Precedence Expertise Holdings, pending regulatory approval. Hopefully which means that Canadian shoppers and companies who use Plastiq for the pliability and rewards supplied by bank card fee options won’t expertise an interruption to their providers.
It’s clear {that a} shakeup is occurring within the tech trade, and that exterior financial forces are enjoying as drastic a task in it as hot-topic gadgets reminiscent of Synthetic Intelligence. Plastiq will be the newest casualty among the many fintech/startup house, however it’s unlikely to be the final.
Till subsequent time, use promo codes whereas they final.