Investor momentum builds for construction tech

Although it’s not the sexiest of industries, the hefty construction sector in 2018 attracted not only the attention but, more importantly, the dollars of investors.

Although it’s not the sexiest of industries, the hefty construction sector in 2018 attracted not only the attention but, more importantly, the dollars of investors.

Historically, the multi-trillion-dollar sector has been slow to adopt new technologies, as builders rely on a variety of disparate systems to manage projects, traditional building methods to construct homes and non-smart materials.

But a wave of startups is looking to capitalize on opportunities within the sector. Companies that have developed software solutions aimed at streamlining processes and increasing efficiencies are increasingly common. Prefab construction has evolved thanks to innovation in that space, and 3D printing technology can create homes in a matter of days.

Investors are taking notice. Funding in U.S.-based construction technology startups surged by 324 percent, to nearly $3.1 billion in 2018 compared with $731 million in 2017, according to Crunchbase data. While the 2018 numbers are impressive, it’s important to note that a few large rounds did take place last year and thus skewed the results. One startup alone, Menlo Park-based Katerra, brought in $865 million from SoftBank Vision FundRiverPark Ventures and Four Score Capital in a Series D round last January. And, smart glass company View closed a $1.1 billion Series H in November. Also, Procore, a (unicorn) provider of cloud-based construction management applications, in December raised a $75 million Series H round from Tiger Global Management.

Without those two rounds, the construction tech sector saw just $1.135 billion in funding in 2018, up a more modest 55 percent over 2017’s totals.

The industry continues to see M&A activity. Larger software companies are recognizing that it makes more sense to acquire companies in this space rather than try to reinvent the wheel from within. For example, in the fourth quarter of last year, 3D design software provider Autodesk announced plans to acquire two cloud-based software startups in the space: PlanGrid for $875 million and BuildingConnected for $275 million. Publicly traded software developer Trimble in July acquired construction management software startup Viewpoint for $1.2 billion.

Jerry Chen, partner at Greylock Partners, is bullish on the sector and expects 2019 will only see more funding and acquisitions. His firm invested in San Francisco-based Rhumbix, which has raised $28.6 million to grow its mobile platform designed for the construction craft workforce. That company, he says, had a “record year” in terms of customers and users.

“2018 was an inflection point for the construction tech industry,” Chen told Crunchbase News. “Major venture investing and strategic M&A by incumbent players continued… and I think you will see other major enterprise software companies begin to invest more in construction in 2019.”

One construction tech startup founder, Nick Carter of Chicago-based IngeniousIO, believes that despite the big numbers, the industry has a ways to go in terms of true startup growth. Part of that is simply due to one thing: tech founders and some investors are intimidated by the space.

“A lot of people don’t understand it,” he said. “There’s a massive learning curve. Companies have been building buildings the same way for hundreds of years and not everyone understand its complexities.”

The fact that construction is a largely unregulated industry is also a factor, Carter believes.

“Eventually money will flow into the sector because of the pure size of the market,” he told Crunchbase News. “The money is there. There are VCs at every angle wanting to get into this space, but they’re looking for the right opportunities. There just aren’t a ton of startups in the space.”

Construction is also a very cyclical business, and one has to wonder if a potential economic downturn would give investors pause. But to Carter, a downturn would only create more need for products like the one his company is working to build. IngeniousIO’s platform uses artificial intelligence to redefine the process of construction projects by creating what Carter describes as “a unifying, data-driven approach.”

“Tighter budgets are where a company like ours can do very well,” he said. “Companies wouldn’t have the overhead of outdated apps that take a significant amount of support to manage, scale and implement.”

The construction sector may not have the cache of other more Twitter-friendly markets, but it does have the sheer size and potential to provide ripe soil for investors willing to break ground on new opportunities.

Investor momentum builds for construction tech

Although it’s not the sexiest of industries, the hefty construction sector in 2018 attracted not only the attention but, more importantly, the dollars of investors.

Although it’s not the sexiest of industries, the hefty construction sector in 2018 attracted not only the attention but, more importantly, the dollars of investors.

Historically, the multi-trillion-dollar sector has been slow to adopt new technologies, as builders rely on a variety of disparate systems to manage projects, traditional building methods to construct homes and non-smart materials.

But a wave of startups is looking to capitalize on opportunities within the sector. Companies that have developed software solutions aimed at streamlining processes and increasing efficiencies are increasingly common. Prefab construction has evolved thanks to innovation in that space, and 3D printing technology can create homes in a matter of days.

Investors are taking notice. Funding in U.S.-based construction technology startups surged by 324 percent, to nearly $3.1 billion in 2018 compared with $731 million in 2017, according to Crunchbase data. While the 2018 numbers are impressive, it’s important to note that a few large rounds did take place last year and thus skewed the results. One startup alone, Menlo Park-based Katerra, brought in $865 million from SoftBank Vision FundRiverPark Ventures and Four Score Capital in a Series D round last January. And, smart glass company View closed a $1.1 billion Series H in November. Also, Procore, a (unicorn) provider of cloud-based construction management applications, in December raised a $75 million Series H round from Tiger Global Management.

Without those two rounds, the construction tech sector saw just $1.135 billion in funding in 2018, up a more modest 55 percent over 2017’s totals.

The industry continues to see M&A activity. Larger software companies are recognizing that it makes more sense to acquire companies in this space rather than try to reinvent the wheel from within. For example, in the fourth quarter of last year, 3D design software provider Autodesk announced plans to acquire two cloud-based software startups in the space: PlanGrid for $875 million and BuildingConnected for $275 million. Publicly traded software developer Trimble in July acquired construction management software startup Viewpoint for $1.2 billion.

Jerry Chen, partner at Greylock Partners, is bullish on the sector and expects 2019 will only see more funding and acquisitions. His firm invested in San Francisco-based Rhumbix, which has raised $28.6 million to grow its mobile platform designed for the construction craft workforce. That company, he says, had a “record year” in terms of customers and users.

“2018 was an inflection point for the construction tech industry,” Chen told Crunchbase News. “Major venture investing and strategic M&A by incumbent players continued… and I think you will see other major enterprise software companies begin to invest more in construction in 2019.”

One construction tech startup founder, Nick Carter of Chicago-based IngeniousIO, believes that despite the big numbers, the industry has a ways to go in terms of true startup growth. Part of that is simply due to one thing: tech founders and some investors are intimidated by the space.

“A lot of people don’t understand it,” he said. “There’s a massive learning curve. Companies have been building buildings the same way for hundreds of years and not everyone understand its complexities.”

The fact that construction is a largely unregulated industry is also a factor, Carter believes.

“Eventually money will flow into the sector because of the pure size of the market,” he told Crunchbase News. “The money is there. There are VCs at every angle wanting to get into this space, but they’re looking for the right opportunities. There just aren’t a ton of startups in the space.”

Construction is also a very cyclical business, and one has to wonder if a potential economic downturn would give investors pause. But to Carter, a downturn would only create more need for products like the one his company is working to build. IngeniousIO’s platform uses artificial intelligence to redefine the process of construction projects by creating what Carter describes as “a unifying, data-driven approach.”

“Tighter budgets are where a company like ours can do very well,” he said. “Companies wouldn’t have the overhead of outdated apps that take a significant amount of support to manage, scale and implement.”

The construction sector may not have the cache of other more Twitter-friendly markets, but it does have the sheer size and potential to provide ripe soil for investors willing to break ground on new opportunities.

Score this 6-quart Instant Pot 6-in-1 multicooker for $50 today

This highly-praised kitchen essential is at just the right price for gifting.

Amazon has the Instant Pot LUX60 6-quart 6-in-1 multicooker on sale for $69 today. That’s an $11 savings off its regular price, plus the first time it’s been discounted since last year’s Black Friday. It has stellar reviews from 4,500 customers.

This pot is the perfect size for 4 to 6 people. This model has all the normal cooking programs, including pressure cooking, slow cooking, rice cooking, sauteing, steaming, and warming. It also has two additional programs for eggs and cakes. There are additional built-in programs for various foods as well. Basically, if you need to cook something, this thing can probably do it for you.

The latest Instant Pot technology means that you can pressure cook for up to 240 minutes, delay your start time by up to 24 hours, keep warm for 10 hours, and more. Your purchase includes a ton of different accessories as well.

Harness the power of your new kitchen gadget with the …

This highly-praised kitchen essential is at just the right price for gifting.

Amazon has the Instant Pot LUX60 6-quart 6-in-1 multicooker on sale for $69 today. That's an $11 savings off its regular price, plus the first time it's been discounted since last year's Black Friday. It has stellar reviews from 4,500 customers.

This pot is the perfect size for 4 to 6 people. This model has all the normal cooking programs, including pressure cooking, slow cooking, rice cooking, sauteing, steaming, and warming. It also has two additional programs for eggs and cakes. There are additional built-in programs for various foods as well. Basically, if you need to cook something, this thing can probably do it for you.

The latest Instant Pot technology means that you can pressure cook for up to 240 minutes, delay your start time by up to 24 hours, keep warm for 10 hours, and more. Your purchase includes a ton of different accessories as well.

Harness the power of your new kitchen gadget with the Instant Pot Electric Pressure Cooker cookbook. You may also wnt to pick up a tempered glass lid so you can see what's going on.

See at Amazon

Should you go for the Polaroid Snap or Mint Camera & Printer?

Here at iMore, we live and breathe photography of all kinds, including instant cameras. We’ve used and tested almost every one to find the best overall picks for you.

Polaroid Mint Camera & Printer

Our pick

$90 at Amazon

Pros

Three color modes
Optional classic Polaroid frame for prints
Has selfie mirror and 10-second timer
Rechargeable battery lasts up to 40 prints
Comes in several colors
Cons

No indicator when out of paper
Flash is automatic
Can’t adjust focus or lighting
Prints seem a bit slower than other cameras
The Polaroid Mint Camera & Printer is a slim and compact instant camera that’s a great starting point for many. It shoots in three color filters, has the option for adding a classic Polaroid frame, and has a 10-second timer and a selfie mirror. It’s designed to be held vertically, just like your smartphone, and you can use a microSD card up to 256GB in storage with it. The microSD means you’ll have digital copies, but you won’t be able to print those out …

Here at iMore, we live and breathe photography of all kinds, including instant cameras. We've used and tested almost every one to find the best overall picks for you.

Polaroid Mint Camera & Printer

Our pick

$90 at Amazon

Pros

  • Three color modes
  • Optional classic Polaroid frame for prints
  • Has selfie mirror and 10-second timer
  • Rechargeable battery lasts up to 40 prints
  • Comes in several colors

Cons

  • No indicator when out of paper
  • Flash is automatic
  • Can't adjust focus or lighting
  • Prints seem a bit slower than other cameras

The Polaroid Mint Camera & Printer is a slim and compact instant camera that's a great starting point for many. It shoots in three color filters, has the option for adding a classic Polaroid frame, and has a 10-second timer and a selfie mirror. It's designed to be held vertically, just like your smartphone, and you can use a microSD card up to 256GB in storage with it. The microSD means you'll have digital copies, but you won't be able to print those out later.

Polaroid Snap

Budget pick

$78 at Amazon

Pros

  • Shoots in three color modes
  • Self-timer and frame option
  • Can use microSD for digital copies
  • Comes in several colors
  • Has indicators for low battery, low memory, low paper

Cons

  • Only has a 10MP sensor
  • Supports microSD cards up to 32GB only
  • No manual flash setting

The Polaroid Snap has a highly affordable price tag and gives you a good value for what you pay. It's slim and portable, fun to use, shoots in three color modes with the option to add a frame, and you can store digital copies on a microSD card. However, it only has a 10MP sensor and supports microSDs up to 32GB, which isn't a lot. The flash is also automatic, though it appears to be unreliable based on customer reviews.

Both the Polaroid Mint Camera & Printer and Polaroid Snap are fairly similar to one another. However, in some ways, the Mint is definitely like an upgraded Snap, especially considering the price points.

Let's break it down

Pictured: Polaroid Mint Camera & Printer

If you really look at these two cameras, it's like the Mint is an upgraded Snap. They both come in a slim and compact design, shoot in three color modes (color, black and white, and sepia), and have the option to add the classic Polaroid frame to printed photos. They both also support microSD cards, come in a variety of colors, and even use the same size ZINK paper.

Polaroid Mint Camera & Printer Polaroid Snap
Price $90 $78
Dimensions 3 x 0.5 x 1 in 0.98 x 4.72 x 2.95 in
Design Slim and compact Slim and compact
Megapixels 16MP 10MP
Power Rechargeable battery lasts up to 40 prints Rechargeable lithium ion
Indicators Power on light Low battery, low paper, low memory
Flash Yes, automatic Yes, automatic
Paper 2x3" inch ZINK paper 2x3" inch ZINK paper
Colors Black, blue, yellow, red, white Black, sky blue, pink, purple, red, white, dark blue
Manual adjustment No No
Color modes Color, B&W, Sepia Color, B&W, Vintage
Selfie mirror Yes Yes
Timer Yes Yes
Printed frames Yes, optional Yes, optional
Digital copies Yes Yes
microSD card Yes, up to 256GB Yes, up to 32GB
Lanyard Clear plastic Nylon

As you can see from the specs, the Polaroid Mint Camera & Printer and Polaroid Snap are very similar in terms of functionality. The benefit of having the Mint, however, is that you'll be taking better resolution photos with the 16MP sensor versus the 10 megapixels you get with the Snap. The Mint also supports microSD cards up to 256GB in size, whereas the Snap only goes up to a measly 32GB.

However, the benefit of the Polaroid Snap that there are light indicators that let you know when you're running low on battery, paper, and even memory. With the Mint, you'll need to remember how much paper you've used since there's no way to tell when it's about to run out. You'll also need to pop the microSD into your computer to see how much space is left.

Still, despite the flaws of the Mint, we think it's the better buy for people who want to check out instant cameras. The quality of the digital copies end up better because of the jump in megapixels, and you can store many more digital photos with it compared to the Snap. You'll get better quality pictures for not much of a jump in price.

However, if you want to spend less money and don't mind the loss in quality, the Snap is not a bad purchase. We just don't feel like the price difference is large enough to justify going for a model that won't take pictures as well.

Polaroid Mint Camera & Printer

Slim and fun

$90 at Amazon

Affordable and packed with features

The Polaroid Mint is a great option if you are looking for a slim and compact digital instant camera. It can shoot in three color modes, gives you the option of adding a classic Polaroid frame on prints, has a timer, and a selfie mirror in the front lets you take perfect selfies. It also has a 16MP sensor and supports microSD cards up to 256GB in size. Photos are printed on ZINK paper, so you'll get clear and vivid prints.

Polaroid Snap

Good on a budget

Good entry point

$78 at Amazon

The Polaroid Snap is a good entry point if you're on a budget and want a decent Polaroid instant camera. The sensor isn't as great as the Mint, but it still supports microSD cards, shoots in three color modes, can add a frame to your prints, and has a self-timer. Photos print out on ZINK paper, and there are indicators to let you know when you're running low on battery, paper, and space.

Enhance your cord cutting lifestyle with $40 off the Tablo Dual Lite DVR

Say bye to cable.

The Tablo Dual Lite over-the-air Wi-Fi DVR is down to $99.99 on Amazon right now, though this is a deal that’s valid for Prime members only! If you’re not yet a member, you can start a free 30-day trial to become eligible. This deal matches one we saw back in December but haven’t seen since. The Dual Lite usually sells for around $140. Amazon is price-matching a deal at Best Buy, so you can grab it there as well if you’re not a Prime member.

If you’ve left your cable subscription behind and mostly watch TV using an HDTV antenna like this one, you should consider the Tablo. It works with your over-the-air antenna to add some DVR functionality so you can record your favorite shows and watch them whenever you want. It’s called the Dual because it can record two live shows simultaneously. With the DVR, you can browse upcoming shows, schedule and manage your recordings, sort them by episode or series, skip commercials, and rewind. It connects to your home network via Wi…

Say bye to cable.

The Tablo Dual Lite over-the-air Wi-Fi DVR is down to $99.99 on Amazon right now, though this is a deal that's valid for Prime members only! If you're not yet a member, you can start a free 30-day trial to become eligible. This deal matches one we saw back in December but haven't seen since. The Dual Lite usually sells for around $140. Amazon is price-matching a deal at Best Buy, so you can grab it there as well if you're not a Prime member.

If you've left your cable subscription behind and mostly watch TV using an HDTV antenna like this one, you should consider the Tablo. It works with your over-the-air antenna to add some DVR functionality so you can record your favorite shows and watch them whenever you want. It's called the Dual because it can record two live shows simultaneously. With the DVR, you can browse upcoming shows, schedule and manage your recordings, sort them by episode or series, skip commercials, and rewind. It connects to your home network via Wi-Fi and has a free app you can access from just about anywhere, including iOS, Android, and streaming devices like the Roku.

The Dual Lite is the most basic of the Tablo lineup, which you can read more about here. You will need to add an external hard drive up to 8TB like the WD My Passport 1TB drive if you want to record shows locally.

Tablo does have a subscription service that will give you 14 days of access to future programming through a guide, different views and filters for all your shows, and out-of-home streaming. It costs $4.99 a month or $150 for a lifetime

Tablo continues to add new features like surround sound all the time, so these boxes only grow in value.

See on Amazon

Saturday’s top deals: affordable smart switches, headphone mounts & more

On a daily basis there is no shortage of great deals to be had, but sometimes hunting them down can be a bit time consuming. Don’t let that drag you down, though. We’ve rounded up some of our absolute favorites from today that you simply can’t miss out on.

Making it all smarter

Etekcity Smart Switch (2-Pack)

Using coupon code UDTUBLTV during checkout drops the price of these popular smart switches by $14, and brings them to one fo the best prices we’ve seen so far. If you’re looking to get started in the smart home world, this is a great entry point.

$25.98 $40 $16 off

See at Amazon

From being able to control them using the physical buttons to just your voice or even a few taps in the free app, these smart switches provide a lot of value, especially at this price. You can set an automated schedule so you don’t have to get out of bed to turn off the lights and never have to worry about coming home to a dark house. Smart home gear can be expensive, but you can also find some grea…

On a daily basis there is no shortage of great deals to be had, but sometimes hunting them down can be a bit time consuming. Don't let that drag you down, though. We've rounded up some of our absolute favorites from today that you simply can't miss out on.

Making it all smarter

Etekcity Smart Switch (2-Pack)

Using coupon code UDTUBLTV during checkout drops the price of these popular smart switches by $14, and brings them to one fo the best prices we've seen so far. If you're looking to get started in the smart home world, this is a great entry point.

$25.98 $40 $16 off

See at Amazon

From being able to control them using the physical buttons to just your voice or even a few taps in the free app, these smart switches provide a lot of value, especially at this price. You can set an automated schedule so you don't have to get out of bed to turn off the lights and never have to worry about coming home to a dark house. Smart home gear can be expensive, but you can also find some great deals like this one that you won't want to miss out on.

Before you turn out the lights, be sure to check out some of these other great deals:

Keep it tidy

Under Desk Headphone Mount

Stop cluttering your desk space with all your over-ear headphones, and instead grab one of these handy under-desk mounts to keep them organized and out of the way. You'll need to use coupon code PKVPGRLR to get the reduced price.

$4.18 at Amazon

Great Low Price

Microsoft Surface Pro 6 tablet

The Surface Pro 6 comes with a 1.6 GHz Core i5-8250U processor, 8GB of LPPDR3 RAM, a 128GB solid state drive, Wi-Fi, Bluetooth, and Windows 10 Home. The screen is a 12.3-inch PixelSense 10-point touchscreen with 2736 x 1824 resolution and 267 ppi. It has integrated graphics, a 5MP front camera, an 8MP rear camera, and support for microSDXC.

$699 at B&H

Fix it yourself

JackyLED 45-Piece Repair Kit

Using coupon code W8SVCAEE makes this toolkit a no-brainer purchase. You get 45 pieces to try and complete your next gadget repair at home. Pair the kit with a nice YouTube video, a relaxing drink, and you may not be so mad that you were a bit clumsy and broke the display of your favorite phone!

$6.92 at Amazon

A Series of Tubes

Netgear CM500 DOCSIS 3.0 cable modem

Clip the on-page coupon for these savings. With DOCSIS 3.0 and 16x4 channel bonding, the CM500 is capable of speeds up to 680Mbps. It's compatible with Windows and Mac and works with every major browser. It works with every major ISP, too, including Comcast, Spectrum, Cox, Charter, and others. Be sure to check with your ISP just in case. Netgear provides a one-year limited warranty.

$44.99 at Amazon

Louder Now

Anker Soundcore Motion B Portable Bluetooth Speaker

This upgraded version of the Soundcore speaker features dual full-range drivers and an oversized bass radiator for 12W of stereo sound. Its IPX7-rated casing offers water-resistance so you can bring this speaker to the pool with you, even drop it in, with no worries. The high-performance battery can last for over 12 hours on a single charge.

$24.99 at Amazon

Switch & Save

Verizon's 100/100 Mbps FiOS plan

Verizon is offering new customers who sign up for its 100/100 Mbps plan a $50 prepaid gift card, and the service is reduced to just $39.99 a month if you sign up for auto pay. This offer is exclusive to those signing up for service online, so if you try calling in you won't be able to get the pricing down this low.

$40 a month with $50 gift card at Verizon

This is just a small sampling of the deals that the Thrifter team has uncovered today. If you want to keep up with everything that the crew is uncovering, be sure to follow Thrifter on Twitter and sign up for the daily deals newsletter so you never miss out on anything!

Rootless Vs Full Root Jailbreak: What’s The Difference?

Rootless Vs full root jailbreak on iOS 12, what is the difference between the two? Which one is better to use? [ Continue reading this over at RedmondPie.com ]

Rootless Vs full root jailbreak on iOS 12, what is the difference between the two? Which one is better to use?


[ Continue reading this over at RedmondPie.com ]

How to find and subscribe to Mobile Nation shows in the Podcasts app

Looking for some fun entertainment in your Podcasts app? You should check out our great Mobile Nations shows!

We love podcasts here at iMore! We find them informative, entertaining, interesting, sometimes even thrilling, depending on what you’re listening to. But did you know that we have a whole slew of shows here at the Mobile Nations family?

That’s right, whether you want your weekly fix of Apple, or if you’re interested in diving into the world of Android, Windows, CrackBerry (BlackBerry), we have your back! We have a variety of podcast shows here at Mobile Nations, and we’re going to help you find and subscribe to them.

How to manually search for our shows
How to find the direct links to our shows
How to create a station for all of the MoNa shows
How to manually search for our shows and subscribe

Apple’s Podcasts app (and every other third-party podcasts app) uses a directory of podcast listings to help you browse and find shows. Everything can be searched for with the searc…

Looking for some fun entertainment in your Podcasts app? You should check out our great Mobile Nations shows!

We love podcasts here at iMore! We find them informative, entertaining, interesting, sometimes even thrilling, depending on what you're listening to. But did you know that we have a whole slew of shows here at the Mobile Nations family?

That's right, whether you want your weekly fix of Apple, or if you're interested in diving into the world of Android, Windows, CrackBerry (BlackBerry), we have your back! We have a variety of podcast shows here at Mobile Nations, and we're going to help you find and subscribe to them.

How to manually search for our shows and subscribe

Apple's Podcasts app (and every other third-party podcasts app) uses a directory of podcast listings to help you browse and find shows. Everything can be searched for with the search feature if you can't find it while browsing.

  1. Launch Podcasts.
  2. Navigate to the Search section.
  3. Tap on the search input field.
  4. Type in your search terms, like "iMore," "Android Central," "Windows Central," "CrackBerry," or "CordCutters."
  5. Make sure All Podcasts is selected, because Your Library will only search for what you have right now.
  6. Once the right results pop up, tap on the show you want to view.
  7. Tap on the Subscribe button.

You're now subscribed to our show! If you have notifications on, you'll get an alert whenever a new episode is available. Enjoy the show!

If you'd rather have the direct links to all of our shows, not to worry! We've rounded them all up for you here, so you can subscribe directly with the links, or copy & paste them in:

Those should take you to the main podcast page for each site (the exception is CrackBerry), where you can subscribe via RSS, iTunes, and more.

How to create a station for all of the MoNa shows

Now that you've subscribed to all of the Mobile Nations shows you want, so why not organize them into a station?

  1. Launch the Podcasts app.
  2. Go straight to your Library.
  3. Tap the Edit button in the upper right corner.
  4. Select New Station.
  5. Give your New Station a name, such as "MoNa" or "Mobile Nations shows."
  6. Click on Save.

Once you create a station, you can tweak the station settings. This includes choosing what podcasts go into the station, the sorting order, grouping episodes by podcast, only having unplayed episodes, and more. Don't miss our how-to guide on creating stations for more information.

Questions?

We have some great content in all of our shows, don't worry! They're definitely worth a listen if you love tech podcasts.

Need more help with the Podcasts app? Drop us a line here and we'll do our best to help you out!

Visa and Mastercard could raise interchange fees

According to a report from the WSJ, Visa and Mastercard are considering raising interchange fees on card transactions in the U.S. Visa and Mastercard generate most of their revenue from these small processing fees, and it could have implications for merchants and fintech startups. When you pay with a credit or debit card, merchants pay […]

According to a report from the WSJ, Visa and Mastercard are considering raising interchange fees on card transactions in the U.S. Visa and Mastercard generate most of their revenue from these small processing fees, and it could have implications for merchants and fintech startups.

When you pay with a credit or debit card, merchants pay a small fee to the bank that issued this card. Your bank then pays an even smaller fee to the company that operates the card network.

In most cases, card issuers and card networks are separate companies. For instance, Chase issues a Visa card, Chase gets an interchange fee on every card transaction, and Chase pays a tiny fee to Visa. Some companies also operate a network and issue cards themselves, such as American Express.

The WSJ says that Mastercard and Visa will raise their fees in April — Visa confirmed the change. While fees on each transaction are nearly unnoticeable, they add up quite rapidly. They generate a ton of revenue for Visa and Mastercard, and they represent significant costs for large merchants.

It could become a consumer protection issue as customers often end up paying higher prices because of those fees. While Visa and Mastercard mostly negotiate with financial institutions, those financial institutions still want a cut on interchange fees. That’s why those fees are passed on to the merchants.

Merchants take into account the fact that a large portion of their customers are going to pay with a card. They end up raising prices for everyone, even if you pay using cash, a debit card or a credit card.

Fees on credit cards are generally higher and are the reason why points and rewards exist. Banks attract customers with advantageous reward systems because they want to get your interchange fees. Interchange fees are also much higher in the U.S. than in Europe because there has been more fraudulent activity — the U.S. has switched to chip-and-pin cards years after Europe.

An increase in interchange fees could also affect consumer fintech startups. Many challenger banks have been relying on interchange fees as one of their revenue streams. That’s part of the reason why European fintech startups, such as N26, Monzo and Revolut, have been looking at the U.S. as a potential market. There’s an entire industry built on top of those interchange fees.