Brex Inc. is the latest financial technology company to unveil a bank-like product.

On Oct. 2, Brex announced it would roll out a cash management account, offering business customers a 1.6% return on their cash balances. Small-business cards have long been dominated by traditional credit card giants such as American Express Co. and JPMorgan Chase & Co., but the Silicon Valley startup entered the scene in 2017 and was valued at $2.6 billion after closing its latest funding round. It has risen to prominence by offering no-fee, no-interest corporate credit cards to young companies.

With both a corporate credit card and a cash management account, Brex customers can pay any vendor, regardless of whether they want to be paid with a credit card or through direct deposit over the automated clearinghouse system or wire payment rails, said CFO Michael Tannenbaum. Brex Cash was prompted by customer requests for such a feature and will be offered to existing Brex card customers on a rolling basis, with public availability coming soon.

The move also comes a month after fellow San Francisco-based startup Stripe Inc. launched corporate credit cards in a beta program for U.S.-based companies. Stripe is the highest-valued private U.S. fintech company, with a pre-money valuation of $35 billion in mid-September after its latest funding round.

Brex has partnered with Boston-based Radius Bank, which will give the startup access to the ACH and wire payment rails, services needed to process payments. However, Brex built its own core ledger system in-house, which allows the company to do unified underwriting between card and cash. Looking at both accounts, Brex can better assess a customer's financial health, Tannenbaum said in an interview.

"Credit cards have historically been very divorced from bank accounts," the CFO said. "We're trying to combine the underwriting and the onboarding, and we're also able to then combine the rewards program. We can only do that because we have built the software ourselves."

A cash management account will allow Brex to reach companies as they are first starting out, since startups need a place to hold their cash on Day 1, Tannenbaum said. The cash management account, in conjunction with the corporate credit card, could effectively then replace a startup's bank account.

But unlike a bank account, Brex does not have insurance from the Federal Deposit Insurance Corp. Instead, Brex Cash users are protected by the Securities Investor Protection Corp., a nonprofit that insures money held by member broker/dealers, Brex included, in case those companies fail. Its members typically offer brokerage accounts where customer money is stored as cash when it is not being invested. Brex invests customer money in a money market mutual fund of U.S. treasury bonds, similar to online broker/dealers like Fidelity Investments.

Robinhood Markets Inc. announced Oct. 8 its second attempt to launch a cash management account for customers. The startup attempted to launch what it said was an SIPC-insured checking and savings account in December 2018. But the company was forced to do an about-face when the SIPC said it did not protect cash held for anything other than purchasing securities.

Brex Treasury LLC, the entity offering the cash management account, is a member of the SIPC.

"To the extent that Brex Treasury is holding cash or securities for its customers, those customers would be protected. With respect to cash, the cash has to be on deposit for investment purposes," said SIPC President and CEO Josephine Wang, in an interview. The SIPC protects customers up to $500,000 in cash and securities, of which up to $250,000 can be in cash.