Payments startup Catch aims to move beyond e-commerce and into physical stores by the end of this year, its CEO said last week.

The company, which is focused on helping merchants avoid interchange fees and retain customers, allows consumers to pay for purchases through automated clearinghouse payments.

The Catch pitch is that merchants don’t pay credit card interchange fees, and they’re able to issue their customers some amount of store credit as an incentive to return. 

Especially in light of the return to brick-and-mortar stores following the COVID-19 pandemic’s e-commerce surge, Catch is working this year “to crack an omnichannel payment experience,” said Catch CEO Nico Perdomo, who co-founded Catch with Chief Operating Officer Denia Ebersole.

Founded in 2020, the San Francisco-based startup is among the companies that research and consulting firm Forrester highlighted last year as tapping into the pay-by-bank option amid rising merchant frustration over interchange fees.

Catch now works with about 50 merchants, including consumer goods companies PacSun, Everlane and SoulCycle. When a consumer opts to pay through Catch, they share their bank account information. With that purchase, they earn a store credit with that retailer that is put into the consumer’s Catch wallet. The retailer decides the amount of that credit and the expiration date on that credit, Perdomo said in an interview last Thursday. 

When a consumer returns to that retailer’s site and uses that store credit, Catch collects a share of that order amount. That percentage varies by merchant but is typically in the high single digits, Perdomo said. 

He acknowledged that’s notably higher than a 2% to 3% credit card swipe fee, but argued his company offers more value to merchants. “Hopefully, they’re getting that customer to come back sooner, spend a lot more with them and just be a much more loyal customer,” he said. 

The company pitches its services to retailers as an alignment of incentives for consumers and merchants. “Interchange is just a tax that big banks and payment companies have used to fund their own loyalty programs for decades,” Perdomo asserted. Catch aims to flip that model and give merchants “the power to do the same thing.”

The company seeks to grow beyond the small to mid-market merchants it currently serves, with the goal of drawing in more consumers by partnering with large, multi-billion-dollar brands, Perdomo said. 

“Hundreds of thousands” consumers currently use its services, and the company is aiming for one million customers within 18 months, a spokesperson said. The big merchants Catch aims to link with might include large sports, apparel or beauty retailers, Perdomo said, declining to be more specific. With Catch’s “sweet spot” being the sub-$250 basket size, the pet and baby goods retail categories also present opportunity for the company, he said.

Catch, which is backed by venture capital firms including Sequoia Capital and Index Ventures, doesn’t disclose the amount of capital it’s raised. The company isn’t looking to raise more funds currently, Perdomo said. He also wouldn’t share the company’s revenue last year. 

The pay-by-bank option won’t appeal to every consumer, and it limits Catch to some degree, Perdomo conceded. Pricey purchases such as home furnishings are not Catch’s domain. Still, Catch’s merchant clients say up to 40% of their retail volume comes from debit payments.

The age range of the startup’s largest consumer cohort is between 20 and 30 years old, Perdomo said. That’s a demographic that has shown strong interest in paying in full and up-front, said Index Ventures Partner Mark Fiorentino, who co-leads that firm’s fintech team. 

“Historically, it's been the premium rewards component that kept individuals using credit cards,” Fiorentino said via email on Friday. “If debit or bank account as the purchase mechanism can mimic or outmatch said premium rewards, pull is quite strong within this target user segment.”

Catch isn’t the only company that seeks to give retailers a way to create their own loyalty programs. Private-label credit card company Tandym lets retailers create their own digital cards and rewards programs in an effort to drive customer retention. That company has also said it’s preparing to allow in-store programs later this year.

Catch also hopes to capitalize on the upcoming launch of the Federal Reserve’s new instant payments system, FedNow. 

“Ultimately, these are all pipes that are being created,” Perdomo said of the new real-time service. “You still have to have a platform and a consumer product that sits on top of those pipes, that makes it appealing for a consumer to actually adopt. And we believe that could be us.”

By Caitlin Mullen on May 15, 2023
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