Fintech company Fragment has streamlined the process of bank account reconciliation and has successfully raised $9 million in funding from Stripe, Jack Altman, and other investors
Reconciliation is the bane of existence, as evidenced by the deep sigh of anyone who has ever closed the accounts at the end of the month.
This is particularly true for a business that processes hundreds or thousands of transactions monthly.
Fragment is a startup that provides a digital ledger API that employs real-time, double-entry accounting to identify discrepancies in the data. Fragment was established in 2021 by CEO Thomas Neckel and CTO Omi Chowdhury.
This is the third venture that the cofounders have cofounded together. They previously established an identity management company called Scuid, which was acquired by CA Technologies in 2014 and competed with Okta.
Subsequently, they established a private investment platform known as Cove.io. This was the impetus for recognizing the significance of a ledger, as Neckel stated that it was “a significant issue that we encountered.”
Neckel informed TechCrunch that the balances must be accurate and reconciled with the bank statements so that anyone can conclude their books for the month. “Accountants frequently employ enterprise resource planning systems to execute this function.”
However, Fragment asserts that its software reconciles accounts quicker than humans can, particularly when a high volume of transactions is involved, for those unable to pursue the intricate ERP software route.
Neckel emphasized that the reconciliation issues between Evolve Bank and Synapse resulted in exchanges of accusations and finger-pointing.
Fintech developers can construct financial products by employing the API provided by Fragment. They can create a fund flow, convert it to code, and then incorporate the code into their products.
Neckel stated that fund flows are the sequence of events documented in the database as entries, and each entry modifies a specific set of accounts.
Image Credits: Fragment / Fragment
For instance, suppose you wish to deposit funds into an account. The deposit is one of the fund flow steps. The entry titled “Make a deposit” will refresh the account in both your product and the bank.
Neckel stated, “We provide you with a designer to model the funds flow, and a database, similar to Postgres, to implement it, as well as a dashboard to operate it.” (Postgres, which is also referred to as PostgreSQL, is an open-source database.)
Although the New York-based startup claims it has already secured early customers such as TruckSmarter, Nala, and Pleo, it will be officially unveiled to the public on Monday.
Fragment is employed to finance purchases by TruckSmarter, which operates its own petroleum payments network. Nala employs fragments to facilitate the transfer of payments to enterprises in Africa.
Fragment reports that Pleo, a B2B spend management platform, employs it to retain and monitor the historical balances of its 30,000 customers.
The startup is also announcing a seed round of $9 million, which is supported by fintech infrastructure executives from Stripe, BoxGroup, Avid Ventures, Zack Perret (Plaid), Jack Altman (Lattice), Gokul Rajaram (DoorDash), Dara Khosrowshahi (Uber), Emilie Choi (Coinbase), Scott Belsky (Adobe), and Cristina Cordova (Linear).
Fragment has raised $10.8 million since June 2021, which includes this new investment. Gradient Ventures funded the company’s pre-seed round.
Neckel asserts that Fragment’s ledger technology is most directly competitive with Modern Treasury, a payments company. Nevertheless, Fragment’s objective is to address the fundamental issue of online value exchange by transcending balances.
“Stripe provided two individuals in a garage with the same payment infrastructure as Amazon,” Neckel stated about the project. “Let’s explore the potential of providing two individuals in a garage with the same financial infrastructure as Square, Stripe, and Uber.”
Fragment intends to allocate the funding toward expanding its engineering team and acquiring go-to-market resources.
In a written statement, Adam Rothenberg, a partner at BoxGroup, expressed his enthusiasm for the potential of technology companies to utilize programmable versions of the double-entry systems that underpin the contemporary economy.