Why We Invested: Nivelo
Back in the 1970s, a group of bankers had the bright idea to replace checks with a computer-based system for electronic transactions. It changed the game.
Today, the Automated Clearing House (ACH) Network, which is still running on 40+ year old infrastructure, remains the main pipeline for electronic payments. The network processes two types of transactions: direct deposits (paychecks, tax refunds, etc) and direct payments (online bill pay, Venmo, etc). We have all likely experienced both.
Last year there were 24.7 billion payments on the ACH Network, an increase of 7.7 percent over the previous year. The total value of payments processed was $55.8 trillion, up nearly 9 percent, according to the National Automated Clearing House Association (NACHA).
This follows a steady run of growth for the network. Last year was the seventh consecutive year in which ACH Network’s value increased by more than $1 trillion, and the fifth straight year that the number of transactions grew by a billion.
But, as transactions grow, so do complications. Today’s banking settlement infrastructure takes days to return notification of errors caused by fraud, insufficient funding and human errors. Of the nearly 25 billion transactions, nearly 1 in 20 will be fraudulent.
How do payment processors combat the inevitable attacks and errors? A company can either build internal tools, slow transaction time or accept the lost revenue.
It is a massive problem. And this is why we are thrilled to announce our investment in Nivelo.
The ACH Network’s expensive security problem demands tools for safe settlement of digital payments. Leveraging its Risk Scoring API, Nivelo helps payment processors validate payments before cash leaves the door by identifying signals of potential account takeovers, synthetic identity fraud, admin errors, business email compromise risks and non-sufficient fund returns.
Again, the key here is speed. How fast is the blink of an eye? Less than a second. How fast does Nivelo review payment transactions, parse them out and provide a probability of default? A blink of an eye. This is compared to the current 4–5 days that it takes to assess risks and clear payments via today’s ACH infrastructure.
That speed results in an unmatched layer of security for payment companies who, currently, report ACH failure rates of around 5 percent of transactions. Once Nivelo analyzes transactions, those that are risky are submitted for further review and those that are not risky are processed or funded immediately. Whether in the case of fraud or a possible processing error, Nivelo issues an alert before the payment is sent out, which eliminates a mountain of administrative costs that develop from a returned transaction.
Nivelo’s ability to deliver value from the start can be attributed to founder Eli Polanco’s deep expertise in payments.
She was a founding member of J.P. Morgan’s New Product Development & Emerging Technologies where she led digital payments initiatives, inclusive of ACH, wires and crypto payments. Eli has a proven track record of growing teams globally and building innovative technology solutions.
The Female Innovators Lab by Barclays and Anthemis is dedicated to identifying diverse female entrepreneurial talent and supporting founders in developing new, digital-era concepts and ventures. We are thrilled to be backing Nivelo in bringing more security to the payments infrastructure that is a part of our everyday lives.