Our investment in Silverflow: bringing the last piece of the payments chain to the 21st century
We are excited to announce our participation in the seed financing round of Silverflow alongside Crane Venture Partners and business angels with experiences at First Data, MasterCard, N26, PAY.ON, Adyen, and more. Founded by long-time online payments industry veterans and seasoned startup founders Anne-Willem de Vries (who was focused on card acquiring and processing at Adyen), Robert Kraal (former Adyen COO and EVP global card acquiring & processing of Adyen), and Paul Buying (founder of the acquired translation startup Livewords) - Silverflow will launch its card payments processing technology in early 2021.
The payments industry: a tale of continuous innovation
Have you ever wondered what happens in the few seconds when you swipe a credit card and your purchase is approved (or declined)? It seems rather easy to swipe a card, or enter a pin to make a payment, but what takes place in the background is a series of continuous real-time interactions between multiple stakeholders — the merchants, Payment Service Providers (PSP), payment processors, card networks, and the banks — making the payments value chain arguably one of the most complex value chains in today’s world.
From the barter system to coins, cash, and cards, the payments industry and the corresponding value chain is continuously evolving. Fast forward to the 21st century, new payment methods emerge every day — think of Apple Pay, Klarna, WeChat, and more. But how many times have your transactions been declined despite having sufficient funds on your account, or have you reached the checkout counter, or page, only to find out that your preferred payment method is not accepted?
The problem that has so far remained unaddressed
In order to stay up to date, merchants rely on Payment Service Providers (e.g. Stripe, Adyen, PayPal) to maintain connections with this extremely intricate and ever-evolving value chain. The PSP market has been heavily disrupted in the last 20 years, and the leading PSPs of today use modern technologies to connect to the acquiring banks who serve as the final conduit into the payment card schemes (e.g. Mastercard, Visa and others).
However, a chain is only as strong as its weakest link, and the reality is that little innovation has taken place in the world of acquiring processing. Silverflow has put its finger on this link. Processing platforms used by the banks to connect with payment card schemes are based on legacy systems built in the 90s and cannot support today’s needs of agility, accuracy, and transparency, causing both PSPs and merchants to lose business. According to a report by Checkout.com and Oxford Economics, in 2019, merchants in US, France, Germany and UK lost USD 20.3bn in digital commerce sales due to false declines of transactions.
Silverflow’s solution
To this end, Silverflow is the first card payments processor with a cloud-native platform built for today’s technology stack, with simple APIs, streamlined data flows, directly integrated into card networks. Silverflow is made for PSPs, acquirers and global top-market merchants, that are seeing €500mn-10bn in annual transactions. Instead of managing a complex network of acquirers across markets with dozens of bank and card network connections to maintain, Silverflow provides card acquiring processing as a service that connects to card networks directly through a simple API. Merchants and PSPs will have lower friction in adopting new and cross border card-based payment methods, improve authorization rates, have a detailed and accurate overview of payment processing costs at the transaction level, and also gain access to valuable data for risk management.
Our investment thesis
In summary, we are stepping on board as an investor with a high degree of conviction because Silverflow is:
Upending the value chain,
Silverflow slashes the additional layer of individual processors, providing an acquiror-bank-agnostic solution. Unlike today, a PSP will use one and the same platform across banks and regions and will also gain access to Silverflow’s global network of banks.
Attacking a massive, rapidly growing market,
In 2019, global card purchase volume of Visa and MasterCard transactions totalled to a massive $13.7tn. Additionally, the growth in card transactions is going to be further fuelled by the technological advancement in developing regions like Latin America, Africa, and Asia Pacific.
With a scalable and defensible solution,
Payments is a heavily regulated space. Connecting to the card networks and staying up-to-date with regulations requires companies to digest thousands of pages of guidelines and follow very lengthy certification and licensing processes. Silverflow is well on track to cross this moat, which complemented by its easily deployable solution will build a strong defensible position in the market.
Built by a team that knows where it hurts and that has strong customer inroads.
Silverflow is helmed by a seasoned and execution-driven team that draws experience from an array of related fields. Both its CEO, Anne Willem, and CBDO, Robert Kraal, had first-hand experience of the pain points for PSPs during their time at Adyen, and supported Adyen to become the first PSP to build a state-of-the-art in-house processing platform. The CTO, Paul Buying, is a technology wizard and a serial tech entrepreneur, with a background in Artificial Intelligence. Additionally, as part of this seed financing round, Silverflow has managed to surround itself by a network of business angels which boast the right connections to PSPs, acquirors, and large-cap merchants.
We couldn’t be more bullish about this opportunity, watch out for the commercial launch of Silverflow to take place soon!
