When it comes to online payments, the front end of the system has seen a massive amount of disruption in the last several years, with companies like Stripe, Adyen, PayPal, Square and others building APIs that make it very simple for online merchants to integrate easy payment services into their checkout flows. But when it comes to the backend, the rails other tech used to actually pass on payment information and make the transactions are more often than not decades old.
Now that, too is starting to change: today, a company called Silverflow that’s built a new take on one aspect of that, with an API to enable data-based payment processing, is announcing $17 million in funding to capitalize on interest that it is seeing for its technology among payment service providers. The company, based in Amsterdam, is also going to use the investment to fuel its expansion to the U.S.
The crux of what it is doing is providing a super-charged alternative to legacy processing systems, with a wider scope for additional services wrapped around the payments, by rebuilding them as data-based networks in the cloud.
“Payments processing technology has changed over the last decade,” Anne Willem de Vries, the CEO, said in an interview. “The cost of bandwidth has gone down tremendously. Older networks were not designed as data systems; they were designed to be efficient. But those limitations are no longer there, and in the data cloud we can do more. So that gives us a good opportunity to innovate.”
The Series A is being led by Coatue Management, with past backers Crane Venture Partners and INKEF Capital, as well as new backer Global Paytech Ventures, also participating. The round also includes endorsement (and cash) from individuals that have made names for themselves in the payments business, including Jason Gardner, the founder and CEO of Marqeta, and Gokul Rajaram, the former head of product for Square who is now a board member at Coinbase. Silverflow is not currently disclosing its valuation, nor too many details about its customer base — it targets payment service providers, acquirers and large merchants building their own payment services — except to note that Deutsche Bank is among a handful of current customers and that it will be adding three more customers soon.
Founded by De Vries, Robert Kraal (CBDO), and Paul Buying (CTO), De Vries and Kraal previously worked together at Adyen, the Dutch digital payments powerhouse, where the former was running card acquiring and processing services and the latter was the company’s COO.
Although the two conceded that Adyen is one of the few companies that’s been tackling the payment processing space with a new approach, by and large they could see that the rest of the industry was running on legacy systems, which were slow, prone to a lot of downtime, and generally not fit for purpose. In the modern world, transactions are essentially just one aspect payments; equally important is the data that comes with that transaction, useful for accounting, for business intelligence, analytics, and more.
“We’ve built a brand new cloud native platform for payment companies,” said De Vries. “Payment service providers and the retailers using them want more insights into data, risk management, loyalty and more. We can deliver these new functionalities quicker and more easily than legacy providers. We are replacing those legacy payment processors in the payment stack.”
Starting first with Visa and Mastercard transactions, the plan will be to extend to all card issuers over time. And then, potentially, to other kinds of payments: it’s a very fragmented and highly localized space, but Kraal said that overall cards are still the biggest and most-used common ground among them.
“The Founder-market fit is the first thing we noted when looking at the Silverflow team,” said Michael Gilroy, a general partner at Coatue, in a statement. “The depth of experience within payments gives this team a unique perspective from which to solve a problem plaguing the industry – outdated infrastructure. The platform is built for the payments industry of today, and has the scalability, flexibility and usability its partners need.”