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Adyen alumni raise €2.6M seed to launch Silverflow, a ‘cloud-native’ card payments processor

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Silverflow, a Dutch startup founded by Adyen alumni, is breaking cover and announcing seed funding.

The pre-launch company has spent the last two years building what it describes as a “cloud-native” online card processor that directly connects to card networks. The aim is to offer a modern replacement for the 20 to 40-year-old payments card processing tech that is mostly in use today.

Backing Silverflow’s €2.6 million seed round is U.K.-based VC Crane Venture Partners, with participation from Inkef Capital and unnamed angel investors and industry leaders from Pay.On, First Data, Booking.com and Adyen. It brings the fintech startup’s total funding to date to ~€3 million.

Bootstrapped while in development and launching in 2021, Silverflow’s founders are CEO Anne-Willem de Vries (who was focused on card acquiring and processing at Adyen), CBDO Robert Kraal (former Adyen COO and EVP global card acquiring & processing of Adyen) and CTO Paul Buying (founder of acquired translation startup Livewords).

“The payments tech stack needs an upgrade,” Kraal tells me. “Today’s card payment infrastructure based on 30 to 40-year-old technology is still in use across the global payment landscape. This legacy infrastructure is costing everyone time and money: consumers, merchants, payment-service-providers and banks. The legacy platforms require a lengthy on-boarding process and are expensive to maintain, [and] they also aren’t fit for purpose today because they don’t support data use”.

In addition, Kraal says that adding new functionality is a lengthy and expensive process, requiring the effort of specialised engineers which ultimately slows down innovation “for the whole card payments system”.

“Finally, every acquirer provides its customer with a different processing platform, which for a typical payment service provider (PSP) means they have to deal with multiple legacy platforms — and all the costs and specialised support each entails,” adds de Vries.

To solve this, Silverflow claims it has built the first payments processor with a “cloud-native platform” built for today’s technology stack. This includes offering simple APIs and “streamlined data flows” directly integrated into the card networks.

Continues de Vries: “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”.

Target customers are PSPs, acquirers and “global top-market merchants” that are seeing €500 million to 10 billion in annual transactions.

“As a managed service, Silverflow provides the maintenance for connections and new product innovation that users have typically had to support in-house or work on long-term product road maps with suppliers,” explains Kraal. “Based in the cloud, Silverflow is infinitely scalable for peak flows and also provides robust data insights that users haven’t previously been able to access”.

With regards to competitors, Kraal says there are no other companies at the moment doing something similar, “as far as we are aware”. Currently, acquirers use traditional third-party processors, such as SIA, Omnipay, Cybersource or MIGS. Some companies, like Adyen, have built their own in-house processing platform.

So, why hasn’t a cloud-native card processing platform like Silverflow been done before and why now? A lack of awareness of the problem might be one reason, says de Vries.

“Unless you have built several integrations to acquirers during your career, you are not aware that the 30 to 40-years-old infrastructure is still in use. This is not typically a problem some bright college graduates would tackle,” he posits.

“Second, to build this successfully, you need to have prior knowledge of the card payments industry to navigate all the legal, regulatory and technical requirements.

“Thirdly, any large corporate currently active in card payment processing will be aware of the problem and have the relevant industry knowledge. However, building a new processing platform would require them to allocate their most talented staff to this project for two-three years, taking away resources from their existing projects. In addition, they would also need to manage a complex migration project to move their existing customers from their current system to the new one and risk losing some of the customers along the way”.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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The fragmentation of everything

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The rise of technonationalism. Diverging regulatory regimes. The spread of “walled gardens.” Polarization like nothing we’ve seen before. The confluence of several trends is poised to completely fragment our real and digital worlds. For companies, this raises a host of new risks, from cybersecurity threats to reputation risk—which, in turn, will require new responses and approaches.

The techonomic cold war

A “techonomic cold war” is already under way—an ongoing, often-invisible state of conflict at the intersection of technology and geopolitics.

Competition to dominate the next generation of technology infrastructure—such as electric vehicles, 5G networks, and quantum computing—is becoming increasingly heated. It’s a high-stakes contest and the countries setting the rules for these technologies could secure significant economic advantage, much as the United States benefited over several decades from pioneering the personal computer and the internet.

At the same time, populist and nationalist leaders have been ascendant in much of the world. These leaders have protectionist and interventionist instincts, and a willingness to buck established norms. It’s a combination which has resulted in the deployment of unconventional tools to favor domestic companies—not just tariffs and trade wars, but company bans and new forms of cyberattacks such as weaponized disinformation.

All of this is leading to the partitioning of both the real world (e.g., trade, labor mobility, and investment) and the digital world (e.g., tech platforms and standards). In this fragmented future, companies once used to operating on a global stage will instead find themselves restricted to operating within the spheres of influence of their home states. (For more, see “Techonomic Cold War” in EY’s Megatrends 2020 report and MIT Technology Review’s “Technonationalism” issue).

Regulators aren’t the only ones fragmenting the digital world. To a large extent, tech companies have been doing it themselves.

Divergent social contracts

Technology platforms are today’s basic infrastructure, increasingly inseparable from the economies and societies in which they exist. These platforms are increasingly where citizens get news, engage in political debate, network professionally, and more.

But while tech companies might seek to create seamless, integrated global platforms, they in fact deliver their offerings in vastly different societies. The social contract of the US is fundamentally different from that of China, Saudi Arabia, or even the European Union (EU). So, governments and regulators in different markets have been moving to recast tech platforms in the image of their social contracts. An early example was China, which developed its own platforms that better align with its social contract than do US-developed offerings.

Meanwhile, the EU has become increasingly active and visible in regulating technology. The most prominent recent example, the General Data Protection Regulation (GDPR), is a precursor of things to come. The GDPR tackles privacy and data protection, but much bigger regulatory issues loom, from the explainability of algorithms to the safety of autonomous vehicles (for more, see EY’s Bridging AI’s trust gaps report). As these technologies come of age and become more prominent in the lives of citizens, expect governments in different regions to become more active in regulating them. Over time, increasingly complex regulatory issues and divergent ideologies will create either separate platforms, or platforms that ostensibly have the same name but deliver fundamentally different user experiences in different geographies.

Walled gardens

Regulators aren’t the only ones fragmenting the digital world. To a large extent, tech companies have been doing it themselves. Walled gardens—closed, self-contained tech platforms or ecosystems—have endured because they are good for the bottom line. They allow companies to extract more value from customers and their data while offering a more curated user experience. In recent months, there has been a growing fragmentation of “over-the-top” media streaming services, with individual studios and networks developing their own subscriber platforms. Instead of streaming platforms that hosted content from a wide variety of creators, platforms will offer exclusive access to their own content—fragmenting the streaming media experience.

Hyperpolarization

It’s no secret that political polarization has been growing at an alarming rate and that social media platforms—while not solely responsible—have been fueling the trend. Filter bubbles in social media platforms have enabled the spread of misinformation, leaving platforms with the tricky and unenviable task of policing the truth.

Worrying as it may be, everything we have seen so far may be nothing compared with what lies ahead. As social media platforms become more active in stemming the flow of misinformation, its purveyors are starting to seek new homes free from policing. In the weeks since the recent US Presidential election, a growing number of Trump voters have started leaving mainstream social media platforms for alternatives such as Parler and Telegram. By the time the next Presidential election rolls around, it’s not farfetched to anticipate that we could see today’s social media filter bubbles replaced by entirely separate social media platforms catering to conservatives and liberals.

At that point, we will have moved from an era of polarization to one of hyperpolarization. For anyone worried social media platforms are doing too little to curb misinformation, imagine how much worse things will be with platforms that don’t even try.

Risks and challenges

The techonomic cold war necessitates a new approach to cybersecurity. “Companies need to guard against not just malware and phishing attacks, but weaponized disinformation,” says Kris Lovejoy, EY’s global consulting cybersecurity leader. “We’ve seen disinformation used to attack elections, but there’s no reason it couldn’t be used to target companies. Most companies today do not have the safeguards and protections they will need in the next frontier of cybersecurity.”

A second challenge is lack of transparency. Commerce thrives on transparency, yet instruments such as company bans are opaque and seemingly arbitrary. To the extent these instruments undermine transparency, they create uncertainty for businesses.

The regional fragmentation of platforms by regulation and divergent social contracts increases the complexity of regulatory compliance and the risk of regulatory noncompliance. Beyond mere compliance, companies face significant brand and reputation risk if consumers perceive platforms to be misaligned with societal values.

A hyperpolarized future will create some of the most significant challenges of all. Losing the last tenuous bridges between our divergent echo chambers would threaten everything from social stability to the future of democracy and the very existence of a shared reality.

This content was produced by EY. It was not written by MIT Technology Review’s editorial staff.

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Zephr raises $8M to help news publishers grow subscription revenue

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Zephr has raised $8 million in a new funding round led by Bertelsmann Digital Media Investments (owned by media giant Bertelsmann).

The London-headquarteed startup’s customers already include publishers like McClatchy, News Corp Australia, Dennis Publishing and PEI Media. CEO James Henderson told me via email that rather than creating “a monolithic product that tries to do a bit of everything,” Zephr is “focused entirely on the experience and journey for the prospect or customer,” driving an average 150% increase in conversion rates and 25% increase in subscription revenue within the first six months.

Henderson added, “By offering the right product, package or message at the right time to the right person, Zephr improves conversion rates, drastically decreases churn and drives new, stable revenue.”

To do this, Zephr largely relies on the publisher’s first-party data about its readers — Henderson said that this data is “by far the most important and powerful type of data that Zephr both uses and generates.” But it also takes advantage of contextual data, such as “time of day, to location, device or consumption patterns.”

He also noted that Zephr is a no-code tool, allowing non-technical members of the marketing, revenue and product teams to use a drag-and-drop editor to create different customer journeys.

Zephr

Image Credits: Zephr

Asked how the pandemic has affected the startup’s business, Henderson said that there were both “positive and negative indicators,” with newsrooms seeing record readership but in some cases also freezing spending.

“As firms prepare for a ‘post-pandemic’ world, we are beginning to see our markets seize the opportunity of all these new potential subscribers and invest in subscription models – and in Zephr.” he said. “In publishing and news media, the old model of dominant advertising revenue is on the way out and we are well-placed to capitalize on that interest.”

The new funding also includes financing from Silicon Valley Bank UK Branch and brings Zephr’s total funding to $11 million. Previous investors include Knight Capital and Nauta Capital. According to the company’s funding announcement, this money will go towards further product development (with a focus on increased personalization), as well as expansion across the United States, Europe and Asia.

“The recent weakness in the advertising market increased pressure for media companies to diversify revenue streams and aim to introduce or optimize subscription models,” said BDMI Managing Director Urs Crete in a statement. “We recognise Zephr’s excellent technology that empowers publishers to galvanise the online subscription opportunity and create customer journeys that are truly unique.”

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PrimaHealth Credit offers a buy-now, pay-later lending service for elective procedures

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The Newport Beach, Calif.-based healthcare lending service PrimaHealth Credit  is now pitching point-of-sale lending services for elective medical procedures.

Taking the kinds of financial lending services that have been popularized by companies like Klarna and Affirm, PrimaHealth Credit is bringing them into elective surgical space for things like cataract surgery, orthodontic work, dental care, or LASIK.

“For many dental, orthodontics, LASIK, and cataract surgery patients, our BNPL product is a ‘last resort’ – the difference between getting the treatment they need, or not,” said Brendon Kensel, founder and CEO of PrimaHealth Credit, in a statement.

The company expects that patients will pay somewhere between 25% and 50% of the cost of their treatment up front with repayment durations for the loans ranging between two and four months.

Rates for the loans will range from 19.99% to 24.99% APR with average loan sizes coming in at around $1,800 across dental, orthodontics, and LASIK, according to the company.

“Until now, when providers couldn’t approve patients for an existing payment plan, they’d either forego providing them care or take them on anyway, exposing themselves to significant liability as they struggle with adequately assessing creditworthiness and properly servicing and collecting loans,” Kensel said.

The program not only handles loan origination for healthcare practices, but handles the back-office tasks for payment and servicing.

“Our goal as a company is to remove barriers to patient acceptance and help people who have the means but not necessarily the credit score to get the quality care that everyone deserves,” Kensel said.

Using the PrimaHealth Credit mobile app, patients can receive instant credit decisions and choose the payment plan that works best for them. The company said the service is currently available in Arizona, California, Florida, Oklahoma, and Texas and will be expanded to all 50 states by 2021.

 

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