Silverflow, a global payment technology company, is announcing a €2.6 million seed funding round, led by UK-based seed-stage investor Crane Venture Partners, with participation from INKEF Capital and notable angel investors and industry leaders from Pay.On, First Data, Booking.com and Adyen. With this seed round, Silverflow has now raised €3 million in total funding. Founded…
In recent years, we’ve seen businesses in some offline sectors start their journey to go digital. Startups are proving increasingly critical in helping such sectors move into the online space. Additionally, there are companies that are helping close the digital divide but what about some existing technologies that need upgrading? This is exactly what the startup Silverflow intends to work upon.
The company has raised a notable seed fund of €2.6M to roll out the first cloud-native card payments platform. In an exclusive conversation with SC, Silverflow’s co-founders, Anne Willem de Vries and Robert Kraal, share more about the company, the initial challenges it faced and more.
Total funding reaches €3M
With the latest funding of €2.6M, Silverflow’s total funding till date is now at €3M. This funding round was led by UK-based seed-stage investor Crane Venture Partners with participation from INKEF Capital and notable angel investors and industry leaders from Pay.On, First Data, Booking.com and Adyen.
The Silverflow team currently consists of five members. The company’s founding team consists of co-founder and CEO Anne Willem de Vries, co-founder and CTO Paul Buying, and the co-founder and CBDO, Robert Kraal. Kraal previously joined Adyen back in 2010 as the COO and has over two decades of experience in the online payment segment. Similarly, De Vries also gained experience in card payments at Adyen, where he joined the cards acquiring team. The latest seed funding will enable the startup to double its team size by the end of this year by adding new developers and a commercial director.
An upgraded payments technology stack
The Silverflow platform has been in development for about two year now and it is slated to launch in early 2021. The platform is said to be the first cloud-native card payments platform that directly connects with card networks.
The company’s co-founder Robert Kraal notes, “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. 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 roadmaps with suppliers. 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.”
The current technology stack or infrastructure for card processing was developed about four decades ago. Shedding more light on the legacy technology stack currently in use for payments processing, Kraal says, “Working for a number of years in Paytech, we concluded that the payments tech stack needs an upgrade. Today’s card payment infrastructure is based upon 30 to 40-year-old technology and it is still in use across the global payment landscape. This legacy infrastructure costs time and money for consumers, merchants, payment-service-providers, and banks.”
“The legacy platforms also require a lengthy onboarding process, are expensive to maintain and are also not fit for purpose today, because they don’t support data use. Further, 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,” he adds.
Many companies tried to work around the legacy tech by adding an additional layer on top of an existing stack. But the base infrastructure remains the same and Silverflow recognised an opportunity in the processing layer, which is the deepest layer of the stack. This stack apparently didn’t receive any “real innovation for several decades”. Kraal says the company viewed this as a huge opportunity to change the ecosystem.
Early days and initial challenges
Silverflow started in early 2019 with Robert Kraal and Anne Willem de Vries discussing the company’s core idea. “After talking to Visa & Mastercard and several PSPs (payment service processors) we were convinced we were on the right track. However, we quickly realised that we needed a technical co-founder for a project like this. We were introduced to Paul Buying by one of my neighbours, with whom I was participating in a machine learning course for professionals,” reveals De Vries.
As for the challenges, there are always some issues companies run into while starting out. For Silverflow, it was the company’s upfront development that had to happen without any incoming revenue. The fact that their services could only be made live after it passed some certain number of certifications, which would result in a longer waiting period for the company’s services to be made available for their customers, posed a major challenge for the team.
“We bootstrapped the company with the founders, and made sure we would be able to build the company with our initial capital. Additionally, we needed to convince our partners, for instance, Visa and MasterCard, about our business model, making sure they would accept us to build a solution to their network.” says Kraal.
“ You cannot simply call Visa and Mastercard for connecting to their network. You need to get “access to the club”. We established this in April this year, which was also for us the trigger to raise additional capital,” De Vries adds.
Ensuring data privacy, Adyen’s role and more
Since Silverflow is introducing a new and upgraded technology stack, a bigger emphasis is being placed on user data security.
“This (user data) is one of our top priorities. Cardholder data is very highly regulated and you need to get a Payment Card Industry (PCI) certification to be allowed to work with cardholder data.” reveals De Vries. “This was one of the first things we did and Silverflow was PCI certified on 16 June 2020. We have chosen for the highest level of Certification (PCI-level 1) to ensure security is part of our system from day one. Our cloud service providers also ensure we keep a safe, scalable and reliable platform.”
Siverflow is being headed by people that have worked at Adyen for a long period of time. The online payments processing platform definitely influenced the startup. De Vries tells us, “Not everyone is aware of the problem Silverflow is solving. Unless one has built several integrations to acquirers during their career, they won’t be aware of the 30-40 years old infrastructure that is still in use. 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.”
Since Silverflow is launching its services in 2021, there are some tasks that are yet to be finalised. “We are finalising our direct connection into Visanet and Mastercard’s Banknet this month. The next step is to certify our processing platform with Visa and Mastercard. This will be done in November and early December,” notes De Vries.
Kraal adds that when both these tasks are finalised, the company will test its services for a couple of months to ensure everything works as intended. Soon after, by February or March next year, the startup expects to carry out the first live transactions via its platform.
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”.
Open banking enables bank-to-bank payments, meaning that (in theory) merchants should be able to accept payments without having to hand over fees to Visa or Mastercard or other payment providers, such as Stripe. The challenge, however, isn’t just implementing open-banking based payments as a checkout option — there are are already a host of open banking tech providers — but persuading customers to switch to a new payment option they are likely unfamiliar with.
The solution, according to fintech Trilo, is to offer customers incentives, for using open banking, such as cashback or additional perks, coupled with a user-friendly payment flow. The U.K. startup is breaking cover today with the launch of its alpha.
“Businesses lose out on so much of their hard-earned money whenever a payment is made with cards, their transaction fees can be up to and above 4% in some cases,” says founder Hamish Blythe, when asked to define the problem Trilo wants to solve. “[In addition], it takes an age for businesses to receive their funds, usually up to 7 days… thanks to cards being invented back in the 50s before we even went to the moon”.
Open banking-based payments doesn’t just offer the opportunity to begin to chip away at the Visa/Mastercard duopoly, but should also reduce fraud associated with cards, leading to lower costs for merchants beyond transaction fees alone and less issues for consumers. But that requires take up of the new payment option.
“Open Banking’s great. However, me and you, consumers, have little-to-no-reason to use it,” argues Blythe. “Without an enjoyable, rewarding, and simple user flow, it’s going to be very hard to take off”.
To help remedy this, Trilo is combining an open banking payments API with incentives and rewards for consumers electing to use bank-to-bank payments. The startup is also doing away with transaction fees for merchants and will instead charge a monthly subscription akin to a SaaS model.
“Say goodbye to transaction fees, we’ve scrapped them,” says Blythe. “Our merchant partners also get their money in 5 minutes on average, so they can re-deploy it even faster… [and] consumers get a boost whenever you pay. Our main USP is that we focus on you, making your time as enjoyable, easy and rewarding as possible, whether that’s 1% off, a free beer, or an upgrade, businesses give you a serious reason to stop using your card”.
More broadly, Blythe says open banking gives a startup like Trilo the opportunity to take on “the largest duopoly on earth”.
“But to do this, we need to have the simplest and easiest way to pay out there for me and you,” he says, “while also having some serious kickback available to consumers when they pay. With our network we can also power refunds, consumer protection, and all sorts of other perks that pure open banking simply doesn’t offer”.
To pay with Trilo, you simply scan a QR or tap the Trilo button on a partnering merchant’s website or app. You’ll be remembered on your phone with a cookie, you’ll then see who you’re paying, what bank, and what your boost is, with the amount to pay clearly displayed beneath. “When you tap pay, you’ll hop over to your bank app, and can securely finish off the payment with a tap of the screen,” explains Blythe.
Meanwhile, to kick off Trilo’s alpha and to demonstrate the payments flow, Trilo is partnering with Make It Wild, who are reforesting large areas of the U.K. to help restore the natural eco-system. “With our alpha you’ll be able to fund a tree for a fiver with Trilo, and the best bit, because it’s using Trilo, every single penny will go on the trees,” adds the Trilo founder.