Silverflow nabs $17M for its updated, cloud-based take on payments processing technology

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.”

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

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, 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”.