Amex’s venture arm sees fintech potential in APIs, canceled flights

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American Express' VC wing is taking efforts to solidify its position in two sectors that are quickly maturing: APIs for small businesses and digital travel concierge services.

American Express Ventures has made a pair of investments, leading a Series A round in Freebird, a Cambridge, Mass.-based travel technology company; and Cloud Elements, a Denver-based company that sells and API integration platform for digital products.

Boosted by e-commerce enablers such as Stripe, APIs have become a basic element of any fintech toolkit, as merchants have grown to expect a relatively low-tech path to accept payments and perform other business functions.

APIs and other open technology tools are among the primary way fintechs and banks will connect to share information as part of open banking, either voluntary or driven by new rules such as PSD2.

That’s made having a deep relationship with an API provider a must for any payment processor, card provider or merchant acquirer.

“It’s the norm rather than the exception,” said Harshul Sanghi, a managing partner at American Express Ventures. “Whether a small to midsized business wants to pay a bill, connect to accounting, or set up an e-commerce site, it’s all in a cloud.”

Cloud Elements, which was founded in 2012, attempts to simplify API connections through a “one to many” model to address the growing number of APIs that businesses use.

While APIs are regarded as revolutionary, they’re also not as easy as meets the eye, with varied security protections and different API models for different functions. That’s creating a new market for fintechs that manage APIs.

“There now needs to be multiple integrations for multiple solutions,” Sanghi said.

Freebird serves a more conventional use case, that of rebooking new tickets. The company, which was founded in 2015, uses mobile technology to support booking after a canceled flight, delay or missed connection.

Flight delays are a problem that most people think about only when it’s right in front of them, but it’s a big dent in business, costing more than $26 billion in 2017 in the U.S. Over the past 18 months, Freebird has added more than 100 corporate travel agencies to its network, including BCD Travel, one of the largest travel agencies in the world.

Given the importance of T&E to Amex, the investment in a mobile travel experience company was a natural fit, particularly given the expansion of mobile technology for travel management and the increasing integration of mobile payments with booking and ticketing.

“Anybody who has traveled for business or pleasure can relate to that point in time when a trip is canceled,” Sanghi said. “You want a hassle-free experience to solve that problem.”

Freebird reported the Amex Ventures-led round was $8 million, while the Cloud Elements investment was not disclosed. Amex Ventures did not disclose its individual investment.

The Palo Alto-based Amex Ventures has invested in more than 50 companies since it was created in 2011, with a focus in areas such as B2B, data analytics, machine learning, security, regulatory technology, compliance and other areas that impact Amex’s relationships with clients. Other recent investments include EverCompliant, a New York-based company that combats transaction laundering and other payment crimes.

Amex Ventures participates in the company’s development, and has made acquisitions of companies in its portfolio, including mobile authentication company InAuth in December 2016 and Mezi in January 2018. Like Freebird, Mezi serves transportation and entertainment use cases.

Amex Ventures is part of trend toward a larger role for fintechs or payment companies in payment technology investment, with these companies existing alongside traditional capital sources.

“In addition to the private equity investment firms, most of the large financial institutions now have venture capital and investment business arms as well,” said Steve Murphy, director of the commercial and enterprise payments advisory service at Mercator Advisory Group.

The fintech industry has been moving more in the B2B direction, though it got there more slowly than it did for consumers, Murphy said. This new approach "could include payments and working capital type of solutions," he said.

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