Cross-border e-commerce tech draws fresh VC attention
"Fintech as a service" is emerging as an opportunity for investors that want to add diversity to the U.S./U.K. digital payment models, helping them to compete in a global market.
As Oak HC/FT takes that wraps off its new fund, it’s looking for opportunities to gain a foothold in the trend. Oak HC/FT is the lead investor in a $100 million round in Rapyd, a company that’s designed to serve a complex international supply chain, such as a consumer in one country using a digital wallet to buy a product from a merchant another country in the merchant’s local currency, with the merchant then disbursing funds to a supplier in a third country in yet another currency.
Oak HC/FT announced the investment on Tuesday morning, a few weeks after launching its $800 million third fund. Rapyd and Oak HC/FT did not disclose Rapyd’s valuation beyond saying it’s “close to unicorn status," or a $1 billion valuation. Stripe earlier in 2019 invested in Rapyd, as part of Stripe’s attempt to build an international merchant network. Stripe and General Catalyst, which is one of Stripe’s backers, also participated in the new Rapyd round.
The investment comes against the larger backdrop of major investment in general payment technology. As e-commerce boosts development, the largest U.S. banks are making payments the top fintech category, according to CBInsights.
This e-commerce growth is stressing international supply chains and combining more cross-border payment methods, attracting developers who are trying to address gaps in currencies acceptance, fraud risk and general processing.
“A large portion of the world is paying through local wallets and local methods, and cash,” said Tricia Kemp, co-founder and managing partner at Oak HC/FT, a five-year-old firm with offices in Greenwich, Conn., Boston and San Francisco. “It’s enabling access to that pool that’s the big opportunity.”
Blockchain firms such as Ripple use a distributed ledger to circumvent traditional correspondent bank-dominated international payments, which were larger in size and less frequent than the smaller more frequent transactions that dominate online merchants and e-commerce.
But there are other approaches. For example, the European Mobile Payments Systems Association, a group of mobile payment companies that are cooperating to streamline cross-border payments across a 350-bank network.
Writing for PaymentsSource, Peter Shore, general manager of Transpay, said the expansion of cross-border commerce and open banking have been a boost for small businesses, but have also created a fragmented and complex cross-border payment industry that's difficult to navigate. "Many diverse choices exist for sending payouts to global suppliers, remote workers, and business partners across different countries and currencies," Shore wrote.
Rapyd’s approach is to combine local payment providers into an API-accessed financial services network to serve merchants, sharing economy apps and online banks to support bank transfers, e-wallets, local debit, identity verification, payouts, and card issuing. It also provides software for e-wallets and foreign exchange management.
Rapyd will use the new funds to extend its reach in markets in Asia/Pacific and Latin America, as well as add more self-service options.
“We want to enable clients to onboard themselves, and fully automate the compliance” said Arik Shtilman, co-founder and CEO of Rapyd, which has offices in Silicon Valley and Tel Aviv. “There’s still a huge opportunity in the sharing economy and the gig economy.”
There's also potential collaboration. Oak HC/FT has invested in several fintechs that are pursuing digital payments and AI-driven analytics that could team with an international toolkit such as Rapyd's.
“Rapyd’s enabling service to parts of the world that have different payment methodologies,” Kemp said. “It’s hard for merchants to reach them.”
Oak HC/FT's other portfolio companies include Dama Financial, which services cannabis businesses; the Digital Currency Group, which provides technology to bitcoin companies; fraud prevention company Feedzai; financial services AI firm Kasisto; and Fast Pay, a workflow and transaction processing company that sells to global media companies.