Omnichannel commerce demands multiple layers of technology, and each layer adds a risk of latency and friction at time when payment companies can least afford it.
Cloud structures can smooth these workflows, and investors are seeing the potential of cloud vendors to serve as the connective tissue between ambitious startups and complex legacy systems.
"The whole payments space is evolving pretty fast," said Omar Khan, managing director of First Quay Capital. "Consumers are demanding change, simplicity and flexibility. Traditional networks are having to make way for new players, especially technology players. Given all of this, companies will increasingly need to have a cross platform offer."
First Quay, an Australian private equity firm, late last month made an investment in Alpha Payments Cloud, a Dublin-based company offering a hub that communicates with business systems and supports multiple technology types and programming languages. This allows it to deploy numerous vendor permutations that work together to improve productivity and reduce glitches.
Alpha has offered merchant automation in an "app store" model for some time, and is bracing for what it sees as more demand for technology that can manage other technology. As merchants and financial institutions embrace multi-channel shopping and payments, or simply rely more on mobile payments or apps, they're using more innovation from third parties, or from the diverse toolkits that are increasingly part of IT sourcing.
The complexities are still prevalent for banks and merchants in optimizing their digital, mobile and point of sale payments, risk and commerce strategies, said Oliver Rajic, CEO of Alpha Payments Cloud. "Both locally and globally, requirements change depending on different buyers, products and varying ticket sizes," Rajic said. "The bank can limit themselves to a small number of vendors for every merchant or can use our platform and access hundreds of vendors and create custom solutions based on the merchant's needs."
Alpha has the potential to be an alternative to the large financial technology vendors that sell a 'best of breed' approach to automation as an alternative to multiple technology relationships, which can be more expensive and difficult to manage, especially for smaller financial institutions or merchants.
"Alpha is the middle man for all of the middle men," said Bernard Golden, a cloud computing consultant, adding these third parties can lead to more than a half dozen points of contact depending on the relationships—and the goal of the new hosted technology is to benefit from these relationships will having a technology workflow that behaves as if these relationships have been eliminated.
Alpha's new investment will boost the company's current initiatives, which include a partnership with payments processor RS2 to provide banks in Thailand with access to multiple financial and non-financial services through a single integration. Alpha additionally announced a new partnership with Australian security tech company Havantec to become the preferred integration provider for its identity authentication service, Haventec Authenticate, and its product, Secure Wallet.
The role of open development, which allows companies to build interfaces for e-commerce or mobile transactions, adds to this challenge, since the number of functions powered by application programming interfaces and software development kits is expected to expand rapidly in coming years.
"The API economy has unleashed a massive amount of innovation in the fintech space, all solving unique problems, but the banks are left staring at hundreds of vendors, and resources limit them to integrating a select few," Rajic said, adding Alpha attempts to solve this problem by providing access to these solutions through a single dynamic API, removing the barriers between vendors, banks and merchants and creating an ecosystem where everyone has access to each other.
First Quay did not disclose the size of the new investment, which raises Alpha's capitalization to $250 million.
"We see a great opportunity for Alpha to work with banks and other financial services companies trying to build a bigger presence in payments," Khan said.
Additionally, First Quay does not have other investments in financial or payments technology at this stage, but its investment in Alpha could open up other opportunities given its model.
"Further, early stage companies in the ‘fintech’ sector that are looking to break through into ‘enterprise land’ can do so through Alpha," Khan said.
Alpha's model will expand in the future, particularly as top management pressures banks and other large companies to save resources in the back office.
"It used to be that saving money wasn't a big deal here," Golden said. "But particularly for stuff like international payments, saving money is a big deal now after a tough couple of years."