New fund seeks out verticals overdue for payments innovation
One of Centana Growth Partners' early investments is in a company that uses the cloud to deliver payments technology to insurance companies, a very specific model that speaks to what the VC's partners feel is an underserved market for payments automation.
"While much has happened in retail or e-commerce, we're at a point in the cycle where there's a lot of opportunity to push innovation in B-to-C or C-to-B," said Eric Byunn, who launched Centana Growth Partners in 2015, along with Ben Cukier.
Both Cukier and Byunn are former partners at FTV. Centana, which has offices in Palo Alto and New York, just completed the fundraising for its first fund, which is $250 million.
Along with American Family Ventures, Centana led a $15.5 million financing in One Inc., a Folsom, Calif.-based company that uses a cloud structure to deliver software that powers different parts of the insurance business. It develops software to power the core systems that manage policies, CRM, and digital distribution data management. In that context, it also develops and sells software to power payments for policies and claims.
Centana's other investments in companies with ties to the payments industry include Jumio, a digital identity management company that operates in more than 200 countries.
For Centana, One Inc. represents the future of payments innovation, since it's a company that provides a suite of services tailored to a certain type of business rather than enabling e-commerce or online payments for multiple verticals from the same toolkit.
"One Inc. offers digital solutions to the insurance sector," Byunn said. "But in particular a large part of what they do is provide payments and payment related technology to insurance companies."
The problem isn't that the payments technology industry is too focused on general retail, says Byunn, adding that's where a lot of the payments industry's needs have been as retailers adjust to omnichannel shopping.
The issue is most technology companies, particularly those in the "open development" space, are horizontal companies that are designed to easily enable payments, and are operating agnostic to the type of business that requires a payments gateway, Byunn said.
"It's important that the company not just enable the payments function, but serve the [client's] broader need," he said.
That leaves gaps in certain markets, where payments are tied to manual processes, and thus the user experience suffers compared to other industries. And industries such as as insurance are still largely manual because there aren't many portals that focus specifically on that industry.
"Even in 2017, the majority of consumers can't pay their premiums using a card," Byunn said. "And you're even less likely to receive any kind of claims payments through an electronic means."
Instead of creating generic products such as credit or debit cards, the industry should be looking where the biggest friction in payments is, either by customer segment or payments flow, according to Zil Bareisis, a senior analyst at Celent, who added the industry should focus on bills, taxes and health care, and seek to use APIs and software development kits to develop specialized solutions.
"Even in 'general retail' there is already a high degree of focus and [specialization], from small vs. large merchants, to specific verticals such as restaurants, airlines, subscription businesses and many others," he said. "We are also seeing an increased focus on serving other vertical segments such as insurance, marketplaces, health care, manufacturing, logistics, etc., and that focus will only increase."
Often it is about building on top of a generic payments infrastructure for a specialized use case, Bareisis said. "For example, instant payments infrastructure can be used for digital disbursements, which allows the insurance companies to pay out claims faster and more efficiently."