How to safely scale an Acquiring Business

June 1, 2022

In this talk, Chris Jones (PSE Consulting's managing director), talks to João Moura (Fraudio's CEO and Co-Founder), Ivan Ferdelja (Intergiro's Product Manager), and Robert Kraal (Silverflow's Co-Founder) about how to safely scale an Acquiring business while quickly onboarding merchants.


Interview Transcript

Chris James (00:05):
Hi, I'm Chris James and I'm the managing director at PSE Consulting. Welcome to this panel discussion. Today we're going to be talking about the exciting topic of how we bring Formula One into the acquiring business. And this panel discussion is designed to cover off a number of topics, which I'm sure will be absorbing a number of people's mental effort during Money 2020. And really what we want to do is to get people's gray cells working a little bit in advance. I'm very privileged to be joined today on this panel session by a number of payments industry leaders. Very pleased to be joined by Robert Crawl from Silver Flow. Hi there, Robert.

Robert Kraal (00:54):
Hi, everybody. I'm Robert from Silverflow, one of the founders. Nice to meet you.

Chris James (01:00):
João Moura from Fraudio, everyone.

João Moura (01:04):
Hi, Chris. Thanks for having me. I'm one of the founders at Fraudio.

Chris James (01:11):
And Ivan from Intergiro.

Ivan Ferdelja (01:14):
Hey, Chris. I'm Ivan, the product manager at Intergiro. Very nice to be here.

Chris James (01:21):
Great. So just a couple of introductory comments before we move into the questions for the panel. And I'm sure everybody who's watching this today is aware of how quickly the payments industry is moving, whether that's new business models emerging through payfacs marketplaces, the role of payments in crypto, how technology is evolving, recent announcements from a number of key players around soft clauses, and obviously the ongoing presence of regulation both here in Europe and across the globe. The payment acceptance market in particular has received a lot of attention both from investors and commentators alike, as new players have come into the landscape and began to challenge the status quo. And it's in this dynamic environment that it has become vital to be able to launch and scale and iterate pace, and in particular, there's a need to rapidly absorb and analyze data to support improved customer outcomes, whether that be across onboarding, or transaction processing, or fraud and risk analysis. And all of those areas have become strong differentiators in the marketplace. However, actually getting that out and on the ground and deploying these new insight led customer services has been a significant challenge because the infrastructure within the acquiring landscape hasn't effectively been up to the job.

Chris James (03:02):
But enough of the theory. Let's talk to the panel members and get their views on what it's actually been like to do these things and what the experience of actually kind of working in the trenches and getting scars from living this rather than just talking about it. So maybe I can start with Ivan. Ivan, perhaps you could begin by telling us what you would regard as the most significant problems and barriers that you've had to overcome in your journey launching the business from inception through to a live service.

Ivan Ferdelja (03:41):
What we see at Intergiro, is acquiring keeps all of our offering together with issuing and payment accounts. So for us, the biggest question is how do we compete and grow in the acquiring market? And as we see acquiring as a pretty much a commodity today. Our edge, we believe, can come through capabilities such as superfast merchant onboarding or instant settlement of funds, or basically transparent data flow from schemes to the merchants. So while trying to solve this or trying to find ways to solve it, we ran into various issues with different legacy providers, and both in terms of understanding our needs, but also reacting fast enough to help us out. So what was great about Silverflow and Fraudio when we partnered up is that we found this great fit, as I see it, where we have a kind of a mutual understanding that we're on this journey together, so we need to build these solutions together. So one big barrier for us was the lack of a fully API-based solution for different segments of the merchant journey, for example. So we identified a number of merchant experience problems when talking to players in the market. And then basically through these partnerships, we can solve a number of these problems by putting together the fully API-based solutions that Fraudio and Silverflow have provided, which means around merchant onboarding, around settlement, around fraud mitigation both on card holder and merchant fraud side. So for us, this means we're closer to automation and this means we can scale quite efficiently. And I would say from our side, by setting this partnership up this way, we're free to ask about merchant experience, which is what our job is.

Chris James (05:44):
Thank you, Ivan. Maybe Robert, picking up from Ivan's story, what have been your experiences in your journey so far?

Robert Kraal (05:54):
I think that, of course, Ivan's story is exactly why we originally thought there would be a space for products such as Silverflow. So we see that many neo banks, but also payment service providers, are looking to become an acquirer, to provide a difference there, to take a little margin, but also to try to innovate in those products, whether it be the data or the speed of onboarding, et cetera. But we also recognize that those products were not available or are not available at this moment. And this is exactly why we said, okay, listen, we need to define a new product to build, a new processing platform, to help exactly these type of customers with the problems that they face. And those problems are real. It's about the simplicity, how can I easily go live, become an acquirer? And that doesn't just include the messaging between Visa and Mastercard. It also includes a lot of other operational responsibilities where you need to look at for incidents, fraud detection, fraud management, etc. But we've decided to focus ourselves at Silverflow, particularly on the technical messaging between Visa and Mastercard, but also around the data. There is a lot of data available when you're handling transactions and you can build a lot of functionality on top of that. You can build all type of analysis tools, but also tools for reconciliation, et cetera, and this is exactly why we build it. So it's great to see that our customers like this as well and that we can work with partners on the data fields to combat fraud and risk-related products.

Chris James (07:26):
Thank you, Robert. Yes. From Fraudio's perspective, how do you see this ever-evolving world of the fraudster and how do you see the marketplace evolving in the next few years?

João Moura (07:41):
Indeed, in this market, acquiring has become very commoditized. Processing was commoditized before that, of course, it also grew to be a very legacy set of systems and services that acquirers have to interact with. And so it was ripe for disruption. Silverflow is taking that space very well. But acquirers like Intergiro, when it comes to fraud management and fraud detection, being greenfield projects and not having a lot of experience, a lot of transactions, they face one big hurdle which is: traditionally machine learning models need to be created from a lot of data. So if you don't have that data to begin with, you are automatically excluded from being able to use that technology. And your alternative will be the very traditional rules based systems which you will have some pain with false positives, also with false negatives. What we have seen at Fraudio is that it is possible to do it in a different way. So instead of that orthodoxy of one data set, one model, we have a very different way of doing things. We aggregate data from all of our customers and then we train one AI from that data and that allows for players that don't have data or for players that have a lot of data, but for instance, on the acquiring side and not so much on the issuing side to connect to our network and make use of the models that we have immediately. And I would say that these days to kickstart, say an operation on the acquiring side, a safe operation, it is possible, whereas before it was harder.

Chris James (10:15):
Some very interesting points and maybe we could wrap-up with a couple of finer points. Ivan, from you, taking us through your experiences on implementing perhaps a non-traditional approach to launching and acquiring service.

Ivan Ferdelja (10:32):
I would say from being issued bins by the schemes that would be non-traditional is that we were basically live roughly six weeks after that. That means we were live with both processing and fraud integrations and that means we were able to serve a merchant life with settlements and fund payouts. So the way of working for us has been that we have dedicated product teams that work directly with product teams on both Silverflow and fraudio sites. And ideally for us they interact through Slack, which has worked quite well, which we were very happy to kind of be able to set up. And this means we get speed, because we can integrate very fast. Our teams can talk to each other, get support and get help instantly when we need that. This is something that you typically don't get with the legacy player, I would say it's impossible. So one big thing that as I mentioned earlier regarding the APIs and a fully API-based approach is that we as a customer get full access to the APIs as both Silverflow and Fraudio, continuously add to them. So all the features get continuously integrated into the API meaning we get instantly access to new features, meaning that for us this has an impact on time to market. So compared to a legacy player, we are able to put out a feature 6 to 9 months earlier which has then a revenue impact as well. With the legacy player, you typically would do a fixed cost project, which would take six to nine months, you would do a kind of change request, etc. So it's a very big difference for us. I would say that all-in-all, at the end of the day we just want to help each other grow. So I would say that this kind of cooperation works great from our perspective.

Chris James (12:40):
Thanks very much for your perspective. It's been a fantastic conversation. It's been very insightful and I'm sure people watching this would have found it very useful. So I suppose it just remains for me to thank our panel members. So. Robert, thanks very much.

Robert Kraal (12:59):
Thank you as well.

João Moura (13:01):
João, thanks very much for your time.

João Moura (13:03):
My pleasure.

Chris James (13:05):
Thanks very much, Ivan.

Ivan Ferdelja (13:07):
Thanks, Chris.

Chris James (13:08):
So that's it from me. We look forward to seeing you all at Money 2020.

Hope you've enjoyed our talk between Chris Jones, Ivan Ferdelja, Robert Kraal, and João Moura, on How to safely scale an Acquiring business while quickly onboarding merchants. See you on our Money2020 panel debate!

About Fraudio

Fraudio is an Amsterdam based scale-up helping companies in the payment ecosystem fight payment fraud and financial crime with its unique ability to build high performing AI and ML models without costly customisation. It is trusted by some of the fastest-growing companies in the world, protecting them from payment fraud, merchant-initiated fraud and money laundering.

It's easy to integrate with products that deliver best-in-class fraud detection from day 1, allowing clients to scale their customer bases safely, reducing operational costs and fraud losses while maximising revenue. Fraudio's founders are from the payments industry and don't believe in black-box solutions. They ensure that end-users are provided with insightful and timely information to control payment fraud and merchant portfolio risk while ensuring the highest level of security and auditability.

About Intergiro

Intergiro is a fintech company based in Sweden that provides a comprehensive variety of financial solutions to businesses in Europe. Intergiro’s APIs allow merchants to automate their business finance or access banking services.

About Silverflow

Silverflow an Amsterdam-based online card payments platform that provides an upgrade for payment-providers to accelerate technological innovation. With Silverflow, PSPs can now directly access card networks, instantly add new functionality, have real-time insight into transaction fees, and get smart data direct from the networks – all to better serve their merchants.

About PSE Consulting

PSE Consulting is one of Europe’s leading payments consulting firms. Established in London in 1991, PSE provides highly regarded expert advice across the payments industry to schemes, processors, transaction gateways, issuers, acquirers, private equity and merchants.

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