Payments (receiving and sending money) remains a fragmented and complex area for merchants, marketplaces, and others doing multi-party business online, and as it grows, $1.5 trillion by 2021 to 2.9 billion by 2030, that complexity will also grow.
payrails is a startup with a solution that it believes makes the job of creating, managing, and (when necessary) modifying those payment processes easier. They have built what their CEO and co-founder Orkhan Abdullayev describes as the “operating system for payments”, and has obtained a round of Serie A of 6.4 million dollars directed by Andreessen Horowitz to prepare for the official commercial launch in late 2022.
Abdullayev and his two co-founders, Emre Talay and Nicolas Thouzeau, previously worked together at Delivery Hero, the international food delivery giant, where they collaborated to design and build the company's payment system from scratch. In addition to a16z, this initial investment for payrails, based in Berlin, includes other companies from the city's fintech, food tech and delivery ecosystems: HV Capital; Delivery Hero CFO Emmanuel Thomassin; Flixbus founders Jochen Engert, André Schwämmlein and Daniel Krauss; and HelloFresh founder Dominik Richter are also in the round.
The founders of payrails they came to conceive their platform fresh from a trial by fire. Delivery Hero had worked within what might be thought of as the trifecta of the e-commerce world: its three-sided marketplace comprised larger and independent restaurants, delivery drivers, and millions of consumers ordering food; and as an added layer of difficulty, they were all making calls in and out of a payment system in real time, 24 hours a day, across dozens of markets, currencies, preferred payment methods, etc.
What they discovered in Delivery Hero was that while there are a number of payment giants in the market building some aspects of the system that they needed, when it came to solutions that they could manage and handle the global challenge across 50+ markets, and do quickly and easily, they fell short. The list includes Adyen, Stripe, PayPal, WePay (now a part of JP Morgan Chase), Dwolla among others, .
“The complexities we faced were driven by geography, with different payment solutions around the world, and we spent a lot of time looking for different solution providers. It cost us,” he recalled. The more global solutions, the ones from legacy companies, were difficult to modernize and integrate into the API model that Delivery Hero wanted to use, while the newer solutions had too many geographical limitations: in many cases they couldn't be rolled out to everyone. the markets where Delivery Hero operated, and "orchestrating multiple scenarios was not enough for us."
Their conclusion was that building what they wanted "required internal resources," which Delivery Hero put into the effort (hundreds of developers working on this problem alone, Abdullayev said). That also meant an opportunity: building it as a product to sell to marketplaces and other companies that had similar business models to Delivery Hero, either on a larger or smaller scale.
His solution has been to conceive payrails as a kind of operating system, which "abstracts all that complexity and focuses on the need for payment," Abdullayev said. "In the longer term, we see ourselves as an infrastructure provider."
By that he means that he is not necessarily initially positioning himself as a point of sale provider or a payment facilitator: he has created a platform that will make it easy to integrate and work with any of these through APIs, to more easily work with a wider variety of third-party (payments and collections), self-employed (collections) and consumer (payments) businesses, and with a wider variety of payment methods depending on the geography in which they are located. In fact, payment service providers can also be potential customers, as they register with the marketplaces as customers.
Areas you will cover in the system will include payment routing, consolidated money movements, and payment reconciliation through general ledgers. The ability to track payments for payment fraud prevention will also be part of the initial service.
The ultimate goal is that you want to reduce the many steps, and subsequent delays, that occur when money moves from one part of that system to another, so that what's coming in can be paid out at the same time to improve reconciliation and, in general, speed of activity, and keeping the business up to date in real time on how the process is evolving.
“We have created an operating system that, in essence, will allow us to create internal processes, allowing cash and other payments from multiple service providers that can take a transaction and let the money go to different places, to pay third parties” he communicated. the company. While not yet launched, the initial service will focus more on cash than credit-based transactions. For example, cash advances for merchants or drivers.
This initial round is one more sign of how a16z is investing. It continues to work aggressively in the fintech sector as an investment category (an area that also includes its cryptocurrency investments); and is betting more and more on promising startups in Europe as it expands its reach beyond Silicon Valley.
“As businesses scale globally, they need an infrastructure that allows them to quickly and easily add gateways and methods to be able to accept payments from their customers, as well as optimize their handling paths and authorization rates,” said Seema Amble, a partner at Andreessen Horowitz who focuses on fintech. "The team of payrails He deeply understands the payment challenges merchants face as they grow. The founders bring a wealth of experience and a strong track record of execution to create solutions for this category, helping customers minimize complexity as they grow in their business."
"Given their deep experience with Delivery Hero, one of Europe's biggest tech champions, the founding team of payrails He uniquely understands the difficulties and costs associated with complex business-level financial operations and has proven his capabilities,” added Barbod Namini, Partner. at HV Capital. “Based on the excellence of the team and their truly disruptive offering, we are excited to support them on their journey to become the FinOps solution of choice for large enterprises.”
