When financial institutions want to offer a debit card or credit card, they hire an issuing processor to help them with those services. When they want to offer merchants the ability to accept cards, they sign up with an acquiring processor.
But when it comes to cross border payments and international fund transfers generally, banks have had far fewer choices, and to industry veteran Gary Palmer, that spelled opportunity.
He founded Payall, a cross-border processor for regulated banks, in 2018. The Miami-based startup has built what Palmer describes as “very specialized” software that gives banks a way to offer their own customers the ability to make cross-border payments.
“If a bank has a client that is paying thousands of people around the world, it’s nearly impossible today to do that through a bank,” Palmer said. “We’ve built the UI and APIs that make it easy.”
That in turn allows those businesses to automate the process.
“Our mission is really to protect the safety and soundness of cross border payments. And I can’t highlight that enough, because this category is considered high risk by regulators and by compliance officers,” Palmer told Fintech.
Indeed, with the COVID-19 pandemic fueling more remote work globally, the need to provide cross-border payments for business and individual clients has never been as pressing for banks.
And that is exactly what drew Andreessen Horowitz (a16z) general partner Anish Acharya, to lead Payall’s new $10 million seed round with an $8 million contribution.
The firm came across the problem in its work around “default global,” in that banks really want to facilitate more cross border money movement – especially as the world is increasingly global.
“We’ve been scouring the Earth, and ran into Gary because he was one of the few people that have real experience building payment processors,” Acharya told Fintech. “One of the big things that we learned is that a lot of it is actually a compliance problem, more than a movement of money problem, when it comes to cross border payments. And Gary shared the same thesis.”
Payall differentiates itself from other startups in the cross-border payments space in that rather than competing with banks, it works with them by white labeling its software.
That software, Palmer says, gives clearing institutions the ability to “know their customer’s customer” and feel more confidence in conducting the transactions because as it stands, the institutions may hesitate because they don’t know who the foreign bank’s customer is.
“We want to make sure that the product is inclusive – and that banks can deliver money efficiently to anybody on the planet, even if they don’t have a bank account, and in near real time and at a fraction of the cost of the normal cross-border product through a bank,” Palmer told Fintech.
The recipients can choose to receive the payments in a variety of methods – either to their digital wallets, through prepaid cards or in their bank account.
Palmer knows a thing or two about payments. In the mid-1990s, he co-founded WildCard Systems, an early independent processor of prepaid cards, that was acquired by eFunds in 2005 for about $250 million. FIS bought eFunds in 2007 for about $1.8 billion. Palmer then went on to co-found Adaptive Payments, which sold to Mastercard in 2015.
He was inspired to start Payall after concluding that there “had been essentially no innovation, or marginal innovation, in the cross-border payments space in over 50 years.”
“This began to excite me because unlike prepay, which was a new category and a new product, I had a chance to address a category that was $100 to $150 trillion in volume that was highly concentrated among a few banks,” Palmer told Fintech. “There were a lot of fintechs thinking about how to go after that business from banks because it was so inefficient. And it occurred to me that I should apply my 20 years of experience of working with financial institutions to changing the way cross border payments and international funds transfer work.”
Additional participants in the seed funding round were Motivate VC along with PS27 Ventures and Bridgeport Partners, with SAFE conversions from RRE Ventures and Transcard. A group of strategic individual investors also participated in the latest financing.
Payall previously raised $8.2 million in pre-seed funding and SAFE financings.
For a16z’s Acharya, who helps lead the firm’s fintech team, Payall represents a case that supports that “banks are here to stay.”
“There are places where internet companies are better and there are places where banks are set up to succeed. And when it comes to serving a lot of smaller customers – especially overseas – they already have the relationship. So it’s really a matter of helping them offer these capabilities, instead of necessarily competing with them,” he told Fintech.