Building a global acquiring processing business

The 17th edition of Europe’s leading Merchant Payments Ecosystem event is ready to open its doors next week. Taking place from March 12-14, 2024, at the InterContinental Hotel in Berlin, Germany, this edition brings together over 1400 global merchants and senior-level payment professionals and uniquely focuses on all aspects of merchant payments, from acquiring to open banking, instant payments, crypto, fraud, and AI applications.

Over the course of three days, attendees will embark on a comprehensive journey through the latest trends and technologies. With over 160 speakers and decision-makers hailing from financial institutions, acquirers, PSPs, POS vendors, and startups across 40+ countries, this event promises unparalleled opportunities for learning and networking.

In anticipation of this unique gathering, Taco de Vries, Managing Director for Payments Consulting Network in the Netherlands spoke with Robert Kraal, Co-Founder and
Chief Business Development Officer of Silverflow, about their strategies in building a global acquiring business, trends and developments in the merchant payments market, and his view on key topics such as payments orchestration and Central Bank Digital Currency.

TV: For people who do not know you, who is Robert Kraal?

RK: If I start at the beginning, then I initially studied geophysics, however, my professional journey led me in a different direction. Right after completing my studies, I delved into the world of payment transactions, being involved with several of the most exciting and innovative companies, right from the start – including Bibit and Worldpay. I also played a key role at Google and Adyen, where I served as Chief Operating Officer (COO) at the latter.

Currently, I am the Co-Founder and Chief Business Development Officer of Silverflow, and I’m also Chairman of the Board at Volt.

On a personal note, I cherish my role as a father to two wonderful adult daughters, and together, we engage in various enjoyable activities such as travel.

TV: Silverflow was founded in 2019. What have the last 5 years been like?

RK: Over the past five years, the journey of Silverflow has been both challenging and rewarding.

In the first six months, although not officially launched legally, we were actively engaged in brainstorming sessions, coding, and building the foundation of
the company that we have today.

Navigating through the challenges of the early days, we faced the unique and unexpected obstacle of the COVID-19 pandemic.

Despite the difficulties of remote work, we managed to maintain collaboration through a spacious office for occasional in-person meetings, while remaining highly productive in remote capacities. During this time, my role involved not only building the product but also pitching it to potential clients,
which proved to be complex in the virtual environment.

A noteworthy experience during the pandemic was successfully raising funds without physically meeting investors. This period allowed us to establish and
fund a company with a technically intricate product, requiring certifications and compliance with various security standards.

Overall, these first three years primarily focused on product development and certification, as customers in our domain require certified products. Commercially, we went live now almost two years ago, marking a new phase where we could actively engage with customers and build a solid foundation for our commercial, technical, and support teams.

Reflecting on these five years, it has been a positive whirlwind not without its challenges. Building a successful company, witnessing its growth, and assembling
a dedicated team have been truly rewarding aspects of this entrepreneurial journey. The dynamism and excitement of entrepreneurship are what make it a fulfilling endeavour.

TV: What is the core value proposition that Silverflow brings?

RK: We have very clearly defined what we consider to be within our scope and where we seek partners to provide specialised services. Take fraud and risk management, for example. Our focus is on providing cutting-edge technology, supported by a range of tools to assist our clients in this complex landscape.

Silverflow specialises in acquirer processing, acting as the technical intermediary between our clients, often those licensed by Visa, Mastercard, and other card networks to accept transactions, and the networks themselves. In simpler terms, we facilitate the smooth transmission of transactions from our clients to the card networks. It’s important to note that we are not an acquirer ourselves; therefore, we are not directly involved in the financial, legal, or KYC aspects.

Our core proposition is not centred around fraud or risk management as there are highly specialised companies in that domain. We’ve developed a straightforward approach to seamlessly collaborate with external parties. Our preference is to select partners who align well with us in terms of innovation, speed, culture, functionality, and more. Additionally, we strongly believe in focusing on our core strengths, recognising the vast potential for improvement,
and consequently, we welcome collaboration with partners who specialise in complementary aspects of the chain.

TV: What are the markets and segments you operate in and target?

RK: We typically serve three types of clients:

1. Licensed acquirers who do not intend to build their own processing platform
2. Those considering a shift from outdated platforms
3. Larger corporates and retailers desiring modern technology while preserving existing banking relationships

When clients approach us, they recognise us as a contemporary player in acquirer processing. This encompasses a broad spectrum, including shopping platforms, large retailers, and payment service providers (PSPs) or in the form of a Payment Facilitators (PayFac) or Independent Sales Organisations (ISO).

Being globally positioned from the outset is an exciting aspect of our business. We cater to a diverse clientele globally, with current clients situated in Europe, Asia, and North America, and there is no inherent limitation to our reach. The potential expansion to Latin America, Africa, Central Asia, or the Middle East is based on strategic market focus and incoming client interest.

TV: Looking forward, what can we expect of Silverflow in the next few years?

RK: Within the next 12 to 18 months, we will strategically pursue our objectives to reach significant milestones.

Firstly, we plan to expand geographically, demonstrating the capability of our product in various markets worldwide. While Europe and North America are prominent markets for card transactions, we are actively extending our reach beyond these regions. Currently engaged in the Asia-Pacific region, we’re planning to add four to five more countries this year, including Philippines, Indonesia, Thailand, and Malaysia.

We’re also seeking to showcase the versatility of our platform. While we are already live with card-present solutions in several European countries,
we want to emphasise that our platform is not limited to e-commerce but is equally adept for in-person transactions.

Our focus extends to acquiring a diverse range of clients in every market category as well. We are committed to demonstrating our product’s applicability across different types of customers. Simultaneously, we have plans to enhance our platform, incorporating additional card networks, features, and functionalities.

And finally, as we move forward, one of our major milestones is evaluating our financial performance. We have set specific targets related to revenue and other financial metrics that we aim to achieve before considering the next funding round.

Industry developments and trends

TV: How do you think the retail payments (processing) market will evolve in the next few years?

RK: From our perspective at Silverflow, we anticipate a heightened focus on data traffic, transaction speed, also regarding settlement, fraud reduction, and ease of use this year. We observe an evolving landscape with the introduction of new payment methods and innovative approaches such as Account to Account banking initiatives and various wallets, leading to a transformation in how people make payments. This shift in payment behaviour involves considerations of consumer preferences, usability, and the perceived advantages of new payment methods.

Drawing on my extensive experience in the payments industry, I have witnessed the introduction of numerous payment methods. One critical factor in the adoption of new methods is understanding why consumers would choose them. For instance, the success of Pix in Brazil is attributed to its user-friendly nature compared to its predecessor.

Looking ahead, there is an expectation of significant shifts driven by various global initiatives. We believe there is substantial effort invested in making credit card transactions more secure, faster, and easier to use, as major players strive to retain their market share.

TV: What will be the most important developments benefiting merchants?

RK: When considering the merchant’s viewpoint, which indirectly aligns with what Silverflow addresses, the priorities and interests differ. Merchants, particularly large retailers, are keen on swift fund settlement, minimal costs, and effective fraud prevention to ensure a seamless and secure payment environment.
For merchants, optimising the mix of payment methods becomes crucial for cost efficiency, fraud prevention, and cash flow optimisation. The considerations extend to the front end, such as the payment mix and product offerings, aligning with the business model and customer base.

Additionally, we observe a trend among larger retailers and corporates towards the integration of channels, seeking uniformity in processes across different channels and efficient backend relationships with various processors. This drive for efficiency and cost as well as risk control is particularly evident in multinational entities that have grown organically or through mergers and acquisitions.

In summary, retailers are grappling with the dual challenge of expanding revenue by catering to diverse consumer preferences while simultaneously focusing on cost reduction and operational efficiency. This entails a comprehensive review of both direct costs associated with payment transactions and indirect operational costs stemming from the complexity of payment ecosystems. The overarching objective for merchants is to strike a balance that fosters growth while optimising costs in an increasingly complex payment landscape.

TV: Payments Orchestration is a big topic during the conference. You have just signed a partnership with Aevi
(a leading orchestration services provider). What is your view on payment orchestration?

RK: I believe that the parties offering payment orchestration services face similar challenges to ours. They also recognise the differences between various payment providers and banks, which often come from technological differences, developmental stages, speed, risk assessment approaches, and service level variations. Their objective is to optimise and determine, at different levels, for which transactions or specific sets of transactions they can extract the maximum value and efficiency.

Our approach aligns with this same goal, although we do view the problem slightly differently.

We identify the variation between different acquirers as arising from the use of diverse, often outdated, technologies. Engaging with these parties, we observe that their systems may not fully leverage their potential, and we aim to provide a better solution.

While our perspectives differ, we share the common goal of optimisation. We can see significant collaboration potential with payment orchestrators, wherein modernising the payment organisation layer and connecting to card networks through new systems, utilising the bank’s license, can offer substantial benefits for both payment orchestrators and banks.

We’re in talks with several payment orchestrators, but we don’t have any live models in place now. Nevertheless, we foresee this as a promising future development that could eliminate outdated technology, creating a modern payment organisation layer with a contemporary backend. This has the potential to bring significant cost savings for banks.

TV: Another topic is CBDC in general and specifically the development of the Digital Euro in Europe. What is your view on this?

RK: Speaking personally, as Silverflow has no involvement with crypto in any form, I find the relevance lacking, especially for Europe. I can understand this concept in countries where many people are unbanked, storing their digital currency on a mobile wallet. In those regions, it could potentially become a de facto peer-to-peer system.

However, in Europe, where almost everyone has a bank account, I believe many people won’t see a significant difference between a ‘traditional’ electronic
Euro transaction and a ‘digital Euro’ transaction. So, it feels somewhat contrived, and I question the problem it aims to solve.

As a believer in the necessity of market acceptance for new products, particularly in the realm of payment products, I emphasise the importance of consumers leading the way. While it’s a bit of a chicken-and-egg situation, convincing and enthusing consumers about the benefits becomes crucial. Simply introducing new payment products won’t suffice; there must be a genuine need that consumers recognise.

Apple Pay succeeded by making payments incredibly convenient, filling a void in users’ lives. For any new payment method to succeed, it must address a real consumer need and provide added value, whether in terms of convenience or other factors. Otherwise, it risks being dismissed by both consumers and retailers.

The MPE Conference

TV: What is Silverflow bringing to MPE 2024? Can we expect any big announcements? And what are you looking forward to?

RK: We’re attending with a team of five, which is a substantial presence for us at any event.

I’m participating in two different panels. One is, of course, on innovation in our domain, while the other panel focuses on how to build a team, specifically addressing team culture building. I’m really looking forward to these sessions.

Our primary goal is to establish and strengthen relationships with existing clients and partners and explore potential collaborations with new clients.
Personally, I find these conferences intriguing not only for business engagements but also as valuable networking events in a relatively small industry. It’s a chance to reconnect with past colleagues, learn about their current projects, and gain insights into the innovations and developments within the industry.

Author: Taco de Vries, Managing Partner, Netherlands, Payments Consulting Network

With extensive experience as a payments business consultant, Taco possesses a unique blend of project management expertise and deep knowledge of various payment domains. His decade-long involvement in international market research has equipped him with comprehensive insights into global retail and consumer services, facilitating a well-informed approach.

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Payments Consulting Network is a media partner of the Merchant Payments Ecosystem 2024.

Happening in Berlin from March 12-14, the Merchant Payments Ecosystem is the largest payment acceptance gathering in Europe.
Connect with industry leaders spanning the entire payment value chain, from merchants and bank acquirers to fintechs and regulators.
Explore the full agenda and register now to secure your spot!

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