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The core underneath is still the same old core, which sometimes dates back to the 80s, 90s, sometimes 70s.
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Welcome back to another episode of Builders. As always, this show is brought to you by Frontlines IO, Silicon Valley's leading B2B podcast production studio. If you're bringing technology to market and want to learn from your peers, we have a library of more than 1200 interviews with Venture backed founders and marketers. Where they talk, all things go to market. Of course, if you want to launch your own podcast, we offer podcasts as a service to more than 80 tech startups. The idea there is very simple. You show up and host and we do everything else. Now, with all that said, let's jump into today's episode. Today we're speaking with Robert Krall, founder of silverflow. Robert, welcome to the show.
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Thank you, brother.
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B
What was your journey into payments?
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Well, actually I've been into payments for pretty much my whole life. So my first entrance into payments was a company called Bibbit. We started it back in the late 90s already. We sold it in 2004 to Royal bank of Scotland. RBS also at that moment bought a slightly bigger company called worldpay and they merged the two together. But they used most of the technology from Bibit, but they prefer the WorldPayment name. So to I always make the joke that there's probably still code in the WorldPay code base that I wrote back in the 90s. After that I spent some time with the local Dutch payment service provider, was a CEO there for Triple E, which we sold to the data. And then my old buddies from Bitbit called me again and say, hey, we're starting up something new, which was Arjen. So I wasn't there from the start, but pretty much when we were about to go live, they want to have an ops team. So they asked me to be the CEO there. And in Arjen, I've also been the founder of their acquiring proposition. So looking at their own licenses from Visa, from MasterCard, other cards networks, and we're also looking at what's the best technology to connect to the card networks. And we looked around and we said, okay, listen, that's not too cool what's out there. So we decided to build it ourselves. And that obviously is also the root for why I founded silverflow seven years ago. And besides that, I'm involved with many other payment companies at this moment. So that's sort of like a short version of my history in payments.
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What was it like building in payments? What was that three Decades ago compared to today.
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Well, one of the bigger differences at that moment there was pretty much no regulation. So today there's a lot of regulation and it differs a bit country by country. So it was really cowboy time. Also. I think definitely at those times the banks were not really prepared for E commerce, so you could do things that are no longer allowed today. So merge a lot of different type of merchants and transactions over one account, for instance, which at that moment sounded quite logical. But today you would not do that anymore. But it was really pioneering. I mean there were good times, there were also bad times because definitely the dot com crash for instance. I'm not sure if everybody remembers, but it was quite a hectic thing that companies were very overvalued and suddenly crashed in terms of valuation. Also, many of them, they just went bust because they didn't have enough funding.
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How does the mania around the early Internet compare to the mania that we're in with AI today?
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I think that in the early days, when I started working in payments in the Internet, which is not really the early days of Internet, because Internet in the Netherlands has been since 92 and I started in 97. I've been working on predecessor of Internet probably since I was 15 or so, so a number of years before that as well. But at that moment it was still, I couldn't explain my parents, what I was doing. So to say, why are you choosing for a career in Internet? What is it? Nobody uses this. So this is the early 90s. I think that it's different. Certainly there's a sort of element of hype around it. It's going to be very big, but at the same time it doesn't exist for too long. And there are already many applications and many companies are very successful. So of course I think people expect a lot from it and to a degree I think I expect a lot from it as well. And we're using it in our organization world as well and it's completely different. There's way more confidence now on applications or usable tools when you look at the AI spectrum compared to back in the days when companies were just not making money. But people also didn't see the need, didn't feel the need. They just said, okay, listen, it will go over in a couple of years. And I don't think AI will go over in a couple of years. Maybe the hype will go over a little bit, valuations might change, but AI is there to stay.
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What's so interesting about AI to me is just that everyone is getting their hands Dirty with it, you know, like people I talk to who like, aren't in Silicon Valley, like, it's not a Silicon Valley thing, it is a global thing. It's all over the place. Like, I am more and more surprised every day. People I talk to are like, oh yeah, I use chatgpt like every day. And that could be someone in like Alabama, someone in Michigan, like, you know, kind of these like places that you would think would be later to adopt technology. It's, everyone's adopted it. It's pretty, pretty wild. And I've never seen anything like it.
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I agree probably within the people that you talk to, but think, for instance, factories or mining or a little bit more traditional businesses where they do your software and maybe it's software for managing their tools or their instruments or doing their financial work, etc. I think that there are many companies who are not necessarily seen as IT tech companies, which probably is the audience that you talk to the most. I think that there's a lot of companies who are not using AI at all, do not have a strategy. I was talking to a buddy of mine who works for a large construction company and I said, well, we do our, all our RFPs via AI. So we've designed a system that we get in the questions from our customers and AI analyzes it and already prepare sort of the answer straight away. Normally it would take two or three weeks before we could get a response to that. And now we have sort of the draft in a fraction in a couple of minutes or 10 minutes or so with an indication how certain our AI is about the answers that they give on this RP or the standard process. Why don't you do it in construction as well? You must get lots of tenders, lots of complex tenders with a lot of. And he had just not thought about it. So the construction area, for instance, it was an eye opener for me and say, okay, listen, even if it's a small piece, you get a tender, build this new building, whatever, or you get the documents and you've done this several times, probably tens or a hundred times. You do this every year. Why don't you automate that process? Because now, yeah, a lot of people are working there. So I think that's probably in my own bubble. And I'm not sure if you're in a similar bubble, but definitely in my bubble. I see that many of the tech companies around me are using AI and are experimenting with it with different and mixed successes. But I also know that there are many other companies where this is still very far off. They're just not thinking. They don't see the possibility how it could help their businesses.
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I think it depends. You know, my bubble is a bubble. I guess it's the nature of bubbles, right? Is getting outside of it. The one that I look to is like, you know, my mom, I should know hold. She is like in her 70s and like she's using ChatGPT on a daily basis and I didn't tell her about ChatGPT, you know, like she found it on her own. And I do see that happening for sure where there's like the older demographic is using this day to day and I think that's pretty unique for technology too. Like, I feel like normally you would just expect to kind of like never reach like the older generation, but like they are using it, which is kind of crazy.
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Yeah, well, I think it tells something about how user friendly daxgi has become. So I think there are more companies like Chat, but I think the fact that people, also older people and younger people and of all types of kinds, have adapted it so heavily. Yeah, it must be very user friendly. It fulfills. But yeah, I don't know your mother, but I can imagine that she usually use it as a sort of alternative to the traditional search, not necessarily to write, to fight code certain apps that make certain parts of her life easier. So it's, it's, it's, it's, it's a good use. It's a limited use compared to what it could do.
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This show is brought to you by Frontlines Media podcast production studio that helps B2B founders launch, manage and grow their own podcast. Now, if you're a founder, you may be thinking, I don't have time to host a podcast. I've got a company to build. Well, that's exactly what we built our service to do. You show up and host and we handle literally everything else. To set up a call to discuss launching your own podcast, visit Frontlines IO slash podcast. Now back to today's episode. Yeah, that's a good point. It's like the AI journey. She's not, you know, vibe coding, different tools to like do something with like taking her dog out. It's like a better search, but it is a much better search. And like, that's enough, I think, for a lot of people to have their mind blown going back to, you know, your journey here. Given your background in payments, there's probably a thousand different companies that you could have founded. A thousand different problems you could go after with Silver Flow. How did you decide to Go after that problem and then how do you define the problem that silverflow is solving?
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Actually the idea dates back to my time at igem. So at igem, this due to regulation, regulation changed and Arjen was at that moment European based, pretty much only. So today they're a bit more global. I said, okay, instead of buying in our Visa MasterCard transactions from the acquiring banks, why don't we buy them indirectly from Visa MasterCard themselves? So essentially cut out the middlemen, cut out the banks, and the new regulation back in 2009 allowed us to apply for this license and it was new at that moment in the market. So we were, I'm not 100% if we were the first ones in Europe to apply for those license, but definitely among the first ones on the base of this new license. And you don't know if you're going to get the license, but at some stage we were sort of in the process, we will get it. And then we had to think about how we'll technically connect to the card networks, which of course is a different thing than actually having the license to operate. And we looked at all the different players that are there in the markets and they're not that many, to be quite honest. There are a bunch of them, but probably if you have two hands, you have the most serious players. And we didn't like any of them. We said, okay, it's all technology, let's build it ourselves. And that's what to a degree I did with my team. I focus more on getting up this acquiring and processing stuff. And that actually helped our gen back in the days tremendously because they were the first payment service provider who both had a gateway functionality, had their own acquiring licenses, the processing technology. And it really helped them tremendously at that time. So fast forward to silverflow where we thought, we anticipated that there would be many companies who say, I want to be the next agenda. So they might be a payment service provider today. They probably work on other sort of agreements with their acquiring banks and some of them reach a certain level of maturity. I might want to say, okay, instead of buying my transaction from my bank, I want to buy them in directly from Visa MasterCard. Essentially what agenda is cutting out the middleman because you get better rates and better servers. And they will also have to make a decision about which technology to use to connect to the card networks. And to be fair, all the players that were there when I evaluated back in 2009, they are still there, but they were in my perspective already considered a Little bit legacy in 2009. Today, in all fairness, they didn't change that much. They changed their PowerPoint presentation, they changed their website and stuff like that. But the core underneath is still the same old core, which sometimes dates back to the 80s, 90s, sometimes 70s. But it's really all technology in our point of view. So we said, okay, listen, that's option one. If you're this young payment service provider, finally getting your own licenses, you can go with all technology. You can also build it yourself, which is possible, but it's not easy. And it's definitely not easy to do it as a very professional level. So you can get some of your messaging through and let's say one, one and a half year, but that's only where it starts. And there are a few companies who are doing it think for instance Stripe build it, they're using it in different markets, but I don't think across the globe you have checkout to build it themselves. And there are a few other quite big companies who can actually build it themselves. And they do this pretty well. I mean, I've got professional opinion there and most of them do it pretty well. I'm also seeing a few who simply trying it, but they're not reaching the bar. But that's option two, build it yourself. And option three is to go with a very modern system that does that. And we scan the world, it is not there. So we say, okay, listen, this is a gap in the market. There is a need for these type of payment service providers who are looking for innovation for data, for ease of use, for low cost of ownership, low cost per transaction, stuff like that. And we can go deeper if you want. And we thought it was not there and we said, okay, that's where we going to position ourselves particular initially for those, I would say, very innovative payment service providers, all different type of clients who are in this process of becoming an acquirer, needed technology. That's where we felt our sweet spot. We calculated roughly 200 of those new acquirers on annual base. If we would get 10% of them, yeah, would be enough to build a business case. And that's essentially what we did today. Those are still our customers, it's one group. But we're also targeting the bigger acquirers, the bigger banks, essentially, because they also have the same problem. They run on legacy technology today, but they get the request from our customers to invest in innovation, in better tools and better pricing, etc. But they don't have essentially the knowledge of the capacity to do that themselves. Many banks don't have these IT companies anymore in household. They outsource it quite often to the same legacy players. So how do you want to make a difference if you have a few companies such as Ajen or Stripe or Checkout and a bunch more who compete on the market with much better technology and you're still stuck to this legacy technology. So that's what we see across the globe. These type of banks are also coming to us. And yeah, the third group, and this is sort of where do we position ourselves, would be the largest retailers. What we see is that very large retailers, they know a lot about payment technology to a degree. What they want is to have the most modern pipe into the card networks. That's what we provide. And of course they also need to have a commercial contract for actually the card acquiring with the bank of their preference because they get the best rates and the best service and the banks give a lot of financial services. So we offer those type of big retailers with that combination. Essentially we sign our own commercial agreement with the bank and they sign with us for a technical agreement and then they can upgrade the functionality even more than the banks themselves can offer. And that's where we thought, okay, there would be space. It's there, we've demonstrated it, we're growing quite rapidly. And the beauty is we're still the only ones across the globe who do this.
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When you think about those three different segments, are there three different go to market motions for each of them or are there is there patterns and overlap that make it so it's not three unique go to market motions?
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Well, the technology is the same, so we have one system that exactly does the same. But you can imagine that the dynamics between those different companies difference. So the payment service providers in general are a bit smaller, they're quicker to action, make their decisions more quick. They're also, they're probably a little bit more comfortable with taking certain risks. So those are usually quite easy to work with customers in the sense of timing. It's relatively easy to sign a contract with them to get them live because they're quite tech savvy and also work with them on ramp up and what they actually do with the data. If you put on the other side the banks slightly different processes. So typically both the commercial process negotiating the commercials around the contract, but also negotiating the legals around the contract. Quite often they have a due diligence process that they want to have all type of orders and make sure that you're compliant with their internal security. There are many layers who have to have, say, a vision. So that whole process takes a bit longer. And it can be considerably longer, I could say. And the same would essentially apply for any form of implementation. So the implementation itself is quite simple. But usually banks need to have a lot of tests and verifications and sign offs, etc. So also those processes take a longer time. The good thing is, of course, if it takes them a lot of time to migrate to us, yeah, they're not going to do this every couple of years. That from a bank perspective, they see this in a long term relation and that's of course what we want to deliver to. So our go to markets also is slightly different. So to the banks, if we go to the banks and say, listen, your current processing platform doesn't meet today's requirements, the bank is not going to change because we give that message. For the banks, there has to be already a strategic shift in their minds. They already should have a realization internally. Say, okay, our software, our offering is not really up to date. We want to bring it up to date because we see we're not winning customers, we're just losing customers. We see that our cost base is too high, so they must already made the decision in their mind they need to change something. And quite often banks assess these projects as huge in terms of money involved, time involved, engineers involved, but also in terms of migration, risk, etc. So they see this whole project as a very big thing. But at the moment that they realize that they have to do something because otherwise they might run out of business. And if they realize that it's a project, then if they hear about us and we say, okay, listen, we think that the project isn't as big as you have it in your mind. It doesn't cost as much as you think, you don't need that many engineers and besides it will save you a lot of money on people or on other operational costs, etc. That is for us, the right moment to enter the market for those payment service providers. Yeah, we can just sort of see on the Visa MasterCard site who's applying for a new license. And we give them a call and say, hey, we saw that you applied for a new license. Did you already think of your technology for that? So we have slightly different strategies how to find them, how to talk to them, how to convince them. And yes, they are different, but the product itself and the whole process around it is very similar. This show is brought to you by the Global Talent Company, A marketing leader's best friend. In these times of budget cuts and efficient growth. We help marketing leaders find, hire, vet and manage amazing marketing talent for 50 to 70% less than their U.S. and European counterparts. To book a free consultation, visit GlobalTalent
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Co and Zooming out. You know, given your background, your experience, I'm sure you've seen a lot of founders come into payments, try to bring their technology to market, try to scale and not be successful. What do you think is a pattern there? What do founders get wrong in payments?
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Well, I think that in general I don't think it's only for payments, but in general I invest in companies as well. You have a lot of companies who say I can do that too. That is nice. I see a company make a lot of money, a lot of revenue, being very successful. If I do sort of the same with slightly different tunings, I can do that too. And there's a part of that is true, you can do it quite often depends a bit on the type of product, sometimes a bit more complex, takes a little bit more time to build and to certify in the fintech but it's not always easy because a combination of having a better product, having a better marketing, so tell the story to your customers, having a better customer service, so knowledge keeping, your people, et cetera. And I think that particularly in payments, people expect certain hygiene factors. They expect it to work, to be up, to be safe, to be secure. They have certain commercial aspects in terms of the pricing that should be competing, but they also have needs in terms of innovation in particular in the eco space. If you look at the card presence space, yeah you could argue that the cycle of innovation is a little bit lower, although we can have a discussion about that as well. But quite often they know what they want so there's a lot of space there to do stuff. But you have to make sure that you're at least on par with whoever you try to compete with. And that's on different elements. It's on the technology, the marketing, the surface, the sales, the commercials, etc. And that's why many feel that they are trying to make a me too product, but they just don't get it right. And it can be one of the elements that they don't get right.
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And when you think about your own company success, the companies you've invested in, just companies and payments that you've seen, what are the patterns on the positive side of things, of, you know, what the traits are that they would all have in common or some of the traits that they would have in common?
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Well, I think that for Us, we sort of looked and say, okay, is there this green field, this open space where nobody else is active? And that's not entirely true because in our space there are other companies active. But we sort of say, okay, the companies that are active in our space, we consider them very legacy. And why is that? They're expensive, they're complex to integrate to, complex to work with, they don't really innovate, they don't use the latest tools in terms of data and cloud, et cetera. So we sort of looked and say, hey, the role of these companies very clear. There's a need for it because every bank and every acquirer uses it. But we think that the type of companies that are there today are just not meeting modern standards. So that gives an opportunity for us to say, okay, listen, we're going to exactly do what they do, except we're gonna completely monetize it and do it in a different way and design it in the way that it would be designed today. And I think that there are in many other fields and whether it's other payment fields or complete different industry fields that I would sort of look at systems or products that in general, most of the players are a little bit older and where you say, okay, listen, I can win a lot of business from them because I'm quicker, I'm more innovative, I can build better products, I can give them better pricing, and I also have a better story to tell to them. And I think that those are the ones that I'm typically looking at when it comes to payments, for instance, But I can imagine that it applies to many other segments if you're in insurances or even if you do something completely different. Yeah, there are many companies quite often who do stuff the old fashioned way.
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And for silver flow, if you think ahead to 20, 26 and beyond, you know, I always like to think in bets, what are the big bets that you're making that are going to pay off from a growth perspective?
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Well, one of the things we're betting on quite heavily is actually our interest in the US markets. Our product is only credit cards. So the US market is of course the biggest credit card market across the globe, both in terms of number of transactions as well as cards per person, et cetera. At the same time, our competitors who dominate the market today in the US we consider them to be a little bit legacy. And I'm not saying that they don't have a good product, but it's not, I would say, innovative enough to be a match for the likes of, for Instance stripe, maybe Adjenn, a little bit too luxury. And there are a few other ones. So we think that many banks at this moment are mostly competing on price, which to a degree is a race to the bottom. And the banks don't like it, but they can't really compete on innovation. I think that what we want to bring back is that banks actually are going to compete on functionality as well. Pure on the innovative side of it. And then the competition on price is they have to decide it for themselves. But we think at this moment that the product pure, the technical product that many of the banks in the US offer is very similar if you look at one acquirer compared to the other. Choir.
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Final question for you. What's the Future look like 3 years out, 5 years out, 10 years out? Paint a picture for us.
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Well, at this moment, I want to give you an indication. We grow between 10, 15% month on month.
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Wow.
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And at this moment, we process over 1 billion transaction analyzed. So it's already reasonably sizable. But you can imagine if you grow with the 10 12% month on month, starting with 1 billion transactions, everybody can do the math how that pans out. So that essentially means that probably in two, three years we might from a size point of view, sort of our times, maybe 20 factor, 20 growth. And a large part comes in our expectations from the US but at this moment we're also European. So we are active in most countries in Europe. We're also active in Southeast Asia. So we expect expansion in many other markets across the globe. But with a strong focus on the U.S. i think our product suites will also be expanded to besides e commerce and card presence to for instance, ATMs. ATMs by itself is a declining market. People get less cash from the ATMs, but it's another area that's just screams for innovation. Yeah. So in all fairness, I think that in two, three years times, we're a considerably bigger company at that moment.
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Amazing. I love it. Robert, it's been a lot of fun. Thanks so much for taking the time.
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Thank you so much.
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Well, that's all for today's episode of Builders, brought to you by the Frontlines. If you want more amazing content like this, visit Frontlines IO where you'll find the library of more than 1500 interviews with founders, marketers and other GTM leaders, where we unpack the tactical lessons from their journey. And of course, as always, if you do want to launch your own podcast, we'd love to have a conversation with you. Visit Frontlines IO podcasts as a service. Mention that you listen. Mention you love the show and we'll give you a 10% discount. Thanks for listening. We'll catch you on the next episode.