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Cloud-Native Acquiring: The Key to a Future Proof Solution

In the past, having a new customer in a new market meant that you had to redesign the product once again from scratch. Today, new customers are being served by more flexible, modern platforms that can be adapted to changing requirements. Adopting a cloud-native approach that can handle these more complex environments is going to be the key to future-proofing your business. Learn more about running a future-proof acquiring platform in this interview with Robert Kraal, CEO at SilverFlow.

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Shortcomings of Classical Acquiring Solutions

We noticed a large gap in the market where acquirers' systems were essentially based on legacy technology with additional technology built on top of that at some point. As today’s needs for eCommerce surged and the pace of the market has significantly increased, acquirers would struggle to keep up with the market as running new projects using these systems can take up to two years. Not to mention that even the daily operational processes such as setting up a new merchant or doing reconciliation is in many cases quite complex.

To succeed today, a short time to market, the possibility for a variety of payment options, as well as leveraging data in innovation and decision making are crucial to every business.

Cloud-Native Acquirers vs. Classical Acquirers 

First of all, many traditional acquiring solutions were developed when engineers had to be very conservative with hardware, processing power, ram memory, and even bandwidth. As a result, they had to make trade-offs to get the most out of the available hardware. Most of these hardware limitations no longer exist today. This has allowed engineers to focus on optimizing the storage and use of data.

Unlike cloud-native solutions, traditional processors that use data centers impose significant upfront costs when entering new markets. These costs consist of setting up data centers, managing them, and finding the right professionals. That being said, cloud-native companies still face other challenges in different markets, and there is certainly a long roadmap to follow before fully operating in a new market.

Silverflow chose a cloud solution that offers a set of standard tools that can improve scalability, a critical component in payments. 

Maintaining an Agile, Future Proof Solution

For many companies operating in a fast-paced environment, the challenge is to make sure that they do not run into the same problems eventually as those bigger ones. But thanks to the modularized architecture we're using with microservices, integrating or building new functionalities is no longer a time and cost-draining task. Of course, there are few techniques that have changed today compared to when those old systems were still at their infancy stage.

Visa, MasterCard, and other cards create new functionality on a regular basis. And of course, it can only be active in the market if the acquirers and issuers support it, and quite often, from a commercial perspective, acquirers and issuers would like to support this, but they look at their processors and say, listen, I want to have this functionality that's new. Because their systems are quite complex, it's quite risky for them to make changes. Particularly if you get to the core of those systems, so those changes are high risk and therefore more expensive and therefore take more time.

How Silverflow Makes Acquiring Accessible To Clients

We make acquiring more accessible in many ways. On the one hand, If you look at the products, Silverflow’s products differ from other options on the market. We grant easy access to data for chargeback, reconciliation, or conversion optimization and more. Additionally, if you look at the product functionality, we are able to provide the latest functionality much quicker, because we are at par with the actual functionality from Visa, MasterCard, and we don't run the years behind.

On the other hand and the particular thing of our clients being payment service providers, Neo banks, and acquirers, there are also these operational and cost aspects and there are your direct costs or indirect costs. But simply because we make the integration to our platform, the daily operations of things are significantly more efficient. In a nutshell, clients can run a financially efficient operation. What all of this means to the retailer who is the end customer, is that you would be able to pass on some of those financial benefits or give them a better deal and still make your own good profits.

The Next Step as the First Cloud-Native Processor

The next steps will be, how can we actually show that we are a globally operating company and it would be ideal if we can work with partners not just in Europe and the US that we have today but also in other tier one markets. We're particularly interested in tier two and tier three markets because those are also the markets that the traditional processors leave behind and where a lot of interesting stuff happens, but we aim to be visible in all those markets.

The Roadmap to Becoming an Acquirer

To become an acquirer, there's an extensive process to be followed.

  • First of all, from a financial regulator point of view, companies that want to offer acquiring to their service portfolio need to have a license or permits. That means that they have to have a certain way of looking at KYC (know your customer) customer onboarding, but also risk management, et cetera. That should by itself be the biggest challenge. 
  • The second element is talking to Visa and MasterCard. They will require that companies are allowed to step into that business from a compliance perspective. They have sets of digital items that you may not have come across If you were a payment service provider working with external acquirers, and you should not take them lightly because they are crucial. 
  • The last step is setting up discussions with Visa and MasterCard to demonstrate your business plan. They are interested in knowing how the company's portfolio is composed and whether it is on the high-risk side or a low-risk side. They look at the portfolio in different categories including, the technical, security, and stability categories. That's what you have to figure out yourself.

Hygiene Factors and Differentiators in Acquiring

It would make sense as an acquirer to have a clear strategy and know exactly where the sweet spot of your customers is. That can be a small business, a medium-sized enterprise, or an international eCommerce company. This is because people who are running bars or restaurants have different needs from the acquiring perspective than people who sell online subscriptions for TV or digital video content. Acquirers might decide to serve all types of merchants, which is great, but then they have to make sure that they can support them with all the needs that they have, and those needs they're different in the sense of how they look themselves.

What I see lacking quite often, not so much in the Netherlands, but in many other countries, for instance, the simple aspect of how you work with multi-currency across the globe as an acquirer. Many acquirers are able to work with euros and, maybe if you're lucky with pounds or US dollars, but that's usually where it ends. That means that there is conversion somewhere in this pipeline and acquirers completely miss out on all the revenue they could and should be made on the conversion. 

About Silverflow

Silverflow is the first and only cloud-based acquirer processing platform and provides a state-of-the-art upgrade for global acquirers and payment providers, shielding them from the current antiquated legacy technology still in use today. With Silverflow, you can now directly access card networks, instantly add new functionality, have real-time insight into transaction fees, and get smart data directly from the networks – all to better serve the end merchants.

About Robert Kraal

​​Robert Kraal has been working at fintech startups for over 20 years. After completing his degree in Geophysics, he started his career at Bibit, the first global PSP (acquired by RBS/Worldpay in 2004). He has managed teams at some of the leading tech enterprises including Google and Adyen. At Adyen, Robert was COO and responsible for financial partnerships from the startup phase. Besides his operational and partnership management, he also built and managed the global acquiring and processing services at Adyen. As Co-founder and Chief Business Development Officer of Silverflow, Robert is responsible for maintaining relationships with the investors, card schemes, acquirers, PSPs, and regulators.

About PaymentGenes

The PaymentGenes FinTech magazine & "Voices In Payments" Podcast are initiatives to positively impact the payments community, by educating and connecting the market with vertical-specific industry expertise.

PaymentGenes Empowers Business growth by providing expertise-driven Recruitment, Contracting, Consultancy Services. These services all resolve and intersect around payments. Get in touch and learn more about how we can help your business here.

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