November 18, 2015
Align Commerce has raised $12.5 million in Series A funding led by KPCB, its first blockchain investment. Among other investors in the round were Digital Currency Group, FS Venture Capital, Pantera Capital, Recruit Ventures and SVB Ventures (investment fund of the Silicon Valley Bank). Marwan Forzley, CEO and Founder of Align Commerce, shared with the LTP team how the company plans to use funds: With the funding, we will expand our current network of countries and currencies. The plan is to continue to grow the arsenal of the most important part of the business: our people. In order to expand growth channels and customer acquisition efforts, we realize that we need to hire the best and the brightest in the space. I am a big proponent of efficiency and scale, and that is the path we are on.
Align Commerce is a next-generation global payment provider that enables businesses to quickly and securely send and receive payments in local currency. The company is the first in the industry to create a patent-pending multi-rail payment technology. Align Commerce's multi-rail system provides customers convenience, transparency, real-time payment tracking and an overall seamless experience in cross-border payments.
The LTP team had the pleasure of further speaking with Marwan about the services the company provides, use of blockchain in payments his insights on the industry. Marwan shared with us his vision on the way Align Commerce can disrupt the payments industry and the reasons company chose to focus on small businesses.
Align Commerce is actively disrupting the archaic international payments industry by leveling the playing field for small businesses in cross-border payments. Small businesses are currently underserved by banks and have the least leverage when it comes to overseas payments. Traditionally banks have focused and catered to enterprise-size companies where the revenue potential is greater and where banks can expand their revenue streams by offering a wide range of products such as credit lines and other instruments. Consequently, small businesses receive retail rate packages that are expensive and difficult to use. Align Commerce set out to change all that. We want to transform and reimagine the entire process from beginning to end. Currently, the function of wiring funds overseas is an experience that requires planning, with information to gather, forms to fill and fees to pay, and is built on pre-Internet technology that lacks transparency and tracking. We believe that a cross-border payment should be something you don’t have to think about or plan for. It should be as simple as paying for a coffee.
The system Align Commerce has designed is built on simplicity, as Marwan explained, — sending and collecting payments by email without the need to figure out the bank account information and the swift codes of the receiver. Elaborating on the idea of simplicity, Marwan added, It is built on a concept that payments ought to be trackable, just like tracking a shipment on FedEx or tracking an airplane status when you are on a flight. We believe that the current foreign exchange market is designed to be opaque, but we need to operate with transparent foreign exchange rates that are visible to the user. Payments should be delivered faster than what is currently available through bank wire, and as the world becomes more and more global, the current experience needs to be radically changed.
One of the more impressive facts about the company is that Align Commerce pioneered the way blockchain is used in payments across borders and currencies. Marwan provided an explanation of the way cross-border transactions typically work and how Align Commerce uses blockchain.
Typically, in a cross-border payment transaction, money is pulled from a bank account originating in country A, put through two, or in some cases, three intermediary banks, only to appear in the receiver’s bank account in country B with less funds from multiple banks each wanting their cut for the transaction. These middlemen are called correspondent banks and they make money by charging their customers a set of fees—some are explicit fees (ex: wire fees) and some are hidden fees (ex: foreign exchange spreads and bene deduct). It is largely unfamiliar to people outside of the payment space and is a great revenue generator for the banks. Simplifying payments for small businesses requires taking away the middleman—which, in this case, are the correspondent banks. Using the blockchain as a payment rail allows Align Commerce to eliminate the intermediary banks, therefore reducing costs for small and medium sized businesses and speeding up delivery times. As an example, blockchain technology allows same-day timeframe in countries such as Mexico and the Philippines, where a bank transaction can take up days or weeks, he said.
Applying the expertise in blockchain use for cross-border payments, Align Commerce was able to reach near real-time payments using blockchain as a vehicle to transport the money. All the customer sees after putting in bank information is money leaving their account and/or coming into their account, with FedEx-like tracking along the way. The tracking is available upon login to their account via status updates that are emailed to them every time progress is made on their transaction, Marwan explained.
With valuable insights on the way blockchain is leveraged by Align Commerce to serve small businesses, the conversation turned to the industry as a whole. Marwan shared his thoughts on the challenges in the industry and the way he sees its future.
We are operating in very exciting times. Like any technology, there is always room for growth and the future is bright. As we add more countries and currencies to our arsenal, Align Commerce is transforming the way small businesses send and receive payments worldwide. We believe that in the next three to five years, blockchain will result in monumental progress in the payment space. The comparison I like to give is what Voice over Internet Protocol (VOIP) technology did to the world of telephony, blockchain is doing to the world of payments. With the emergence of VOIP, long distance phone calls went from being up to $10 per minute, to costing pennies overnight. Similarly, the bank wire fees are being slashed with the emergence of blockchain technology and our use of it.
Marwan made a very interesting prediction on the role of the blockchain in future, saying, We believe the blockchain is the future of payments and potentially, the future of many other industries. There are a lot of ideas on the potential uses of the blockchain. From decentralizing SSL Certificate Authorities, to building an email service, social networks or crowdfunding—the possibilities are endless; it takes a few good innovators to bring the concepts to life.
However, as the industry evolves, for pioneers like Align Commerce, the competition is getting tighter as new players with potentially more innovative solutions enter the market. The main concern in this case is to protect the technology and ensure a strong position. We asked Marwan if Align Commerce technology can be copied or if its USP is defendable.
There is considerable work and what we in the industry call plumbing infrastructure that goes into creating a sophisticated and robust multiple payment rail such as ours. That includes setting up banking relationships and building the proprietary, patent-pending technology system. The time and effort that someone will have to put into creating a similar system puts us ahead of the competition. The key to any idea is execution, and it is definitely easier to replicate an idea once someone has done the groundwork building it. We therefore expect competition and welcome it. I would love to see the space grow leaps and bounds over the next three to five years, said Marwan.
Lastly, Marwan shared with the LTP team his plans for the company: We have seen some very significant growth over the last year. I want to continue that momentum and plan to continue the advancement of our cutting-edge, patent-pending multi-rail technology supported by APIs to enable our partners to leverage optimized cross-border payment delivery.
One of the final comments Marwan made was about the things that keep him up at night. Every entrepreneur solving a problem can resonate with his words. As an entrepreneur, I’m always thinking of how to improve the product offering and the service and what will simplify life for the small-business owner. Is there a better way to do what we set out to do? That is what keeps me awake at night. Having spent most of my career in payments, I know how convoluted and opaque the market is. I want to change that and level the playing field for small businesses and therefore make it simple for business owners to focus on their business, concluded Marwan.