Payments technology startup ConnexPay, which serves intermediary agencies and marketplaces in travel and e-commerce, has closed a Series A funding round of $7 million led by BIP Capital. The funding also included Pamela Joseph, a long-time payments executive and former COO and President of Georgia-based TSYS, as well as a “major payments unicorn” that the company has not yet disclosed.
Led by two industry experts — founder and CEO Bob Kaufman, who worked for U.S. Bank and its payments subsidiary, Atlanta-based Elavon, for over two decades, and COO Jacob Eisen, an investment banker with a background in payments — ConnexPay has put together a tool that enables both the issuing and acquiring sides of payments unlike anything else currently on the market.
BIP Capital CEO Mark Buffington says ConnexPay, is “transforming online payment acceptance and issuance for the travel industry.”
“ConnexPay reduces risk, lowers the cost of accepting cards, and enables unlimited credit and easier reconciliation,” Buffington said in a statement.
How does it work? Without getting too deeply into the weeds, Eisen explains that, because of the slow and tedious nature of ACH transfers, an intermediary marketplace — a travel site like Kayak, Hotwire, Expedia, and the like — does not have access to real-time liquidity when they need to purchase something for a customer.
Say you buy a hotel deal. You enter your credit card and the site processes the payment. They typically will need to immediately pay to book that room in order to secure the same real-time deal price.
But, the funds from the credit card transaction have not yet come through. In fact, this typically takes 24-48 hours or even longer, says Eisen.
“Our technology helps the intermediary in real-time by acting as the processor, linking the payment to the supplier,” he tells Hypepotamus. “By doing that, we eliminate the need for credit for these marketplaces, which is a real issue.”
ConnexPay can provide those funds by doing a real-time fraud check, accessing what’s known as a good authorization code that indicates the consumer’s money will indeed come through (after several hours, of course).
They then issue a virtual card to the travel site with the funds on it, allowing them to purchase the airline ticket, hotel stay, etc. By the time that supplier is actually processing that payment the next day, the original purchaser’s funds have arrived in the bank.
“I call it ‘credit unlike credit,’” says Eisen. He also calls the service a “payment gateway, which links inbound and outbound payments together.”
ConnexPay has partnered with Visa for the issuance of virtual single-pay cards to their travel site partners. They also issue Mastercard cards.
“Collaborating with Visa to help expand issuance of Visa virtual cards provides a substantial boost to ConnexPay,” said Kaufman in a statement.
Other partners powering the core technology include Marqeta, TSYS, and Kount.
On the client side, the travel companies no longer have to worry about access to credit or liquid funds, they reduce card acceptance fees, and generally even see a kickback from ConnexPay for using the service (the startup earns revenue through transaction fees).
They also get the anti-fraud benefits that ConnexPay conducts automatically, eliminating issues with customers who will never pay for their purchase.
The technology is put to work through an API integration.
ConnexPay launched publicly in April and since then has doubled revenue month-over-month, according to Eisen. They currently have about 15 mid-market travel intermediary clients doing anywhere from $50 million to $30 billion in sales each year.
While the travel industry certainly provides plenty of space for growth — it’s valued at $1.62 trillion in the U.S. alone and makes up over 10 percent of the worldwide GDP — ConnexPay’s technology is applicable to other industries as well. These same issues are experienced by e-commerce intermediaries like Etsy, as well as ticket marketplaces, insurance brokers, and others.
A large portion of this Series A will be allocated towards hiring, Eisen says, mostly on the technical side. The bulk of their technology and product teams are located in their Atlanta office, with a few additional supporting employees in Naples, FL and Minneapolis.
“Atlanta is our hub simply because of the payments talent here,” Eisen tells Hypepotamus. “I wouldn’t be surprised if we get to 50 [employees] in 2020.”