The payments space is starting to settle down. The flow of seed funding has slowed, and a handful companies have separated from the pack, raising meaningful capital over the past year. Add Providence-based Swipely to that list. The payments processing and analytics play announced today that it has raised $12 million in new funding in a series B round led by Shasta Ventures, bringing the company’s total venture financing to $20.5 million.
Last year the startup moved away from its initial card-connected loyalty model to pursue a smart payment-processing and analytics strategy aimed at a number of larger, and mostly commoditized, legacy processing players. The three year-old company runs credit cards payments for small and medium-sized businesses, and then builds marketing and analytics services on top of that data.
“Historically, the services that traditionally have helped merchants accept credit cards have done little to nothing to add value. They’re a necessary evil, a cost of doing business,” Angus Davis, chief executive at Swipely, told Street Fight. “Imagine if Amazon.com deleted their customer database. That’s essentially what happens every night on Main Street.”
Swipely’s product plugs into the back-end of a merchant’s point of sale system like a traditional payment processor, but stores the transaction data (which would traditionally come in a paper statement weeks later) immediately to the cloud. There, the company can use the data to run a suite of ancillary services. That includes metrics to determine a business’s most valuable customers, the percentage of new versus returning customers, and more. It also folds in marketing services that allow businesses to sign up customers in card-connected loyalty programs and lead generation.
Since making its shift last year, the startup has been on a tear. Swipely has nearly tripled the total transactions it processed in all of last year, up from $250 million in 2012 to $700 million today. Today, the company’s platform is used in over 130 cities, and has processed over 2 million consumers.
Part of what has accelerated its growth is that the model asks little of merchants or consumers in terms of learning a new behavior – a pitfall that has limited some payments startups’ ability to grow: “If our merchants had to replace their point-of-sale system to adopt Swipely, they probably would not do it. They’re large businesses who depend on these systems to do a lot of things,” says Davis about the decision to take an open approach. “For the most part, the new-fangled iPad POS systems don’t compete at the upper end of the POS market today… If it’s not broken, there’s no need for them to fix it.”
The question now remaining for Swipely is whether staying out of the consumer experience (by creating a mobile payments app) and the merchant experience (through the point of sale device) will hurt its positioning down the road. As new entrants like Square push upstream with an integrated model (including merchant processing, consumer payments, and POS), and legacy players try to add similar services, Swipely could find its market share diminished. But it’s clear that for the time being the advantages of the open model (early scale and low-cost adoption) far exceed the long-term value of a closed approach.
Steven Jacobs is deputy editor at Street Fight.