Banking News

Goldman backs blockchain payments venture Veem

Goldman Sachs

Veem, the payments company that targets international payments for SMEs, announced a $25 million funding round led by Goldman Sachs. Other funders include Google Ventures, and it brings total funding to almost $70 million according to CrunchBase.

Veem is integrated with Quickbooks, Xero, and Netsuite to make it seamless for SME’s to make international payments. It uses its ‘multirail’ approach to find the best way to make payments depending on the source and destination.

But behind the scenes, it mainly uses cryptocurrencies for the transfers, though sometimes SWIFT is used. As Veem transparently integrates with the banking system, transactions are seamless for end users. This is reminiscent of CiclePay’s person to person payments.

According to Forbes, the cryptocurrency Veem uses is Bitcoin, and undoubtedly they used Bitcoin in the early days. But as of last year, it seems they were using Ripple’s XRP, though not necessarily exclusively. Given the spike in Bitcoin’s transaction fees from October last year, that makes some sense.

The company is growing rapidly. From mid-May to this week, the customer count rose from 60,000 to 80,000. At the time of the Series A funding round they had 590 customers which increased to 18,000 by their March 2017 Series B round. Apart from the bookkeeping APIs, Veem actively markets towards accountants and inked a deal with Trend Forward to expand their reach in China.

Company CEO Marwan Forzley has a relevant pedigree. He was CEO of eBillme from 2005 until 2011 when it sold to Western Union (WU). He continued at WU until March 2014 when he started Veem, previously called Align Commerce.

Why payments is a hot topic

The correspondent banking system is flawed. With a conventional international payment, it can only go through direct banking relationships. Hence it often involves one or more correspondent banks. If something goes wrong, the lack of transparency makes it hard fix. At best it delays the payment, at worst it’s lost.

In the same video, CEO Marwan Forzley described blockchain and crypto as the glue: “Think of it like a way to tie up a whole bunch of local and domestic payment systems together. Which typically have been historically done through correspondent banking systems. Think of that as a model that is going to evolve where at the center of it are all the digital assets. And the peripheries are domestic payment systems, and that market is the glue that connects that all together.”

Compared to SWIFT, it provides greater transparency, superior tracking, real-time, and the ability to outsource payment to the edge of the network, the local banks.

As a result, there’s a massive amount of innovation in the sector. Just this week, JP Morgan said it has 75 banks in its blockchain payments system to add transparency to the correspondent network. SBI Ripple Asia announced it had secured the needed license to take off in Japan. Their planning both international and domestic payments. And Stripe, while not a blockchain play, announced a funding round that valued the venture at $20 billion.

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