Payments, the final frontier. These are the voyages of the starship Kash whose multi-year mission is to “clear financial transactions instantly (like cards) and have much lower fees and fraud rates (like ACH.)” Her captain, Kaz Nejatian, wants to reduce transaction costs – for retail payments, primarily – to nearly zero. In short, Kash wants to boldly go where lots of banks have gone before and gotten mired down in slow networks and high costs.
First, a bit of background. Kash is funded to the tune of $4 million by Green Visor Ventures and others and is essentially taking the speed of card transfers and marrying it to the surety of Automated Clearinghouse systems, the machinery used to clear checks in the US. Both of these technologies are full of friction. However, by creating a payments API for various customers, they are able to reduce costs and reduce risk at the same time.
“People assume that the only two options to payments is the existing heavy, fraud full, and expensive legacy system or BTC. We think that’s wrong (though I am personally a big fan of BTC.),” said Nejatian. “Credit card companies use FICO scores run every 3-6 years [to prevent fraud]. We think FICO scores are a very bad way of running payments. We have an algorithm that determines creditworthiness on a live basis without using FICO scores. We use dozens of different factors based on the info users give us, financial history, and what is publicly available.”
“How fast do we clear? Right now, if you want to use an alternative to credit system you have to use either wires, checks, or ACH. All of these are either very slow or very expensive. We clear transactions using our algorithm instantly with zero NSF or unauthorized payment fees. We settle (like credit cards) on the next business day.”
Nejataian is a former lawyer and his partners, Danny Su and Geoff Flarity graduated from the University of Waterloo. Su worked at Microsoft while Flarity comes from Morgan Stanley and OANDA. Their product, liveACH, launches today. It will save retailers over 3.5% per transaction, a massive savings once realized. They recently brought on Joe Saunders, former CEO of Visa, as Chairman of the Board and Sam Wen, formerly of Square, as Developer Ambassador.
The company entered the arena as a sort of debit card on the phone. Now, however, they are truly B2B.
The product isn’t quite consumer facing but, when implemented, can save both retailers and consumers a lot of money. The team is dedicated to making like easier for the little guy.
“I am an immigrant (moved from Iran when I was 12). Like most other immigrants, my parents opened up a store when we moved to Canada. We worked 14 hour days at that store. But month after month, the credit card companies made more money from the store than we did. That’s not right. We want to change that,” he said. “Finance doesn’t have to be full of friction.”