Managing the arcane arts of processing transactions for online purchases is a complicated job. Once a shopper enters the numbers on their card, the expiration date on their credit card, and their zip code, a complicated machinery of transaction processors springs into action representing both buyer, seller, and processing network in a matter of seconds. Until now, most of the infrastructure to support those sales existed in silos, but Credorax, a small startup based outside of Boston in Southborough, Mass. is looking to change that.
The company has spent the past six years laying the groundwork to build an integrated, international architecture for online retailers to receive payments, no matter their location. The idea, according to company chief executive Benny Nachman is to give online retailers one service provider for any geography around the world.
And Credorax has raised nearly $130 million to support that vision. The last round, a $40 million investment including the new backer Columbus Nova Technology Partners and previous investor Blumberg Capital, followed a previous $40 million round raised last August from FTV Capital.
Companies like Credorax need so much capital, because they’re trying to compete in massive industries where a number of existing players have already plying their wares. Whenever a credit card purchase is made, there’s an agreement between two financial institutions that sit between a buyer and a seller. The issuing institution that gives the card to the buyer and vouches for them, and the acquiring institution that handles the transaction for the seller. Initially, when credit card networks get rolled out, these acquiring institutions, which basically function as banks, dealt with one country. But with the explosion of online retail, a shopper could be based in the U.S. and making purchases in the UK, or Spain, or China or India. For sellers, managing the process could be a hassle.
Since the company’s launch in 2008, Credorax has been working with national governments to comply with all relevant financial regulations, so that retailers can use the company as its acquiring bank no matter where in the world they are.
So far, Credorax is in 28 countries including Japan, where the company received its license just this quarter. The next step for Credorax will be to receive its US license, which should be happening before the end of the year, according to Nachman.
“The exchange of money, ideas, and services is becoming increasingly international, so countries and geographies become less important,” Nachman says. “I’m a pure play acquirer that deals with e-commerce and mobile commerce.”
By contrast, giant competitors like First Data have eight or nine platforms aimed for physical points of sale, and a hodge-podge of legacy systems in different countries around the world. Traditional brick and mortar vendors, or stores that only sell items in one country are not Credorax’s target, according to Nachman.
Credorax has 200 employees and offices in Malta, London, Tokyo, Tel Aviv in addition to its offices in Southborough.
“The e-commerce market is $1.2 trillion and 30% of this is cross-border,” says Nachman.
Photo via Flickr user Epsos.de.