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Tokenization is not a new idea, but since the announcement of Apple Pay and its much-praised tokenized security protocol, it is a hot idea. Lately it seems a consensus is emerging amongst payment and security professionals that among the better ways to protect sensitive consumer data is to swap cardholder data for tokens. While it won’t stop a cybercriminal on a hacking hunt for data, it’ll make sure that what they steal is basically worthless to them.
One company was riding the token wave well before everyone in payments fell in love with them. A Durham, NC startup, Spreedly, was founded in 2007 with a simple but ambitious goal – to “remove friction by helping online merchants securely store and tokenize credit card data across the broadest range of payment endpoints possible.”
And, fresh off their latest capital raise, PYMNTS.com CEO Karen Webster sat down with Spreedly’s CEO Justin Benson, to catch up on their most recent developments and where he thinks the future of payments security is heading.
In many ways, Benson told Webster, Spreedly found itself in the enviable position of being in just right place at the just right time. Their investors obviously agreed.
And, here’s why. Spreedly has a bit of a different twist on tokenization. Spreedly’s cloud-based credit card vault allows its customers to work across multiple payment gateways simultaneously. That means that marketplaces and aggregators that want to offer their consumers a frictionless yet secure way to transact online can do that with Spreedly’s tokenization protocols.
Benson states “It was really this opportunity for somebody to say ‘hey look, store your data in a secure fashion and transact that data anywhere on the network and it can be across a payment gateway or it can be through a third party API.’”
On the frontend of things, Spreedly looks much like a modern payment gateway API, something developers particularly favor. Spreedly also ensures that sensitive card data never touches the client’s servers and that Spreedly never touches the money flow. The money goes from the customer to the gateway/merchant account.
Spreedly also offers its customers another advantage – its business model which is a SaaS model with monthly fees that start as low as $99. And even though its customers currently are smaller startups, those startups actually become part of an ecosystem that all leverage the Spreedly token scheme. Another plus for its investors
“We actually have a lot of startups themselves that build on top of Spreedly so it becomes a great reference point or backdoor entry into discussions with VCs that are investing in those companies. Pretty integral to the success of the startup they’re funding, so that helped us avoid a lot of the “cold” introductions you typically get when you go to raise.”
Spreedly hasn’t seen a lot of downtime, which is eye-catching for investors. “There’s a lot of financial certainty that you normally wouldn’t see in a startup at such an early age.” Benson told Webster
Spreedly has created an ecosystem around their solution creating a secure network, which prevents their clients from being tied down to one particular brand or form of payment.
“We kind of had this vision of maybe being the network that payments can travel across.” – Benson
Over the long term and with the new funding, Spreedly plans to further develop its standard and expand internationally.
In the second week of October the leaves are turning, every coffee sold in American is flavored with “pumpkin spice” and payments investors are circulating money likes it is going out of style—with over $800 million flying around in VC funding, private placements etc. Security and fraud saw the majority of the investment activity, a situation that tokenization start-up Spreedly leveraged into a new infusion of dollars. Check out MPD CEO Karen Webster’s interview with Spreedly CEO Justin Benson and the rest of the week’s biggest investment plays with this week’s Innoation Investment Tracker.
The Big Takeaways for Payments and Commerce
* $800M in financial activity was observed across a variety of investment types – VC funding, private placements, etc. Of that total, 60 percent was driven by strategic or venture –backed investments. The biggest transaction was the IPO of MOL Global Inc. which collected $169M followed by the acquisition of Welch ATM by Cardtronics for $160M.
* 98 percent of the week’s activity was concentrated on the retail payments side. Of that, 60 percent of the activity was concentrated on strategic or venture capital.
* Venture backed and strategic investments on the retail payments side accounted for $468M of the total investment activity in the second week of October. Of that, 56 percent was strategic. In the commercial payment side the biggest transaction was Nulogy collecting $7.5M in VC.
* Interestingly, most of the venture and strategic backed investments were in the payments and security/fraud areas accounting for 63 percent of the total. POS/payment acceptance ($-), mobile money ($-), authentication/biometrics ($-)and prepaid ($ -)reflected the least amount of investment activity.
* The most active VCs/PEs included Insight Venture Partners ($60 Million), Accel Partners ($32 Million) and Wicklow Capital Inc. ($30.5 Million).
* From a geographic perspective US was the most active region followed by Asia ex-China and Europe, while China observed slow activity.
* The median investment amount was $3.5 Million.
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