Building a Unified Payments Platform: Our Investment in ConnexPay
Following two years of lockdowns and travel restrictions brought by COVID-19, “revenge travel” has been sweeping the world as consumers look to make up for lost time.
Travel spending is up 11 percent in 2022 versus pre-pandemic in 2019, and 41 percent of people plan to spend “more” or “a lot more” on leisure travel in 2023 per a recent survey by the American Society of Travel Advisors. Online Travel Advisors (“OTAs”) are positioned in the middle of this surge and must manage the difficult task of supplying travelers with tickets and reservations from travel providers that are understaffed and still suffering from lingering COVID aftereffects.
Many OTAs operate under an agency model, whereby when travelers make bookings on their sites, the OTA will pass the consumer’s payment directly to the travel supplier (e.g., airline, hotel, tour/activity, etc.). For these agency model OTAs, lack of control and visibility into the payment flow puts them in a disadvantaged position as the intermediary when it comes to addressing things like customer returns, cancellations and chargebacks – all of which have become more common since the pandemic. Furthermore, agency model OTAs miss out on the opportunity to monetize those customer payments passing through their sites.
Despite these challenges faced by OTAs on the agency model, the current experience under the merchant model – where customer payments are acquired by the OTA and issued to pay the supplier – isn’t much better. Being merchant of record involves multiple contracts with payment processors, managing different bank accounts, and holding prefunded accounts or lines of credits as a backstop for risk taken by payment processors. Moreover, the process to settle the acquiring payment from the consumer and then issue the payment to the supplier can take days, which burdens an intermediary’s cash flow. These obstacles have left OTAs facing a tradeoff between flexibility and complexity.
That’s why we’re proud to announce our $110 million investment (with participation from current investors, Panoramic Ventures and F-Prime Capital) in ConnexPay, the first and only unified acquiring and issuing payments solution.
ConnexPay enables commerce intermediaries to combine their payment acceptance and issuance processes into a single solution. The platform empowers intermediaries to pay suppliers with virtual credit cards, which simplify the payments experience and return better rebates on transactions. OTAs operating on the agency model that leverage the unified platform to become merchant of record gain greater control and flexibility over their business as well as a new revenue stream from monetizing the payment flow. OTAs that were already merchant of record gain value thanks to the simplified process and improved economics afforded by the unified solution, without the need to maintain a line of credit or prefunded accounts. By leveraging the acquiring payment settlement as a backstop for payment issuance, ConnexPay increases the overall speed of settlement and improves liquidity for its customers.
ConnexPay was founded in 2017 and has rapidly gained traction in the travel market; however, its unified payments solution is applicable to commerce intermediaries across a wide range of industries including online marketplaces, media and advertising, loyalty and rewards, ticket brokers and resellers, delivery services, insurance and warranty, and fintech applications.
FTV’s growth investment will help ConnexPay further expand its sales and marketing team to capitalize on the significant opportunities ahead, both within and beyond travel. FTV will also support ConnexPay’s international expansion and investments in product development to enable additional currencies, as the company looks to supercharge its next stage of growth.
We’re grateful for the opportunity to partner with Robert Kaufman, founder and CEO of ConnexPay and a payments industry veteran, along with Niels Kohl, Anant Patel, Tammy Clemons, APSC, Kunal Patel, Judson Preuss, Julie Heffelfinger MBA, MS, Sandy Smith and the rest of the ConnexPay team. This experienced team successfully navigated one of the most challenging moments in history for the travel market and emerged with an expanded customer base and unique technology that has catapulted growth. Year over year, ConnexPay has doubled its customer base and increased its revenue by 5x while maintaining profitability, a testament to the prudent nature of the executive team.
Today, ConnexPay serves more than 70 clients across various industries and has had best-in-class customer retention. Our conversations with ConnexPay’s customers were extremely positive, highlighting great customer service as well as frictionless implementation and transition to the platform. We love how ConnexPay is invested in the health and success of its customers due to the symbiotic nature of the platform’s value proposition. As customers capture additional market share, ConnexPay grows, and as ConnexPay continues to make improvements to its platform, customers improve monetization of their businesses.
ConnexPay marks FTV’s latest investment in the broader payments ecosystem, joining a growing group of high-profile names like EBANX and Paddle. Moreover, our portfolio comprises several companies focused on providing payment solutions for specific verticals, including Fleet One (shipping and logistics), VPay (health insurance), and Neon One (nonprofit organizations).
We look forward to supporting ConnexPay’s continued impressive growth and ambitious roadmap to bring a unified payments system to commerce intermediaries across the globe.