NAB Ventures leads funding round for FX platform
(8 March 2017 – Global) NAB Ventures has led a $US24 million ($31.6 million) funding round by foreign exchange (FX) payments group Veem, in a deal the bank believes will assist it in increasing its market share in international money transfers made by small business.
Silicon Valley-based Veem has built a FX platform which sits above any infrastructure used to make cross-border payments. This could include the traditional Swift system, or new blockchain-powered alternatives such as Ripple.
The technology examines available paths for money to move between countries and chooses the fastest and cheapest path for a given transaction.
NAB is helping Veem establish banking facilities in Australia so it can expand its business here, where it will compete with the likes of OFX, which itself stole forex volume from the major banks by offering a cheaper and smoother service.
NAB has led a group of high-profile investors in Veem's 'Series B' raising, including Google Ventures, US venture capital investor Kleiner Perkins Caufield & Byers, Silicon Valley Bank and the Japanese communications company, Softbank. Neither NAB nor Veem would disclose the amount of equity pledged by each of the backers.
The deal is NAB Ventures' third investment after a A$50 million fund was established in mid-2015. It also made an equity investment in Data Republic last year, and in February put seed funding into health technology start-up Medipass Solutions.
NAB Ventures general partner Melissa Widner said NAB does not have a commercial agreement tied to the equity investment, but "there will be partnership opportunities down the track. We are exploring different ways to work with them.
"This is a space where there is going to be a lot of disruption. There has been a lot on the retail side, but not so much in the business market, which is a lot larger."
Veem allows funds to be sent by just using an email address. NAB may use the relationship to recapture volume from its customers who currently turn to other providers for forex services. For every 82¢ its customers trade through NAB, $1 of foreign exchange transfers goes through other providers, Widner said.
"Big companies that regularly do [international money] transfers have good experiences but small businesses have painful experiences with banks," she added.
Marwon Forzley, CEO and founder of Veem, describes his technology "as application layer, like Western Union for business payments".
Business customers looking to move money through the international bank network today might pay fees of around $40 to initiate a transfer, another $20 to send funds and then lose between 2 per cent and 4 per cent of the transferred amount on the foreign exchange spread. But Veem charges no fees and the forex spread is around half that of traditional players, between 1 per cent and 1.9 per cent, he said.
About $US25 trillion is moved each year across the Swift network, with $US24 trillion of that representing transactions between companies. Of that, US$6 trillion of transfers are made by small businesses. "That is the market we are going after," Forzley said.
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