Companies use invoices to pay for many of their major costs, ranging from materials to contract work. Most still rely on solutions built on top of bank transfers or credit cards to complete cross-border payments, which typically take two-five days to complete and represent a $130 trillion global market.
Enterprise payments startup Paysail just raised seed funding to build a tool that shortens the cross-border payment process to less than five seconds, the company says. Its solution leverages stablecoins, which it describes as “cryptocurrencies designed to have a stable price because they are pegged to a commodity or currency.”
Using stablecoins to pay invoices also reduces transaction fees for businesses by removing third-party intermediaries, according to Paysail. Other startups in the space using traditional banking infrastructure to make payments more efficient have hit a ceiling on how fast and cheap they can offer payments because of fees charged by these intermediaries, particularly between countries that don’t transact as regularly, Paysail cofounder Nicole Alonso told TechCrunch in an interview.
Paysail co-founders Nicole Alonso and Liam Brennan-Burke. Image Credits: Paysail
“There have been enormous strides in making payments between, let's say, the U.S. and Canada, significantly cheaper and quicker. But if you're sending a payment from the U.S. to [a country in] Africa, it could still be really difficult and cost exorbitant fees,” Alonso said.
The cost of making a cross-border payment using legacy systems like Bill.com usually includes a transaction fee charged by the third-party intermediary as well as a currency exchange fee. A transfer done through Paysail, in contrast, costs only a “gas fee” it takes for the transaction to be validated on the blockchain, currently less than one-tenth of a cent, Alonso said.
Paysail is currently using Celo’s CUSD stablecoin, which tracks the price of the U.S. dollar, to enable payments and plans to expand to other stablecoins backed by different countries’ fiat currencies as it grows. It is also evaluating a transaction fee of around 0.9% to generate revenue for the business, which Alonso said could be structured as a tiered offering based on each company’s transaction volume and will ideally “significantly undercut any existing competitors in the non-crypto space” on price.
The company announced its $4 million seed round today led by Uncork Capital, with support from Tribe Capital, Pear VC and Mischief Capital. Angel investors Nik Milanović, head of business development and strategy at Google Pay, and Juan Manuel Fernández Lobato, founder and CEO of Ebury, also participated in the round.
Paysail’s current users comprise “a small cohort” of companies, most of which are already transacting in cryptocurrency or are familiar with the space, Alonso co-founder Liam Brennan-Burke told TechCrunch. The company wants to fine-tune its solution for crypto-native customers before expanding to those that have no prior crypto experience, Brennan-Burke added.
Alonso and Brennan-Burke, who launched Paysail after meeting as students at Claremont McKenna College last year, are Paysail’s only full-time employees today. They plan to use their funding to hire a full-time engineering team, as well as legal counsel and eventually a sales team.
Paysail is building its tech to allow users who don’t have an existing crypto wallet to start transacting on its platform by generating a noncustodial wallet on users’ behalf through a third-party wallet provider. It aims to eventually bring this functionality in-house and add new features within the Paysail wallet like allowing users to earn yield on their stablecoin holdings, Brennan-Burke said. In countries like Nigeria, where local fiat currency depreciation poses a significant risk, companies may prefer to hold their wealth in stablecoins pegged to less volatile currencies and transfer it into local fiat on their own timeline, he added.
“The goal ultimately with the platform is to continue making cryptocurrency payments really digestible and easy to use, and not so daunting for those businesses and individuals who don't have any prior experience with it,” Brennan-Burke said.