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Portfolio company Zooz gets acquired by PayU

By Mor Assia, iAngels founding partner

This week, marked another win for Israeli technology. PayU, subsidiary of Naspers (JSE:NPN), also known as PayPal of the developing world, announced that it had acquired Zooz. This will be iAngels’ 6th portfolio acquisition since the firm was founded in 2014. Zooz, which operates in the payments space, has a unique technology allowing merchants to decide how transactions should be routed. Zooz analytics solution provides its merchant customers with visibility to follow transaction processes and data across consumer purchasing channels.

PayU will integrate Zooz into a broad offering of payment solutions and services, catering primarily to the e-commerce industry.

iAngels invested in Zooz in early 2016. This like recent acquisitions namely VisuaLead by Alibaba and BriefCam by Canon, showcases another strong multinational stepping into Israel for the first time to acquire both the technology and team. Historically, multinationals making acquisitions in Israel have tended to form a presence and develop a bigger appetite for further acquisitions, which benefits the Israeli ecosystem and contributes significantly to its growth.

We invested in Zooz for its team, business acumen and rapid customer acquisition, including significant customers such as Gett, Payoneer, Zara, Wix and Burberry. Zooz was positioned as a growing leader in its category and the unique relationship with PayU as a dominant distributor supported and propelled Zooz to new heights.

Oren Levy, Zooz’s CEO, and Ronen Mordecki, his partner of 8 years, co-founded Zooz out of a rich background in Marketing, Fintech and Engineering. They wanted to cater to a blue ocean of merchants needing to navigate transaction failure due to lack of cross border acquirer relationships and resulting consumer churn.

It was only natural that when PayU were considering a strategic investment into Zooz, for the process to end with an acquisition. PayU wanted the technology for itself and decided to adopt an open platform approach for the solution, which has been solving a true pain point for many of its customers. PayU were well positioned to see first hand the whole process and its benefits.

I believe the platform and transparent approach is the right path, as this has been a central conversation of the payments industry, highlighting the limitations of the traditional banking system which operates on old legacy contracts between banks. There are multiple intermediaries taking up pieces of the pie along the way at the expense of the consumer.

Blockchain is also trying to circumnavigate the banking system altogether and cut off all intermediaries in the most transparent and bold way, in order to process cross border transactions and open up the world to collaboration and new business. Interim solutions before blockchain payments become mainstream, which could still take years, involve the traditional banking system but in a smart way, supported by technology and data rather than politics.

Consolidation of vendors and banks to form larger alliances may relieve some of the frustration on the consumer side, at the same time as enabling them to compete and stay relevant. Solutions such as Zooz can be instrumental in this approach, in understanding how transactions are processed and by having the data and analytics to make smart financial decisions. With the payments industry going through a major transformation, it is exciting to see Israeli startups collaborating with international teams to present continuous groundbreaking innovation in this space.

We congratulate the team for completing this acquisition process, and look forward to their successful onboarding and integration into the PayU organization.

For further coverage of the exit:

TechCrunch – PayU acquires Zooz to take on international payment services

No CamelsIsraeli Payment Technology Provider Zooz Acquired 

CTechPayU to Acquire Israel-Based Payment Startup Zooz

 

 

How Israel Plans to Disrupt a $4.7 trillion Industry

The digitization of currency presents an incredible opportunity for the world’s incumbent financial institutions, from payment processing to credit and insurance products, wealth management, and currency transfer and exchange. Yet the regulatory, security, and risk management challenges faced by these institutions have paved the way for a flood of new entrants.  In 2015 alone, over $19B was invested in FinTech to disrupt the $4.7T financial services industry.

A successful bank robbery used to require careful planning, orchestration, weaponry, and a bit of luck.  Furthermore, the bank’s maximum loss was limited to its physical assets locked away in the vault. In 2013, Russian cybergang Cabarnak stole $1B from over 100 financial institutions, using nothing more than a few lines of malicious code.  How can today’s financial institutions, encumbered with bureaucracy, legacy systems, and regulatory burdens innovate ahead of tomorrow’s financial reality?

Enter Israel

With domain expertise ranging from enterprise software to information security, business intelligence, and the blockchain, Israel’s brightest engineers, technologists, and data scientists have started applying their knowledge to one of the hottest sectors in the world; FinTech.

Fintech, at its core, is the use of technology to eliminate market inefficiencies. To illustrate, let’s look at one of the biggest money markets in the world today; remittances. Remittances are expected to reach an estimated $610 billion in 2016, rising to $636 billion in 2017. As of the end of 2014, the global average cost of sending $200 was 8%. Let’s think about that for a second. Money is now data, sitting in the cloud, with virtually no cost to disassemble, redistribute, and reassemble. So why does sending $200 still cost $16? Due to the regulatory burdens combating money laundering and terrorism financing, international remittances sent via mobile technology accounted for less than 2% of remittance flows in 2013.  But as mobile phones reach critical mass in the developing world, this will change drastically, and Israeli technology will play a role.

Flavors of Fintech

Now let’s look at an emerging $6.5b market like bitcoin, which processes $110mm in daily transactions, but with pervasive fraud, wire/bank transfers have become the incumbent use case, leading to slow, cumbersome transactions that necessitate minimum purchase requirements. Imagine a system that uses sophisticated algorithms to enable bitcoin exchanges, brokers, and eWallets to accept credit cards with no risk of fraud. Enter Israeli Fintech company Simplex, which has already processed more than $4m in bitcoin purchases via credit card.

Next we have the marketplace lending industry, with a compound annual growth rate of 123% between 2010-2014, projected to grow to $490b globally by 2020. Companies like Lending Club, Zopa, and Prosper have led the charge, but the real innovation will come from inventing new methods of credit underwriting, rather than continuing to price risk using the decades old FICO score. Look at Backed which reverse engineered Lending Club’s underwriting model to discover a huge opportunity in mitigating risks for co-signers, thus reducing APRs for borrowers, or Cinch, which evaluates small business creditworthiness based on a reputation score, rather than the traditional credit score.

Take the $45B in pocket change carried by travelers each year, and turn it into digital currency with TravelersBox. Consider the global payments market expected to grow to $2T by 2020, and Zooz, the only agnostic technology layer that connects to any payment provider and provides business intelligence to benchmark and compare provider performance for enterprises. Finally, combine the global equity markets at an astounding $69 trillion and counting, and throw in eToro, which allows users to track the financial trading activity of top performing users and automatically copy their trades.

Investment Opportunities Abound

There are more than 400 fintech startups in Israel, covering more than a dozen business models, including crowdfunding, money management, financial advisory, banking, wallets, payments, point of sale, currency exchange, virtual currencies, small business funding, retirement, insurance, lending, security, blockchain, security, and investing. And at iAngels, we are seeing them all.

As more banks and financial service companies establish accelerators, R&D centers, and incubators in Israel, the number of investment opportunities will grow in parallel. In 2015, Israeli FinTech exit activity reached $1.3B, up from $700m in 2014, while 47 companies raised $241m. As your trusted partner in Israel, we continue to access and analyze Israel’s highest quality entrepreneurs, providing you with the best FinTech investment opportunities Israel has to offer. Take a deeper dive by browsing through our investment portfolio, here.

Max Marine
Max Marine is an iAngels Investment Analyst. Prior to iAngels, Max was a Junior Partner at Venture1st, providing marketing and communications support to Israeli start-ups. Max passed the three CFA exams consecutively, holds an MS in Investment Management, and a B.B.A. in Finance, Real Estate, and Risk Management and Insurance from Temple University’s Fox School of Business. Contact him at [email protected]

 

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Payment startup Zooz raises $24 million as global fintech looks for standards

As payment solutions proliferate and calls for standardization mount, Israel-based payment platform startup Zooz said it has closed a $24 million led by Target Global Ventures, to expand globally and bolster its products and services.

Zooz’s series C round more than doubles the total amount invested in the company to $40.5 million, raised in four rounds. The latest round included Fang Fund, iAngels, Kreos Capital and existing investors Blumberg Capital, lool ventures, Rhodium, Claltech (Access Industries’ Israeli tech vehicle), XSeed Capital, CampOne Ventures and angel investor Eilon Tirosh.

“We are opening  sales and tech support offices in Berlin and San Francisco. We are also you going to invest more in business intelligence that relate to payments and better optimization of data. We are also looking to go from 80 to 120 employees in a year’s time. Sales and tech support in both cities,” said Ronen Morecki, co-founder and CTO of Zooz.

Primarily targeting developers for both mobile and desktop, Zooz provides a payments platform designed to help merchants reduce the rate of international cards being rejected.

“We know to route to the right payment processor, increasing the chances of the card being accepted.”

Zooz wants to be in Germany for the country’s massive growth potential. The company is seeking new retailers and Europe’s largest economy is fertile ground for expansion.

According to ATKearny’s Global Retail Index, Germany is the second largest online market in Europe with almost triple the UK’s current growth potential.

The same report predicts that European online retail sales will reach 234€ billion by 2018 and almost half of all online retail sales across the EU will be from online purchases made using a smartphone or tablet by 2018.

“We believe that the German market is highly advanced in eCommerce and many other retailers in Europe are interested in the German market. So it makes sense for us to follow their lead, said Morecki.

Europe doing the right thing

While Zooz is not directly competing with banks, it is banking on the success of deregulation and the expansion of unified standards globally. In fact, the company’s expansion into Europe plays out against a backdrop of the EU’s planned revised Payment Services Directive (PD2), which is intended to open up the market to new players.

“PSD2 will fundamentally change the game for consumers, banks and third party providers by opening up the market in the same way that the app stores did for mobile phones. With PSD2, third party providers can develop new services on top of existing bank infrastructure that never would have been developed otherwise,” said Erik Engellau-Nilsson, Vice President at Klarna.

According to Uri Rivner from BioCatch, a provider of behavioral authentication, one of the points the directive addresses is electronic payment security in the EU, making online payments safer and more secure.

Payment service providers will be liable for any fraud related issue and will have to be accredited on a yearly basis. Securing the payment ecosystem means a relatively fast, friction-free and unified solution for all.

“The European Commission understands that new payment features are added – purchasing from a new mobile device, first-time customer, applying for a new account – features that up till recently were not addressed, and therefore the need for a regulation is crucial,” said Rivner.

Lack of standardization

One of the biggest hurdles in mainstream adoption and growth in mobile and digital payments is lack of standardization.

There are a multitude of competing platforms, networks, service providers, point of sale technologies, and retailer strategies, including Apple Pay, Samsung Pay, PayPal, Square, Softcard, Walmart Pay, Venmo, just to name a few. Ensuring that there are compliant, secure standards across the board and that solutions are compatible across different channels – online and in-store – will be critical to mass acceptance.

“All parties involved in the payment lifecycle, from retailers to service providers to regulatory bodies, must coordinate to develop consistent and compatible solutions that keep the customer’s needs – convenience and security – at the heart of the conversation,” said Leo Loomie, VP at Digital Risk, a data analytics and compliance solutions provider to large financial institutions.

This article originally appeared on Techcrunch