Startups and large companies alike have sought to disrupt the payments space, but it has largely been a one sided effort. Square, Stripe, Paypal, and others focus primarily on collecting payments. Tipalti has taken the opposite approach, helping “mass payers” distribute payments around the world.
Tipalti has created an “automated end-to-end global payment engine” that supports a full range of localized payment methods and currencies in virtually any country. These methods include ACH / Direct Deposit, Global-ACH / International Local Bank Transfer, paper check, wire transfer, PayPal, prepaid debit card, and cash via Western Union.
“If you are a mass payer — paying to more than 100 payees — you can have the best payment solution available with one line of code and literally zero cost,” says CEO and co-founder Chen Amit.
For companies with under 100 payees, manually addressing the various logistical and regulatory hurdles of sending money in multiple currencies via multiple methods is a more manageable proposition. But for ad networks, marketplaces, crowdfunding platforms, and the like, which have far larger numbers of payees, the situation quickly becomes a nightmare.
“If you’re involved in any mass business network, your suppliers can live anywhere on the planet, and each of them can have different payment requirements or preferences,” says Amit.
“It’s not just a matter of paying in local currency but also supporting localized payment methods, observing maximum transferable amounts, collecting the entire required banking and tax information, and getting all the account numbers and other details right.”
The concept behind Tipalti was born out of the frustrations of one such payer, a global ad network who was overwhelmed and in search of a solution that did not exist. The ad network was struggling to maintain IRS, OFAC (office of asset control), and other levels of compliance while issuing tens of thousands of wire transfers and PayPal payments to multiple countries on a monthly basis.
Learning of the problem, Amit and his co-founder Oren Zeev spent nine months creating a commercially viable solution which was introduced to the market in September 2011. Today, the same ad network uses Tipalti to pay globally in 140 currencies.
In the nearly two years since, the company has grown to support 20 large clients, which collectively issue nearly $20 million in payments each month. Tipalti, which is sold as a SaaS platform, collects a small fraction of each payment at rates it describes as “generally more competitively priced than competing commercial solutions” and which is often passed along to the payee.
The company’s clients are approximately 60 percent in North America, with Europe, the Middle East, and Asia also represented in declining order. Tipalti itself, which currently has 15 employees, is headquartered in San Francisco with a team of developers located in Israel.
With the goal of making the process as frictionless and comfortable for each payer as possible, Tipalti uses the payer’s own bank account without the need for any third-party transfers. Also, the company offers white-labeled payee registration and payment selection sites, branded to match the payer website’s look and feel.
Based on the success of its payment distribution system, Tipalti receives regular requests to offer an accompanying payment collection option — the domain of giants like Square, Stripe, Paypal, and others. Given the demand, this is something the company is strongly considering, although it’s likely to partner with another solution provider, says the CEO, rather than developing it in house.
The founders of Tipalti are well suited to build and scale such an ambitious business. Amit previously served as CEO of Atrica, a carrier ethernet company that was later sold to Nokia-Siemens. Prior to that, he co-founded and led Verix, a business intelligence software company, as well as ECI Telecom. Zeev is currently a partner at Oren’s Capital and was formerly a partner with Apax Partner, roles across which he has invested in Audible, Chegg, GT Nexus, Gogobot, Spreecast, Bonobos, Cramster, Infolinks, Houzz, and other prominent companies.
Tipalti assembled an undisclosed small private angel round in 2010, let by Zeev and his personal network of investors, according to Amit.
As the barriers to international commerce fall, and the regulatory framework around global payments continue to gain complexity, the need for solutions like Tipalti will only grow. Once a viable solution has been developed, something Tipalti can rightly claim, the challenge becomes delivering it to all those businesses who need it. The company has been head down building and perfecting its solution for the last two years and has done little marketing.
“Our biggest challenge is anonymity,” says Amit.
It’s inevitable that the company will face some real competition in the space. Payoneer already offers a comparable service, as does PayPal (although this is far more limited and restrictive). It’s conceivable that Stripe and Square could cross the line from payment collection to distribution, but with the two caught up in an arms race to win their existing markets, this seems less likely in the immediate future.
“The complexity is in the details, the thousands of details you need to deal with in order to successfully execute payments at a mass scale internationally,” says Amit. “Our biggest advantage is in the knowledge we’ve accumulated over the last two years.”