Spreedly is very focused on the card-not-present space in online payments. When we began, over ten years ago, there was a subset of merchants and some platforms that needed to work with multiple providers simultaneously , multiple PSPs, primarily. Doing that proved to be a sticky problem. You had to be involved in PCI compliance, manage development resources, do integrations with multiple providers, and so on.. We built our service initially to solve that problem; by creating a cloud-based service that these merchants and platforms could plug into. I would say that early in our history of online payments, connectivity and security as well as just being able to transact was the most important thing.
At the time, many companies were still thinking they could simply plug into Adyen or Stripe directly. They only needed one provider. We were working with the niche part of the market that wanted or had to work with more than one provider. Around 2017, 2018, consequently, there was a shift in the market and lots of merchants decided that even with the best provider, there was some sort of restriction on the business. Or that it just made really good sense to work with multiple providers and orchestrate their payments. That can be delineated as the second phase of the company's growth.
While still being the same platform, the same team, we saw interest move from being connected and secure to really being a business partner and helping our clients optimise their payments process and broader acceptance rates. We are based in North America and our big three markets are the EU, North America, and Latin America. That's where the bulk of our transactions happen, for the most part equally across those three regions.
I think the interest in APMs and LPMs is accelerating rapidly. The default thinking in the industry was that merchants had to support APMs or LPMs, but they end up representing only 5-8% of the total volume. There's always some unique country where an APM is very important, but for the most part credit cards are the universal answer. About 18 months ago, that started to change, and it was all part of the orchestration movement. Merchants didn't just want their payments process to work. They wanted to have all the options available to ensure they captured every sale possible. That was the catalyst for an increased interest in APMs. The success of new offerings like Pix in Brazil has caught the attention of governments everywhere.
When it comes to Spreedly, we're always playing catch up, but in a good way. The increased interest in the marketplace for APMs and LPMs is significant. However, another big trend is the number of new and existing providers discussing orchestration. We're at a moment in the market where some merchants are confused. Everybody's orchestrating everything: fraud, APMs, credit cards, payins, payouts.
It'd be interesting to see in 2023 if we settle down a bit and if these processes eventually become easier. We are in constant dialogue with merchants and merchant platforms. They're interested in orchestration, but I think they feel a little overwhelmed when they get out there and try to understand who does what, who's truly agnostic, who is augmenting their core offering, and so on. This may be the understandable downside of orchestration becoming very interesting to merchants in a very short period of time.
That's one of the trends we observed early on when merchants would express interest in APMs or LPMs. They would look at an individual APM with a payments flow that was significantly different to a credit card. They built their flows around authorising an amount knowing they could go and capture that amount. When they looked at an APM that might not tell them for 24 hours, whether the funds were available or may not - meaning they would have a different refund cycle, it all became overwhelming.
Instant payments really solved a big part of the workflow challenges. Still, there is a lot of work to be done in the realm of subscriptions and recurring payments. A lot of the newer APMs don't have a really elegant way to charge a customer continually.
Circling back to an earlier idea, we must mention the macro trend of numerous PSPs starting to understand and accept the need for orchestration. For a long time, they believed they built a comprehensive solution, and it should be the only solution that a merchant needs to have global coverage. And, of course, they monetise by taking the transaction. Working with the merchant to support a transaction flow through somebody else is understandably not something they were interested in, philosophically or financially, but the continued increase in interest across the board has some of those PSPs thinking about revisiting their position.
It's still early, but in 2023, we'll see increased communication from some of the larger PSPs about being more open to working with their competitors for the right types of merchants.
There have been many governments that have tried to implement real-time payments that are mandated by the government. Brazil's Pix has surprised everybody with just how successful it's been. Columbia, Mexico and many others are all looking at that, and they're really doubling down on what they can do to implement a local payment method as successfully. And this principle does not just apply to Latin America, Brazil is a large enough country that it'll catch the interest of Asian countries as well. So I expect the continued rise of country-based or government-driven real-time payments.
For us, in particular, in ecommerce, 2023 will be the year when the post-Covid adjustment happens. You can see it now. There's a lot of rethinking coming from companies who, even though they were on different growth trajectories, decided to try everything. There was a lot of funding involved in supporting that, either corporate or VC. I think in 2023, we are going to witness companies making decisions that are profitable and that they can support. It would be interesting for us to experience, after the euphoria around the increase in digital transactions, a year that will be one of reckoning - in a good way, driven towards more efficiency rather than volume.
Justin joined Spreedly as CEO in 2011. He has driven Spreedly’s dramatic expansion through a successful pivot and evolution of the company’s go-to-market strategy. He led the company's fundraising of $75 million from Spectrum Ventures to accelerate Spreedly's growth strategy. He combines a technical background with expertise in sales and customer experience.
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