You Wouldn't Flip a Coin to Buy a T-Shirt

Trust Me

Trust is at the center of all commerce. Trust that one party will deliver goods or services. Trust that they will be honored with payment.

The late 90s and early 2000s brought a new frontier, one where eCommerce became the new modality, but one that lacked trust. eBay brought millions of buyers and sellers together in a worldwide marketplace, however, a key piece was missing – digital payments, and managing the associated risk. With the integration of PayPal, the missing piece of the puzzle was solved. PayPal enabled millions of buyers and sellers to transact in a trusted manner on eBay’s platform.

Fast forward to today and both a lot and a little has changed. Digital commerce is the growth driver of the economy; B2B adoption and decentralized commerce represent the next frontiers.

But in payments, there’s a more complicated story. The card networks have been both a great enabler and restrictor of innovation. Cards have allowed consumers to safely access a huge network of merchants, instantly, with next to no risk. However, they are expensive and are restricting access to the next frontiers.

Up until very recently, the “digital” alternative to cards in the US was connected to the ACH network, or the interbank clearing system. While this option is inexpensive and the preferred option for large volumes, it is very slow. ACH payments take 2-3 days to clear, which makes transacting a challenge, especially online. After all, we expect to receive items in 2-3 days, not have the payment take that long.

This problem has been the ‘elephant in the room’ for payments for a very long time. PayPal originally started as a wallet for the Palm Pilot but had to resort to cards. Across the globe, where cards were traditionally less accepted, mobile wallets leapfrogged cards, and have been followed by government-led faster payments systems. We can see this with UPI in India growing ~500% in 2 years, PiX in Brazil, and Open Banking in Europe. Increasing adoption of bank-to-bank transfers supported by regulatory tailwinds are pointing to a world in which digital payments will diversify off the card networks.

At Activant, we have asked the question for a long time – what payment platforms will power the next frontiers? And what will be the catalyst for change?

Crypto the Catalyst

The last several years have seen the precipitous rise of crypto markets. Which, even with the recent cooling, are a trillion-dollar global market. Whatever your perspective on crypto, there’s no denying that it has been a major catalyst for change across all of finance. It’s provided a vocal challenger to the card hegemony.

But the success of decentralized commerce is dependent on the bridges between traditional and decentralized finance. Simply put, it’s really hard to get your money in and out. Sardine data shows that half of all transactions are rejected. You’d never flip a coin at register to buy a t-shirt. So why is this ok for what’s supposed to be the future of finance?

This abysmally low conversion rate, combined with aggressively high fees create a massive opportunity holistic payment platform. If you can solve for crypto – the highest-risk part of the market – you unlock so much more.

Risk Management

Accessing this enormous opportunity has always been about managing risk. After all, part of the reason cards have been successful is their ability to do so on a global scale. Trust is at the center of every transaction – which means it’s crucial to prove identity and manage fraud risk.

It’s one thing to manage fraud for an ecommerce transaction, where a merchant has days, not seconds, to stop their goods from reaching a fraudster. But if your goal is to move money instantly across the world, that’s a much harder problem, and one that never rests.

But moving money for fintech and between crypto and fiat is even more challenging – you can't simply cancel the distribution of funds like you can during the shipping window of a physical product. And risk isn’t tackled once; it is continual and ubiquitous challenge.

So it’s an enormous opportunity, but highly complex. How might you solve it?

At Activant, we break it down across three vectors:

1. Cards and ACH
2. Traditional & decentralized
3. Identity and Fraud

We’ve already touched on the first two – let’s talk about part three, the enabler of both. Identity and fraud solutions have traditionally been siloed:

Fraud platforms have been effective at managing eCommerce transactions, but are traditionally siloed from fintech and crypto, limiting their effectiveness on complex digital transactions. Identity solutions have unlocked an entire world of fintech in the past few years through digital onboarding, KYC, and AML. However, they have typically been point-in-time and failed to manage the ongoing risks like account takeover – you may have seen Chime and Venmo dealing with this recently.

Most importantly, identity and fraud solutions rarely talk to each other. Connecting the two is critical for managing risk holistically.

Crack open the Tin: Sardine

Sardine is the only offering in the market that combines fraud, identity, payments, and crypto in a single platform.

A remarkable team - if you had two or three of these folks onboard, you could build a great company - Sardine had more then ten of them

From our first meeting, we knew that Sardine had the team to tackle this massive problem.

Having looked at thousands of companies in fintech, it’s rare to find a team with deep experience all of these vectors. They built the risk models of many industry titans, like Coinbase, Revolut, PayPal, Adyen, Bank of America, and Bolt. But crucially, their previous work is powering billions of dollars of money movement every day across the highest-risk areas of finance.

Soups, Aditya, Zahid, and their entire team are building the platform they wished they had in their previous jobs.

They deeply understand their craft, love being in the weeds, and have a hunger to win. Just look at their customer base: Brex, MoonPay, and Chipper are just the tip of the iceberg.

At Activant, we are always on the lookout for foundational infrastructure players that can underpin the future of commerce – we believe Sardine is one of these, and are privileged to partner with them on this journey.

Sardine is hiring actively - check out their open roles.