Why We Invested in SWAP: It's All About BaaS

Why We Invested: SWAP

If you are an up-and-coming fintech entrepreneur, how do you connect your offering into existing banking and payments systems? If you are a consumer platform and want to offer financial products to your engaged customer base, where do you go if fintech is not your core competency?

One path you could take is to try to connect to the legacy systems yourself. However, the systems are complex and the barriers to entry are so high that it is nearly impossible for a new player to build the connections. Another approach is to connect to third-party players with access to the systems, which isn’t easy. Incumbents have historically dominated the market by supporting connections to card schemes, payments processing, banks or bank accounts – all of which have integration challenges, are expensive and generally outdated. Each market has only a few legacy players; time and time again, many of these players have proven unreliable, with service being interrupted or going down with frustrating frequency leading to further distrust within the financial services industry. In short, the current set up is closed, high cost, and limits competition.

Yet, there is hope.

It’s All About BaaS

Over the past couple of years at Flourish, we have focused on a global digital banking thesis – which now includes nice high growth fintech companies – and we learned the importance of back-end “Banking-As-A-Service” (BaaS) partners who deliver basic infrastructure for banking, transfer, lending, and payment processing. By partnering with the right BaaS partner, rather than building a full-stack solution from inception, fintechs can get to market and iterate their products faster, and focus more on accumulating customers. Beyond pure-play fintech, non-financial services startups and platforms can also utilize this method of partnering with back-end players to embed financial products into their offerings.

With a booming fintech market and recent Central Bank regulations enabling further innovation in Brazil, the need for BaaS has never been higher. That is why we are thrilled to partner with SWAP.

When two of the co-founders, Doug Storf and Ury Rappaport, were working in senior positions at 99 Taxi, they faced the same frustrations outlined above. They experienced repeated back-end problems, then looked to the market and realized that there were only old-fashioned incumbents serving the payments and banking market, and no one had APIs. Together with their third co-founder Alexandre Takinami, they decided to change this, and two years ago began the journey to create SWAP. As the hub to connect into the financial services ecosystem in Brazil, they are making payment rails and banking services more accessible and dramatically reducing the start-up costs of a business to offer financial products.

“We are like AWS (Amazon Web Services) for payments, helping companies improve connection, experience and embed finance into their business so they can stop outsourcing those functions,” SWAP`s co-founder and Chief Product Officer Ury Rappaport told Crunchbase News on July 7th.

Demand for What SWAP Offers

SWAP’s product suite is relevant across multiple industries and multiple stages of a business from new to scaling fintechs to embedded finance models such as marketplaces, retailers, logistics, and e-commerce. With their flexible product menu of BaaS APIs and hands-on client service, they enable anyone, licensed or not licensed, to quickly plug into bank accounts, credit card issuing services, digital wallets, and payment processing. At a time of preeminent uncertainty, SWAP continues to see an uptick in organic inquiries from small and large companies alike who are re-evaluating their partners during the COVID-19 lockdown. Companies are looking for new revenue streams, the most cost-effective products, a high level of flexibility, and the best customer service – all of which SWAP can provide.

We are excited to be investing in SWAP’s Seed round alongside a strong local and international syndicate including former co-investors like Partick Sigrist (Co-founder of iFoods) and new co-investors like ONEVC, GFC, Canary, SOMA Capital, Brad Flora (Y Combinator Partner), ABSeed, Rhombuz, and Hustle Fund.

At Flourish, we are driven by our normative view of a fair financial system, one where financial infrastructure is open, low-cost, and drives competitive markets. We are proud to join this strong group of investors in partnership with the SWAP team to drive towards a fairer financial system in Brazil and beyond.


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