Goldman Sachs has a few million more reasons to believe in the future of blockchain.
Earlier this week, the New York-based financial institution led a $25 million funding round for Veem, a San Francisco-based payment service built on the ledger technology. It joins Silicon Valley Bank and the National Bank of Australia, both investors in previous rounds, as financial backers of the startup.
Veem, which launched in 2014, says it will use this C-round to scale its services beyond the 80,000 small businesses it currently works with across 96 countries.
“We’re thrilled to have Goldman Sachs lead our investment round,” says Marwan Frozley, the CEO and founder of Veem. “This funding will help us expand our footprint, increase our distribution and form new strategic partnership.” Frozley was the founder of eBillme, a payments startup acquired by Western Union in 2011.
Cross-border money transfers, also known as remittances, is a $600 billion industry. And the companies in this space applying blockchain technology are all looking to disrupt the traditional model of how money is transferred, eliminating the SWIFT middlemen that take a percentage of every transaction.
The World Bank estimates the global average of remittance fees reaches around 7 percent, so if a small business owner is looking to pay a software developer based in the Philippines $2,000 for a completed contract, $140 would be spent just to make sure the transfer goes through.
It’s this specific use case that Veem is centering on, aiming at small and medium-sized businesses—or 95 percent of all the businesses around the world.
The Veem service can process payments using SWIFT— or transfer funds using bitcoin. That choice depends on the size and type of transaction; Veem determines which method is cheaper. For example, if a transaction is required to be sent overnight and during off-hours, it’s most likely going to choose the bitcoin payment system than the traditional SWIFT model.
The company reported that in the fourth quarter of 2017, almost two-thirds of its total transactions were over blockchain.
The big banks have taken notice. “Veem has reduced small business’ burden with its payments platform,” says Rana Yared, a managing director at Goldman Sachs. “We see tremendous opportunity for continued growth.”
SWIFT, Frozley says, is an antiquated global transfer network that may have worked in the 1970s, but should no longer serve as the foundation of today’s modern day wire transfers. “Banks are looking for ways to optimize these experiences, and partnering with Veem allows them to do just that,” he told Decrypt.
The company isn’t shy about its recent growth. Veem said it had around 590 customers at the close of its series A; that base has grown to some 80,000 to date.
The latest investment adds to Goldman Sach’s on-again, off-again relationship with the crypto world. Earlier this fall, rumors circulated that the investment bank curbed its crypto-trading desk, which appeared to cause a 5 percent drop in Bitcoin in the days that followed. The company later walked back those reports.
But its apparent the financial firm is a fan of blockchain itself. In August, it helped lead a $32 million series B round for Axoni, an enterprise-focused blockchain startup. Perhaps its better to watch what Goldman does than what it says.