Vogogo Raises $8.5 Million to Boost Bitcoin Exchange Security
Calgary-based online payment services provider Vogogo, a platform that automates payment processing, regulatory compliance and risk management for businesses, including clients in the bitcoin and digital currency sector, has raised $8.5m in new funding.
The round was led by Beacon Securities, Canaccord Genuity Corp, Clarus Securities and Salmon Partners, with the capital aimed at helping the company expand its service beyond Canada to the US and Europe.
Speaking to CoinDesk, Vogogo CSO Rodney Thompson said that his firm has become more actively involved in the digital currency space, owing to the need of the industry’s businesses for a partner that can handle fiat compliance and the associated fraud mitigation responsibilities that coincide with these offerings.
Thompson told CoinDesk that most of his firm’s partners are digital currency exchanges that have turned to Vogogo as a way to handle risk management, explaining:
“We remove the risk management side, [handling] know your customer (KYC), anti-money laundering (AML), fraud mitigation and dispute resolution, and our banking partners are willing to work with us so we can put our payment processing behind that. It’s been proven that [the digital currency industry] is trying to put its best foot forward, but people are having a difficult time with managing the platform side of it.”
Thompson indicates that Vogogo has become a valuable third-party partner that allows digital currency businesses to mitigate fraud in real time, without having to build in-house systems that meet this need.
Now, Thompson indicated, his firm is looking to build on this success to perform similar services to digital currency companies operating outside of Canada, adding:
“For us, it’s just about growth, taking what we’ve been doing in Canada and expanding out globally. From our side, we’re specializing this piece of what we do for the crypto industry, for crypto businesses.”
Early market entrance
Thompson indicated that though Vogogo and its employees have had an internal interest in bitcoin for some time, as the company’s CTO was an early and active bitcoin miner.
Despite the familiarity, it wasn’t until the June 2013 closure of LibertyBit, then the second-largest exchange in Canada, that the company became convinced it could serve a real business need in the budding industry.
“LibertyBit really stands out to me, because they were ran into a problem where they were doing online bank maintenance and they thought they were indemnified, and of course there really is no such thing as an indemnified payment, and they went down. So, it was then that you were just starting to see the issues around it.”
This development, as well as similar shutdowns from other major exchanges, pushed Vogogo to look more closely at the opportunity. After about three months of development, Vogogo tailored its offering to the digital currency space and began serving the market.
How Vogogo works
Thompson revealed Vogogo is currently working on a new product release that will allow it to handle KYC, AML and compliance requirements for digital currency exchanges.
“We [will] do the ongoing fraud mitigation. So, we will set the customer with their payment and all the ongoing fraud mitigation around it,” Thompson said. “What that means is we’ll manage all your bad debt, any fraud scenarios that happen, we manage all that.”
Vogogo doesn’t actually handle bitcoins or altcoins for its clients. Instead, Vogogo ensures that fiat payments are managed correctly, limiting its clients’ risk for chargebacks and the other previously mentioned issues that come with the responsibility for customer funds.
Thompson added: “When an end user gets to that exchange to deal in bitcoin or altcoin, that’s on the exchange. When they want to take whatever they’ve sold and move the fiat back into the currency of their choice, that’s also on [the exchange."
No pivot needed
Thompson said that while Vogogo is happy to serve clients in the digital currency space, extending its services to this community doesn't necessitate a fundamental change in its business. Vogogo had historically served e-commerce platforms, and continues to do so.
Rather, Thompson indicated that all Vogogo needed to do was gear its existing offerings to the needs of the space while capitalizing on existing expertise.
"We've always dealt in secondary payment options, and that being payments that aren't credit card related, and because of that, we've always had a risk engine in front of those payments."
When asked about potential upcoming digital currency regulation in Canada, the CSO said that this, too, won't require Vogogo to shift or change its product offering.
"For us, we have a really strong payments team, we have a really strong risk management team, legal team, so we're constantly adapting what we do on the shifts, regulatory or other. If there is a change on the regulatory side that we need to address, it's pretty easy for us to make those changes and to make our platforms compliant."
Expanding to new markets
As for the funding, Thompson indicated that it will be necessary given the company's desire to enter new markets in Europe and North America, especially owing to the expense of expanding a risk platform globally.
This expansion, Thompson said, will require Vogogo's payment solutions to be customized and integrated with domestic banks.
"We take working with our banking partners and any regulatory requirements very seriously, we don't cut any corners. [If] we’re set up to be somewhere, it’s all set up properly.”
For more information on Vogogo and its payment solutions, visit the company’s website.
Images via Vogogo