Former Mastercard Europe chief turns to VC to discover innovation

Rapid changes in payments and regulations have blown open the door to new ideas, creating frontiers for fintech investors. Javier Perez hopes three decades of experience will help him have an early read on startups.

The former Mastercard Europe president helped found Miami-based Global PayTech Ventures (GPT). Perez and his sons, Daniel and Kristofer, focus on early-stage paytechs looking to raise seed capital or Series A or Series B rounds. GPT, whose investments are funded by private capital from a network of investors, offers payments industry experience, contacts, and hands-on help for growing paytechs.

Perez spent 25 years at Mastercard, including 15 years as president of Mastercard Europe until December 2020 and two as president of Mastercard Latin America and the Caribbean. His sons Daniel and Kristofer previously worked for Mastercard and Visa, respectively.

Having been in the payments industry for 30 years, Perez has established relationships with people at banks, regulators and payment companies. “I understand what’s going on, what the implications are of doing this or that, and the resistance a new entrant will experience,” he said.

The opportunities for GPT reside in the massive changes in the payments industry, accompanied by regulatory developments such as Europe’s PSD2, which lower the barrier to entry for new players competing with incumbents.

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“Most VCs don’t specialize in payments, so it takes time to brief them on concepts such as PSD2 or tokenization,| said Perez, who is GPT's managing partner. "But, for paytech founders, it’s very important to move quickly and find what I call ‘smart money,’ investors who understand payments and can help them with the market and with contacts.”

GPT’s January 2021 launch generated early interest. Its LinkedIn profile received nearly 30,000 hits soon after going live, said Perez. The firm has recently closed its first deal, taking a 20% stake in Danish paytech Subaio.

Subaio provides banks with a white-labeled subscription management service, using AI to help users identify and cancel unwanted subscriptions. GPT expects Subaio to take advantage of open banking to diversify beyond its core business model. Subaio, which joined Mastercard’s Start Path program in November 2020, has eight European banks as clients. “When Subaio’s system doesn’t understand something, it raises a red flag, resulting in human intervention. Subaio is a good example of the type of technology we are looking for,” Perez said.

GPT focuses on Europe, the U.S. and Latin America. It has staff in Miami and New York, and its next step is to open an office in Europe. In Latin America, Perez likes Brazil, as it is ahead in payments innovation compared to Colombia and Mexico. "We expect to close transactions in Brazil very quickly.” Perez said.

Perez is also interested in open banking-based payment initiation services that use real-time bank rails, issuer-processors providing cards that integrate with digital wallets, and acquiring. “We like AI applied to payments in order to understand what the consumer behavior is and how to help the consumer,” Perez said, adding he focuses on what he calls ‘the last mile.’ “A platform may be technically sound, but I always ask if it works. In a retail situation, for example, the last mile means the customer gets debited and the merchant is paid instantly.”

Perez has a background in managing acquisitions and new business development. While at Mastercard Europe, Perez mentored start-ups, and oversaw the firm’s merger with European card scheme Europay and its acquisition of U.K.-based Vocalink and Nordic processor Nets’ account-to-account payments business.

Perez has been planning his own VC business for some time, noting people with ideas often came to Mastercard looking for investment, but could also benefit from experienced guidance. “Start-ups need hands-on investors with payments industry experience and contacts who can help them develop their business,” Perez said.

Perez expects to announce the closure of deals with two other paytechs shortly. The first is a Dutch acquirer whose entire processing engine is in the cloud. This would allow any payment service provider to connect directly in the cloud to the acquirer through any device, eliminating the usual lengthy and complex integration process.

GPT's other deal involves a Brazilian start-up which routes transactions on behalf of merchants to the most effective and lowest-cost acquirer. This is needed because in Latin America, particularly in the case of digital payments, up to 30% of transactions fail, Perez said, hoping the company can be a bridge between the merchant and acquirers, sending the transaction to the acquirer most likely to be able to process it and offer a good price.

GPT’s standard investment ranges from $1 million to $10 million, and ranges from angel investing to Series B funding. The firm considers proof of concept, proof of life, some clients and transactions, a pricing model, a management team, and a functioning operation. It will also go below $1 million for a very early-stage company that it likes.

Perez plans a hands-on approach to its portfolio companies, taking a seat on the board and providing strategic advice. While recognizing the importance of valuations in venture capital, Perez said he invests in a company primarily because he believes in what it does. “I would rather overpay for something I consider to be good and wait six months longer to get a return on my investment,” Perez said.

Unlike conventional VC firms, GPT isn’t focused on seeking a specific return on capital or an exit in a set number of years, said Perez. “We’ll decide, for example, if it’s better for a company to stay as it is, rather than have an early sale,” he said. “Often, it’s better to wait a year or two and have a much better exit than rushing and badly selling the company.”