One of the iron laws of fintech investing is ‘invest in payments.’  For fintech, this return on payments investment seems to reflect three big trends:

1. the huge secular trend towards increasing digital commerce (requiring digital payments)
2. a financial engineering insight that payments companies have the same recurring revenue and high margin profile as the best software companies, and
3. in a world where engagement is king, payments are the ultimate form of engagement.

It’s worth noting that although fintech payments companies have taken headlines, every payment of U.S. dollars requires a bank to be party to the transaction. Banks are traditionally the only entities that can directly access the payment system. But ‘invest in payments’ has not been the iron law of banking – banks have mostly not built their payments businesses as the crown jewels. Moreover, even within fintech, most of the activity has been around new ways to move money between consumers and for consumers to make payments to businesses. Relatively few of the winners have focused on moving money B2B at scale, especially over ACH, wires and emerging payment rails.

Because of this, access to the U.S. payment system for true innovation has remained constrained, despite the presence of 10,000+ banks and credit unions. This is especially true with respect to complex or cross-border B2B payments, where the correspondent banking network continues its secular decline and linkages remain fragile.  

More anecdotally, we hear frequent stories of large fintechs struggling to create new banking relationships, payments companies taking a year to find a suitable banking partner, and in one recent case a highly funded and highly talented group of fintech engineers simply deciding to sell their company after a year of trying to find a bank that was willing to underwrite their real-time payments idea.

These are just a few reasons why we are so excited to be leading the Series A investment in Reserve Trust. Reserve Trust is a trust company that can operate as a direct participant in the U.S.payments system. This means that Reserve Trust is operating at an even more foundational level than the payments infrastructure companies that fintech investors have come to know and love. Unlike other payments companies, Reserve Trust does NOT rely on a partner or sponsor bank to move money.  

Moreover, in Reserve Trust, we are combining the best of a regulated financial institution with the deep principles of technology infrastructure, and also bringing the “band back together” from the cloud storage pioneer SolidFire.  

Reserve Trust CEO Dave Wright and COO Dave Cahill built SolidFire around the principle that cloud storage would require both leading edge hardware (solid state storage) and a more flexible, cloud-scale storage architecture. And just as fun, SolidFire’s original seed investor, Phil Bronner, is investing out of his new fund Ardent and joining the board. When Dave Wright told me that he saw an opportunity to apply cloud principles to payments, I realized for the first time that that phrase could be more than just a cliché overheard at Money2020.  

With this funding round, QED is also partnering with Fintech Collective, who have built a track record at the intersection of infrastructure and DeFi. "AtFinTech Collective we back creators with a hunger to reimagine the way money flows through the world. Reserve Trust is uniquely positioned to do just that by rewiring bank-to-bank payments,” said Matt Levinson, principal at FinTech Collective. “With a unique regulatory asset and executives with deep expertise in cloud infrastructure, Reserve Trust may ultimately pave the way for B2B payments that are smarter, faster, and cheaper.With potentially $25 trillion in addressable payments volume, the opportunity in front of them is beyond massive.” 

We couldn’t agree more.