Summary of an episode of the Breaking Banks Podcast
Bruce Parker, CEO of Modo, made an appearance last week on the Breaking Banks podcast hosted by Brett King. As Bruce joked, he was the Resident Payments Plumber for the show. You can listen to Bruce’s section of the podcast above, or read a summary of the conversation below.
Modo is focused on connecting existing payments infrastructure from large scale players to all the new, cool things that are going on in the industry. This means Modo has a pretty substantial role to play in the market today as making changes to the existing infrastructure is difficult. Modo creates interoperability between large financial institutions and new digital payments players in order to seamlessly bridge the gap from old to new.
Modo primarily works with the commercial side of large banks whose clients are similar to the “FANGs” (Facebook, Amazon, Netflix, Google), also known as the “Big Four” of technology. These types of clients demand different things from their bank; things like enabling digital economies to deliver funds using digital wallets as the endpoint instead of bank networks. This brings into question how we can seamlessly connect these two very different endpoints.
At Modo, we don’t connect systems using one-to-one integrations in order for them to communicate. We have a cloud-based payments utility that normalizes the actions of each system and then maps them to our state machine and acyclic directed graph (ADG) architecture. By doing this, we can track the different ledgers of the systems as they move throughout the payment lifecycle and keep all the ledgers in sync.
Since Modo’s infrastructure is in the cloud, it can be deployed anywhere. We have a presence in our home continent of North America (through our work with Bank of America Merrill Lynch, Alliance Data, FIS Global, Mastercard, and Verifone). We also have Klarna as a client in Europe. Through our work with Bank of America Merrill Lynch, we do work in Asia focused on disbursing funds to consumers without traditional bank accounts. We’re all around the globe!
As a company that is dedicated to connecting the old to the new, we are founded upon the idea that banks will always have a role in the financial industry. We actually believe that the role that banks have in 20 years will probably look eerily similar to the role they have today. Why? Because they are the custodians of currency. They’re trusted and regulated by the government in order to hold our money. As far as some of the functional elements of the bank, those very well might change and we have already seen that change occuring. Companies like Alipay, PayPal, and WeChat are great examples of companies stepping up after banks have neglected some of their functional responsibilities.
A great example is the work we’re doing with Alipay for Bank of America Merrill Lynch. Bank of America Merrill Lynch’s corporate clients want to be able to disburse funds to users around the globe that may request payment through one of the regional digital wallets in their area. Even if the consumer is interacting with Alipay, Alipay is the wallet destination, and Alipay keeps the records for payments, the funds will live in an actual chartered bank because the government says that’s the way it ought to be.
And Modo also doesn’t see the Alipays, the WeChats, and the PayPals being created as part of a bank offering. The new digital players are very agile and focused on the behavior of their customers. Each player has a very important role in the payments ecosystem, and our strategic bet is that it will continue to happen, and pulling these two worlds together will continue to generate friction throughout the industry. Until we all become interoperable, that is!