Originally Published on CardRates
In a Nutshell: Payments systems have evolved rapidly in the digital age, and banks and other financial services companies have had to utilize multiple legacy systems from various companies to keep up with demand and preference. Modo helps companies with technology that allows for interoperability between multiple payments systems. The company currently focuses on, pay-outs, pay-ins, and checkouts for financial services institutions. It maintains high security standards through its tokenization, encryption, and cryptography methods. With plans to help companies optimize decline rates and approvals, Modo seeks to bolster its role as a payments plumber that provides the pipes to facilitate the use of multiple payment systems.
From his vantage point in the traditional payments processing world, Bruce Parker watched the birth of the modern payments industry as digital technology exploded in the early 2000s.For decades, cash, checks, and credit cards had essentially been the only payment methods for individual consumers, businesses, and banks. The system could be slow, but in the pre-digital dark age, it was just the norm.
Nobody knew what payment possibilities lie ahead. But Parker had an inkling that mobile technology would be making a big impact in the payments industry. After investing more than a year of time and energy studying the mobile issue for his employer, the company never bothered to listen to the results of the project, Parker told The Dallas Morning News. In 2010, Parker quit his job with the traditional payments processor and launched his own company, Modo. Parker said his original idea was to help brands develop their own payment apps.After honing Modo’s technology and looking for a niche in the mobile payments world for several years, Parker told The Dallas Morning News he realized his company needed to pivot. Modo eliminated the consumer-facing element from its product and used its proprietary COIN technology to re-shape its product to become a payments plumber of sorts by providing the pipes to facilitate the use of multiple payment systems.As the payments industry evolved, banks and other players in the financial services industry were overburdened with multiple payment systems serving various purposes and audiences. Additionally, the institutions were managing their own legacy systems and trying to make all of these processes interact with one another in an effective way.Modo helps solve these challenges by providing a “cloud-based utility that works with banks, networks, eCommerce players, processors, and their partners to enable interoperability between payment systems.”Brian Billingsley, Modo’s Chief Revenue Officer, said this means a bank or other institution can use multiple payments systems, like PayPal, China’s Alipay, and ApplePay, and Modo will handle the behind-the-scenes business of making sure money is transferred safely and securely between systems and parties as needed.
Reducing Friction Between Payments Systems Through Interoperability, Not Integration
Many companies in the finance industry are attempting to solve the problem of multiple payment systems and services through integration, but Billingsley said that’s not the solution. Piecing together multiple integration methods is not the right path to innovation.
Integrations also require multiple updates, incur high costs, and demand significant effort just to keep the system functioning.Billingsley said, rather than integration, the idea behind Modo is interoperability.“We created this model intended for mobile use, but when that didn’t take off we realized that we still had this great interoperability platform that allowed you to interoperate very disparate payment systems that don’t normally talk to each other, like loyalty programs, credit cards, debit cards, or wallets like PayPal,” he said.According to the Modo website, interoperability allows for:
- Secure control over the access and use of payment data, even when exchanging it with partners
- Single point of connection for payment data exchange which accelerates time to market, scalability, and partner flexibility
- Insulation from change in partner requirements as Modo handles it all
- Increased partner choice as Modo provides more endpoints and becomes the broadest payments utility to connect payment systems
- Total control of funds as Modo is a technology solution, not a financial service provider, and does not hold or move money
“We very much view ourselves as a utility,” Billingsley said. “We’re a marketplace that allows banks and other financial services players to gain access from a technological perspective to these various networks and endpoints to make it very easy to work with them but still get to compete on the basis of being a bank or a processor.”
Modo’s Primary Services Include Pay-Outs, Pay-Ins, and Checkouts for Financial Institutions
The three main areas Modo currently focuses on are checkouts, pay-outs, and pay-ins, Billingsley said.“The pay-outs area is one we’ve done really specifically for banks,” he said. “Our partners like Bank of America and Deutsche Bank are very large corporate banking businesses that need to move money all over the world, whether it’s for the gig economy, paying out developers, insurance companies, or whatever it may be.”