Payment Methods

How Payments, In Context, Become Events

Each event in life is made up of smaller decisions and actions, all combined in moving parts to make a cohesive whole. Why should payments be any different? Modo is emerging from a self-imposed dark period with the goal of changing the way we talk about payments — and the change should go well beyond semantics, CEO Bruce Parker told PYMNTS’ Karen Webster.

A happening, an organized activity, a memorable incident – these are all classic definitions of the word “event.”

But when we reach back a bit etymology-wise, the Latin translates loosely to “result” – which is suitable, considering an event is actually the result of some set of actions.

We often aren’t worried about the commercial context of a transaction in the complex payments world (and payments rule the world, right?) – in part because processing transactions is hard work, but context matters. Especially when one looks for new ways to unlock value in payments.

Are we too focused on just the transaction, the big moment, or the result? Is it time to take a step back and get some context?

Think about it: Paying someone — whether it’s for goods or services or just transfers — involves setting a time and often a place, figuring out who is invited, selecting the providers for critical roles, and even when the big moment comes, it’s still not over. Afterward, there are records to file, notifications to send and sometimes issues to resolve.

In an interview with Karen Webster, Modo CEO Bruce Parker said that viewing a payment holistically — before, during and after – will help break down information silos and remove the friction of interoperability, and even improve operational efficiencies to boot.

But herein lies a quandary: How should we refer to everything related to a payment before, during and after the transaction? There currently is no single word readily at hand — we have to trot out that whole preceding sentence. So, Parker is proposing a semantic solution: He suggests “let’s just call it a payment event.”

As payments have become more dynamic and complex due to multiple payment methods, evolving networks, emerging business models and new experiences, we hear increasing calls for new approaches to transactions. Parker told Webster it’s time to focus less on the transaction or what is happening during the big moment, and instead step back to focus more on the context of the transaction itself: the payment event. We should simply leverage the transaction systems already in place, he said.

Emerging from a self-imposed, several-week-long period in which the company’s site and announcements had “gone dark” in order to re-focus on core businesses, Parker told Webster the firm’s value proposition is that it conducts the exchange of payment event data, securely and fairly, for banks, networks and payments providers – as well as their clients, customers and partners – across whatever systems they have chosen to use. That payment event, he said, is comprised of data that can also be componentized, tracked and managed through a single flow, depending on the context of the event. And it includes much more than simply the transaction.

The context of each event leads to the ability to think about each of them differently (weddings are different than birthday parties). Modo is already in market with solutions for checkout events with clients like Klarna; loyalty events with Verifone and FIS; and payout events done for Bank of America Merrill Lynch. Future payment events that are on the Modo roadmap include the request to pay events, acquiring events and receipt events.

“We are in some ways the anti-blockchain,” said Parker. “The blockchain, or any distributed ledger, asks the world to agree on a common ledger.” Modo asks, by way of contrast, not to agree on a ledger. “You already have one,” Parker said of current and would-be clients’ own ledgers within existing systems. “Allow us to mediate and interoperate between ledgers and do so before, during and after the transaction … we can not only connect systems that don’t talk to each other today, but we can [also] make settlement and reconciliation more seamless, reducing friction by an order of magnitude.”

Modo, said Parker, works to facilitate the systems that hold, touch or move money but never hold, touch or move money itself. The larger issue in the background: How to facilitate the systems of records to interact with one another across all payments types, providers and experiences?

“We are providing this event-driven service that our clients can use to store and track their payment data at any point in the lifecycle, as well as share it with anyone they choose without losing context,” he told Webster. Modo’s’ cloud-based SaaS offering means payments providers do not have to modify their systems to get the benefits of the interoperability they are seeking.

“We code to you,” he said of the current and future clients of Modo, “and whoever you tell us your counterparty, or counter-provider, is, we are going to do the same thing for them.”  Modo is responsible for the security of the data for the duration of their involvement.

You may have noticed above that Modo is not only describing themselves as securely conducting data, but also as doing so fairly. They insist that there is a need for understanding fairness when exchanging data.

But fairness? In business? In the payments business? Call that an F-bomb of a different sort. As Modo emerges from its “dark” period, said Parker, “we’re hoping the word ‘fair’ brings some cognitive dissonance,” with people questioning why that concept (and language) might even be necessary in a discussion on payments.

The challenge is that what is “fair” is in the eye of the beholder. Parker said fairness requires that stakeholders establish what Parker termed a “very durable rule that says, ‘If I am going to hand off data that is in custody about a shared customer to you, what are the rules by which we agree to live by?’”

The owners of the data establish the rules – and Modo, said Parker, makes them durable (and enforces the rules), which is different than other schemes for collaboration. And, he posited, fairness may become a new security standard, and simply assumed to be required.


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.