Payment rails are getting more attention these days, and there is an increasing focus on offering a standardized, relatively seamless experience that can be locked and loaded by various operators with minimal hassle.
And that brings us to the world of global payment rails, the subject of a recent PYMNTS discussion featuring Karen Webster and Steve Kirsch, CEO of M10, an affiliate company of Token.io that develops solutions for digital currency. M10 focuses on creating a digital money solution to help global banks quickly and affordably handle international transfers, settlements and remittances.
“M10 is a new digital money payment rail that enables banks to increase their financial agility and evolve a new suite of international transfer services for their corporate and retail customers,” Kirsch said. He added that the company’s goal is to push past the obstacles of global money transfers and to enable companies to “do business without friction.” M10 facilitates real-time, intra-bank transfers and cross-border remittances, as well as Internet of Things (IoT) and B2B payments, “with no counterparty risk and at a lower cost than existing rails.”
M10’s efforts with its payment rails come amid further efforts regarding open banking, which promises more global payments innovation as upstarts and others get more access to banking APIs and data. “We offer a single API across all banks,” Kirsch told Webster. He emphasized that the company’s aim is to help move digital currency — that is, digital forms of fiat currency — across bank rails, and that it has nothing to do with cryptocurrency, which is still an unwelcome concept to many financial institutions (FIs) and payments players.
Payment rails are undergoing significant innovation, a trend that promises to continue into the 2020s in various areas. Earlier this year, for instance, Visa launched Visa B2B Connect, an end-to-end payments network, across more than 30 countries to start. It also gained control of Earthport, having bought the U.K.-based firm for a reported $257 million in a deal announced late last year.
Mastercard, for its part, bought Vocalink and Transfast. And Citi in late November revealed the launch of its Citi Global Connect platform, enabling corporates to accept B2B payments across borders with integrated FX capabilities. Citi noted that traditional methods of cross-border accounts receivable are inefficient, involving multiple collections service providers with silos between invoicing, collections and reconciliation.
Meanwhile, payments messaging firm SWIFT recently announced that its gpi service can now integrate into domestic real-time payment systems, enabling banks to wield gpi for real-time cross-border payments.
As Kirsch told it, Swift’s gpi and other services and rails have their own flaws, mainly centered around speed, and that’s the opportunity that M10 aims to exploit. “If you are doing open banking (through those other rails), you are still going through the corresponding bank system,” he told Webster. “It’s moving slowly.”
Not only that, he said, but such rails essentially keep bankers’ hours, which can impact settlement and clearing. “Central banks are typically closed on weekends,” Kirsch said, “and banks themselves don’t typically process things on weekends. You are dealing with a legacy system that doesn’t work on weekends.”
The idea for M10, then, is to work 24/7, and via a system that participants can easily install and run. “Let’s create some Uber-like technology and give it to the banks, without them having to lift a finger,” he said, describing the thinking behind the offering.
That sure sounds good, but when it comes to payment rails, FIs are unlikely to take a gamble on an upstart player or system — especially one that, as Webster pointed out, sounds too good to be true. Kirsch acknowledged that, and said it’s unlikely that any bank would adopt the M10 rail offering right way in a big way — no one is likely to jump into the deep end of the pool. “But we are creating a parallel infrastructure, and we are creating it in the cloud,” he noted.
Indeed, the cloud is key to scaling the M10 service, Kirsch told Webster. In any case, he described a process via which banks interested in this newer payment rail would essentially test it — that is, dip its toes in the water — via small-value transactions at first. He countered Webster’s contention that the M10 offering amounts to a “network of networks of networks” when it comes to payment rails. “Once you are in my scheme,” he said, “then you don’t need (those other rails).” He also teased an announcement to come regarding a bank starting to use this new rail.
It will certainly take time to see if this new idea will take off, and whether banks will really trust a different rail to meet the payments challenges to come in 2020 and beyond. But you can be sure that more innovation lies ahead in this area of payments.