It’s the calm before the storm for Modo Payments, according to the startup’s Founder and CEO, Bruce Parker. It’s everything his startup friends and mentors warned him about: big challenges, big opportunities and the sheer terror and exhilaration that go along with them.
Parker said Modo works to provide interoperability and manage payments data, all in the cloud — which he said is a big deal because less than 1 percent of all payments data is ever in the cloud, although he believes that’s where it all should be.
Getting to the cloud is a good idea, Parker said. Other industries have all gone there, and doing so would save financial institutions from building their own connections while also creating access to new technology and the benefits of computing developments.
Fortunately, Parker said, the conversation around the cloud is changing, but people (understandably) have a lot of questions and security concerns, preventing anyone from wanting to go first.
According to Parker, there’s no good technical reason why payments couldn’t be managed in the cloud; there just aren’t any examples of people who have.
Computers will continue to get more powerful and less expensive, Parker said, but payments seem to be the land that time forgot: Over 90 percent of card transactions run on old tandem computers.
In the cloud, there’s no concern or even question about what computer is running transactions. Someone comes along behind the scenes every six or nine months and updates the system, Parker said, but payments aren’t getting that refresh.
“They’re still stuck on platforms that are 50 years old,” he said.
Parker said payment systems are only as good as the number of operators they can talk to. Today, players must build their own connections to Visa, Mastercard and ACH – but payments are the only space in which that conversation is still happening, he said.
When one person sends an email to another, they don’t ask how one email provider is communicating with the other. It’s taken for granted that they will be interoperable. In payments, however, a transaction that starts on Visa’s network cannot be completed on Mastercard’s. The cloud has the potential to change this, said Parker.
He gave Bank of America as an example. Having connected the FI’s systems to PayPal, Klarna and Alipay – with more connections on the way – Parker said that sending someone money is now as easy for large corporations as sending someone an email, and can be done in whatever method the recipient prefers.
“You can be comfortable, compliant and secure in the cloud,” Parker says. “We’ve partnered with different providers to ensure all of that.”