nanopay: The Global Middleman For Payments

Cross-border payments aren’t easy. They can be costly, time-consuming and fraught with risk. Banks that power international payments must satisfy the regulations and standards on both ends of the transaction, but while also protecting the transacting parties and the funds moving between them.

Toronto-based technology startup nanopay aims to make the whole process easier — and more secure. Founder and CEO Laurence Cooke compared it to making an international phone call: On each end of the call, there is a local network supporting the connection, and those two networks are joined by a global middleman network. nanopay is that middleman for payments, according to Cooke.

Nanopay recently integrated with the local rails in Canada and India. Now, customers in those countries can use the platform to send money to each other and have all the complex cross-border and compliance components handled by nanopay. In fact, in a recent check-in with PYMNTS, Cooke listed four ways that working through a middleman like nanopay can reduce risks and costs for banks facilitating cross-border transactions.

First, a middleman removes the credit risk. Currently, traditional correspondent banking requires that funds be held in foreign banks in the local currency, so there is credit risk involved with that institution — and banks are often working with several of them, so multiply that risk accordingly.

Second, it removes the currency risk. Again, in the traditional process, funds sit in a foreign bank in a foreign currency. If the exchange rate fluctuates, banks can lose U.S. dollars in the process.

Third, it reduces the anti-money laundering (AML) risk. As corresponding banking shrinks, said Cooke, direct point-to-point communications require multiple hops, and that can lead to more fraud, more mistakes and more mouths to feed along the way.

Finally, it reduces the spread banks must offer to the end user. Today, between the time when a customer conducts a transaction in the morning and the time when it’s settled (usually at midnight), the currency can change drastically. nanopay ensures the bank gets the same rate it’s offering to customers and settles at the same rate at which it does the transaction.

nanopay demonstrated how its platform can process consumer and B2B transactions live at last month’s Finovate conference held in New York City, New York. Finovate conferences showcase cutting-edge banking and financial technology, and 1000-plus startups have presented at the short-form, demo-style exhibitions to date.