Originally published in The Paypers Payments and Commerce Market Guide 2018-2019
The Paypers has interviewed Bruce Parker, founder and CEO of Modo, to learn more about loyalty programmes and the trends and developments impacting the payments industry.
Having worked in the payment industry for years with ubiquitous companies, why did you start Modo Payments (Modo)? What consumer or merchant needs did the incumbent players poorly serve?
A retailer’s primary concern should centre on customer experience, increasing sales, and reducing costs. However, payments have long been a bottleneck and impacted the retailer’s ability to grow and innovate. And therein lies the problem.
First, the software sold by these ubiquitous companies is outdated, saddled with underperforming systems, and outdated architectures. Therefore, the data associated with payments ends up stuck in the silos of older mainframe systems and other kinds of legacy hardware architectures. The payment processing services are costly, far from intuitive, and chopped up into different steps. There are a lot of discrepancies or exceptions, errors that crop up because the systems are constantly handing off between one another due to the fact that we’ve chopped up the payments life cycle.
Merchants, businesses, and consumers are seeking simpler, streamlined payments solutions. Merchants, particularly, are looking to accommodate geographic growth and new demands, in order to adapt quickly and seamlessly to the constantly evolving retail landscape. With new technologies, payment processes, and cloud services, we can eliminate many of the challenges associated with traditional payment solutions. They can realise measurable improvements in their payment ecosystems as well as protect their ability to deliver high quality, end-to-end customer experiences.
What hinders the industry from serving these needs? How do you tackle these problems?
The reason why the industry doesn’t change is because these systems run 99% of all the retail card payment transaction volume and use a computer architecture, called a tandem, which is a type of mainframe. And what’s more, it’s very difficult and expensive to make changes.
But why don’t we make with what we have and try to rebuild and modernise what we already have, instead of replacing the old systems? Let’s leverage the infrastructure that’s already in place and focus on reducing friction in payments by creating interoperability. When payment systems are interoperable, they allow two or more proprietary platforms to interact seamlessly. This means you don’t have to change your existing infrastructure to integrate with new systems or methods of payments. We can take any source of value, deliver it to any destination, and even bring it back again.
We provide a cloud-based utility for connecting existing payment systems without requiring changes to those systems. If you want to be able to accept multiple forms of payment and deal with the new forms of digital payments that are coming up and improve your reconciliation and exceptions, chargeback, all the things that happen in the back office of payments, Modo’s payments utility allows for faster connections between systems without requiring changes to any source or endpoint.
With the proliferation of wallets, value-added services such as loyalty schemes are becoming increasingly important. How do you support solution providers and merchants in setting up added-value services?
Modo’s technology empowers consumers with omnichannel shopping experiences where loyalty points can be used to checkout at the point-of-sale, online, and via mobile commerce. Making loyalty point redemption more convenient for consumers by creating interoperability between loyalty programs and every day commerce allows for a valuable experience that benefits the consumer, merchant, and loyalty program provider. As recently announced, Modo is working with Etihad Airways to allow seamless payment for multiple products and services. Etihad is accepting payments on their website in order to preserve plane tickets, but have a challenge when they want to accept, for instance, a credit card or a wallet and loyalty points in the same purchase. The reason why they were having a problem is because the systems that they use to power acceptance of payments on their website for reservations and the systems that power their loyalty scheme are totally different, they don’t connect to each other.
Our approach is to turn the various sources for value – and the data constructs that come with it – into something that merchants know how to handle, which is a card. Therefore, we provided that interoperability that I referred to earlier. We decided to connect the source of value from a loyalty with the use of a credit card or a wallet and make that easy to process by the reservations website, so that that reservations website can process a combination of loyalty points and another form of payment, just like a credit card.
What are the trends and developments that will impact the payments industry the most in the next three years?
Proliferation is the most important problem facing payments. There are many new forms of payment today – different wallets, card schemes throughout the world –, whether those are bank sponsored or merchants sponsored or they’re regionally/globally focused. Over the next three years, we will see yet more fracturing and more proliferation coming from other smaller organisations, from regionally focused organisations, from the banks themselves. As payment models proliferate – from digital wallets and mobile to new card standards –, businesses and consumers must carefully evaluate the landscape.
How is Modo Payments going to develop in this timeframe? What is next on your agenda?
Our job so far has been to solve this problem for incredibly large participants already in the payments business. Next is to bring interoperability directly to businesses, merchants, to the people who are facing this problem. Therefore, the next thing on our agenda is to announce a product that allows us to do just that. We will be coming back to the market with a solution to deal with all of the different forms of payment and overcome the proliferation of payments.