By Melissa Repko The Dallas Morning News
WWR Article Summary (tl;dr) Great Q&A with the founder of "ModoPayments." As the mobile payments industry continues to explode, this is an interesting look at how some payment systems work and what is on the horizon in the industry.
Bruce Parker's obsession is an invisible technology that you use each day but rarely think about: payment systems that shuffle money around after you swipe your credit card, reimburse your friend through an app or make an online purchase.
Parker, a self-described payments geek, is the founder and CEO of ModoPayments. That's short for "mobile does" or "more dough."
Modo acts as like a payment plumber. It uses a transaction system called COIN to connect financial services companies or other sources of value with digital payment tools. It connects old and new payment systems and can integrate loyalty programs. Its list of clients includes Bank of America, VeriFone and European financial tech startup Klarna.
Parker began the company in 2010 thinking it would help brands build their own payment app, like Starbucks did. But over time, when it became clear that few customers were ditching their plastic credit cards for phone payment apps like Apple Pay, Modo pivoted. It lopped off the consumer-facing part and decided to sell "the engine that converted value," which was the COIN system.
Modo has raised about $11.6 million from strategic partners and investors. It was used for about $10 million of transactions in January, but Parker said he'd like to see that grow to $85 million per month by December.
Parker spoke about the startup's growth at Modo's suburban Dallas office. His answers have been edited for brevity and clarity.
Q: How did you become an entrepreneur?
A: I was the head of strategy for the largest payment software company in the world, ACI Worldwide. I was asked by the board of directors to do a review of the impact of mobile on the payments industry. And they never took the briefing. I spent over a year on this, with this big team and we were studying all of these different issues.
I was the classic frustrated corporate dude who had some insights, some ideas and some experiences, and it took me a full year to get up the gumption to quit over this. I finally decided something was going to happen. I needed to be a part of it, and that was ultimately when I left.
Q: What does Modo do? How do you typically explain it to a newbie?
A: Every form of payment you can think of started as paper. All of the computer systems that deal with that stuff follow the same path. They think in terms of 'I'm going to bring all of this stuff in, dump it on the desk and figure out what to do with it.' That's batch processing. It's a very industrial kind of thing.
We enable people to say 'You can have as many participants in payment as you want and you can add them whenever you want.' You can verify that someone has good money before you go down the path of trying to exchange value. We can figure out 'This person has loyalty points. This person has a gift card. And this person has goats, whatever it is', and we can make sure everyone agrees on what that value is.
Q: Give me an example of a client and how they use you.
A: For Bank of America, we're connecting a system that sends payments between companies and individuals. The most compelling example is sending value between Google (which owns YouTube) and somebody who's posted a video on YouTube. When those folks were from North America, that was very, very easy. Send them a check. Ask them for their bank details.
Now, we've got people in Indonesia, the Philippines and all over the world posting videos to YouTube and they're going viral. All the sudden YouTube needs to pay that person and they may not even have a bank account. If they're in Indonesia, they may be on a different island from where there is a bank. What we're doing is we're connecting that disbursements platform to an individual anywhere around the world. We are going to use PayPal, AliPay, M-Pesa and 117 other digital payments networks around the world that those consumers may or may not already participate in. That person in Indonesia can use their version of Paypal, Dompetku, and they can say, 'Oh, I got paid from my Youtube video' instead of having to figure out, 'How do I take the check to the bank?' or 'How do I provide bank details, which I may or may not even have?'
Q: You've spoken to me before about how unconventional things have become forms of currency, especially in parts of the world where people are unbanked and where currency is unstable. How is that changing the way we think of money?
A: The example everybody likes to talk about is M-Pesa based out of Kenya. A mobile carrier wanted to enable people to send value back and forth to one another, but the currency was complicated, so it let people to send (cell phone) minutes to one another. Fast-forward ten years and the value of a minute is more stable than the value of fiat currencies amongst a handful of countries that these folks happen to be very active in. You have a stand-in for a currency, so I can trade airtime minutes more easily than I can trade dollars or whatever it is.
Q: You have blazed your own trail outside of traditional fintech capitals like London or New York. What's kept you in Dallas and what has it been like?
A: This is home. This is where family is. This is where friends are. ... To me, moving simply for the sake of being part of the cool kid club is not really motivating. Unless somebody could explain to me why that actually helped something, I never found that enticing.
The cost of living here, although going up, is still a fraction of London or New York or San Francisco. For a startup, talking in terms of how much capital we've raised and how long we've been around, what that directly translates to is time. ... It gives us the flexibility to find the real market opportunity and pursue it to its logical conclusion without the absurd time pressures of what people in New York, Boston, San Francisco and London have to experience. They're fruit flies. They raise a fair amount of money, but then they spend it very, very quickly, and if they can't figure it out what they're doing in 18 months to 24 months, it's over. In our case, it's been just about seven years. I don't think you could do what we're doing in any other market. ___ BRUCE PARKER Age: 45 Hometown: Born in Montreal, but moved to the Dallas area at age 10; lives in suburban Dallas Education: Bachelor's degree in electrical engineering from University of Pennsylvania Family: Married to wife, Tricia, for 23 years, has four children, Cameron, 19; Kathleen, 16; Marguerite, 13; and Brendan, 11; and a soft-coated Wheaten Terrier, Gimli