For startups, it’s never easy explaining when they’re doing something the same yet different. The payments industry already has switches, gateways and hubs to connect the one to many, the many to one and the many to many — so, what makes ModoPayments any different?
To Founder and CEO Bruce Parker, the answer is simple: ModoPayments is not a switch, gateway or hub, but a utility for managing complexity by supporting those various types of connections from one end of a transaction to the other under a single operational face, external to the merchant’s firewall.
Switches are old tech, said Parker. They focus on helping merchants connect to multiple banks and card networks — and vice versa, on helping banks and card networks connect to multiple merchants.
Essentially, he said, a switch is a train yard for information. It’s payment transaction processing without any identification of people or clearing of settlements when things happen after the transaction.
Conversely, said Parker, ModoPayments isn’t a switch because it also focuses on the parts of the lifecycle before and after the transaction — identity beforehand, reconciliation afterward.
Furthermore, a switch connects things that are like each other — i.e., all card networks — whereas ModoPayments connects unlike elements such as eWallets as well.
A gateway emulates what an in-store terminal can do in an online setting. It is, said Parker, an onramp by which to get from an unexpected place on the web to an existing processing or payment method. Unlike a switch, he said, a gateway is a single connection with a myriad of very different points behind it.
Parker said ModoPayments differs from a gateway because it makes those diverse points look and operate the same so they can be managed by a single means.
Finally, hubs exist inside the firewalls of large banks, processors and networks. Parker said they are often implemented to eliminate duplication as organizations grow through acquisitions and mergers. Otherwise, he said, they can end up with different pieces performing the same job in different ways.
Parker noted that hubs live on premise and are centered on standards. When regulations shift, such as the new PSD2 standards in Europe, organizations often turn to payments hubs to adapt. They are seen as a means of changing the system of record to update from legacy infrastructure.
Similarly, Parker said, the ModoPayments value proposition is to help organizations deal with complexity, but the startup never touches anything inside the firewall — it only changes how systems interact with what’s outside.