Deutsche Bank is taking a stake in a payments company that's trying to displace cash and checks
- Deutsche Bank is taking an undisclosed stake in payments technology company ModoPayments.
- The technology makes it easier for businesses to send money to each other and to consumers via mobile.
- More consumers, and particularly those in emerging markets, are electing to skip bank accounts and hold their cash in so-called e-wallets.
Imagine the CFO of a Fortune 500 company sitting in a New York skyscraper is able to send a multi-million dollar payment to a supplier in South Africa that he receives on his mobile phone.
That's the promise of a new investment Deutsche Bank has made into ModoPayments, a Richardson, Texas-based startup that makes it easier for businesses to send money to one another electronically.
Deutsche declined to give the size of the investment, which is being made out of the German lender's transaction banking and cash management units.
Currently, large transaction banks like Deutsche Bank can arrange to have their corporate clients make payments via their mobile phones, but it's often expensive and time-consuming since many of these payment systems are built on old technology.
Modo improves this process by reducing friction between payment systems. This enables Deutsche and its customers to send payments through a host of applications where consumers are increasingly holding their money, like Kenya's mobile-phone based system M-Pesa and China's WeChat.
"It's something we could do and have looked at in the past but it's very complex, expensive, and bilateral. Their technology allows us to be agnostic and faster to market," Deutsche's global head of digital cash products for global transaction banking David Watson said in an interview. "By partnering with Modo, we deal directly with them and they take on the responsibility of the extension into the likes of M-Pesa, WeChat or Alipay, and other e-Wallet providers."
That brings scale to the firm's transaction banking business just as more consumers - and particularly those in emerging markets - are electing to skip bank accounts and hold their cash in so-called e-wallets. Think of an insurance company that's paying out large-scale claims to consumers without bank accounts, or software developers who prefer to have their money deposited directly into an online wallet.
"You want to make sure you pay them in a way that makes it easy for them," Watson said. "Many of our client's customers or providers don't have traditional bank accounts like you and I might have in the US right now, where we open an e-wallet linked to a credit card or debit card. And there are places where it has jumped from cash to e-wallets. In those locations, you don't want to mail them checks or cash; you want to deposit it right into an e-wallet."
Later this year, or early in 2019, Deutsche Bank expects to unveil products it's been developing in concert with strategic clients and Modo, Watson said. He declined to name the clients or describe the product.
The investment in Modo is the latest fintech investment for Deutsche Bank. In May, the bank bought India-based software developer Quantiguous Solutions to help accelerate its application programming interface program.