Ex-Western Union Exec Eyes Blockchain for Cross-Border Payments
Before answering a single question about bitcoin or blockchain technology, Align Commerce CEO Marwan Forzley began slamming the mainstream process of moving funds across borders.
"First of all, we believe cross-border payments are a mess … we want to simplify this by dumbing it down and making it easier," said Forzley, a former Western Union executive who joined the money transfer company after selling it a payments technology startup, eBillme.
Forzley founded Align in 2014 and on Tuesday received a $12.5 million investment led by Kleiner Perkins Caufield & Byers. The startup is part of a growing market of companies that want to use the technology that enables virtual currency transactions to also improve the performance of international payments backed by traditional government currency.
The traditional process is filled with potential glitches, slowdowns and toll booths, Forzley said. For a wire transfer, there's the time to wait for the sender's and receiver's bank to execute the transaction, as well as the correspondent banks that send money from one country to another. Each step adds delay, which can affect the currency exchange rate and add other costs, Forzley said.
Align's billers and payers conduct transactions via email. Align uses blockchain to move money across borders and allow each party to pay in his or her own local currency. The term "blockchain" is most commonly associated with bitcoin, which uses the distributed ledger system to record and verify transactions. But increasingly, mainstream financial services companies and startups are finding ways to use blockchains without requiring the use of bitcoin.
"Blockchain is a rail that provides real time access to a global network of endpoints," Forzley said.
Align doesn't use virtual currency for the actual payment—the virtual currency infrastructure is a conduit that converts the government-issued currencies.
"International payments have long been an area with some of the biggest friction in payments; they could be slow, expensive and opaque," said Zil Bareisis, a senior analyst at Celent. "It is not surprising that it's being targeted by companies with disruptive technologies. I am sure we will see blockchain and distributed ledgers having a big impact on international payments in the future."
The process falls under Fincen rules and other regulations for international payments, and can also address the various "faster payments" initiatives that are underway in countries around the world, Forzley said.
Align does not charge a wire initiation fee, but levies a 1.9% charge of the amount of the currency converted; Forzley said this is about half of the expense of a traditional wire transfer.
Given the broader trend of small to medium sized American businesses using the Internet to sell outside of the U.S., there's a growing roster of companies that are using bitcoin's technology, if not the virtual currency itself, to take a bite of transaction costs and remove the friction of international payments.
Earthport earlier this year entered a partnership with virtual currency technology provider Ripple to build a streamlined international payments system that shares Align's goal of avoiding correspondent banks. Earthport refers to the technology as a "distributed ledger" to differentiate it from blockchain, which is just one type of distributed ledger.
In the financial services industry, distributed ledgers replace traditional bank statements and record data on multiple computers—a process designed for security, tracking and speed. The technology has intrigued banks, despite their general bearish take on virtual currency.
Another company, Currency Cloud, is using hosted technology to automate international payments and related tasks such as treasury management.