Align Commerce, a San Francisco-based startup, is launching a cross-border invoice and payment service using block chain technology to provide faster and cheaper service for small and medium size businesses.
Founded by Marwan Forzley, who sold his previous payments company, eBillme, to Western Union, Align Commerce expands on the core idea of that billing firm, which provided a way for people to shop online and move money directly from their online bank accounts. Forzley thought that something similar might work for cross-border, since a growing number of companies are now selling to consumers who live in a different country.
“One common element of payment systems around the world is that they are all siloed systems, all built to be domestic,” he said. “When they were built, no one was thinking that even small business was going to be global with buyers and sellers in different parts of the world.”
Traditional payment systems connect through correspondent banking and SWIFT messages when payments have to travel across borders. The process is slow and expensive.
(Others are also pursuing this market. Currency Cloud began in Europe and has recently opened in the US and expects to announce users soon.)
Align Commerce is using the block chain rails to move money across borders. A payer sends a payment in a local currency like the Euro to her local Align Commerce bank. Align Commerce sends the payment to a Bitcoin exchange where it is converted to bitcoins. Then Align Commerce sends the bitcoins to the receiver’s local Bitcoin exchange where it is converted to the local currency, such as dollars. Align Commerce then deposits the dollar amount into the receiver’s bank, minus a 1.9 percent fee.
“Block chain is the transport,” explained Forzley. “It is a way to connect all these payment systems. As commerce is becoming more and more global, we need global infrastructure to deal with global issues.”
“Open your online business to international buyers,” says the company on its Web site. “With PayinLocal, business in the United States can start selling to buyers in other countries.”
Align Commerce is focused on two business cases. In small business to business it provides a simple way for a winery in Napa to collect payments from a wine shop in France. It is not designed for big companies like Oracle or Google which make payments through money center banks generally using SWIFT, but for smaller businesses looking for faster, less costly ways to collect funds from around the world.
“Napa can log in, set up a profile and set up an invoice,” said Forzley. “The system notifies the shop in France, and says here is the way to pay it, and you can pay from your bank locally in Euros. We pick up the payment, put in on the block chain, move it to the US and convert it to USD and then move it to the bank used by the winery in Napa. The the wine shop in France paid locally, the winery in Napa got paid locally, and the entire payment moved on the block chain.”
Using the block chain is about half the cost of a wire, he said, and in its beta operation which started near the end of 2014, Align Commerce has picked up clients from consulting, business process outsourcing, retailing, lawyers and importers and exporters with payments typically running from a few thousand dollars to $10,000 or so. Payments usually move in about two days.
Align Commerce plans to grow through partnerships, including partnerships with bank, Forzley added.
“We are definitely interested in partners who have access to businesses.”
The second focus at Align Commerce is on transparency of foreign currency fees.
“Businesses complain they don’t understand how the FX market works, how to compute their costs. I send you an invoice in Euros and 30 days later money shows up in my account and it is USD and I have no idea which invoice it is for, and what did it cost me. We went to businesses and said we will give you a price and it will be the same all the time. We take the mid-market rate and apply our fixed spread on top.”
Align Commerce runs a proprietary routing technology to find the optimal rate for any transaction. Senders and receivers can see the rate, relieving businesses of shopping around.
“Their core business is to move the product out and deliver the services. How this stuff works is not their core competency but they do it because they need to. They find the simplicity of our pricing model and transparency are very valuable.”
Users can also see where their payments are, he added, bringing to payments a level of detail that FedEx and UPS have offered for years.
“We developed a map that allows businesses to track payments as they move,” said Forzley. “As simple as it sounds, it is a concept that does not exist with wire. With wire, you have no idea what happened to the money. You have to call the receiver or they have to call you and say they got the money. We are redefining the whole idea of tracking so businesses can watch the payment coming to them.”
Founded by Marwan Forzley, who sold his previous payments company, eBillme, to Western Union, Align Commerce expands on the core idea of that billing firm, which provided a way for people to shop online and move money directly from their online bank accounts. Forzley thought […]