Building the Long-Missing Value Layer of Online Payments
In an increasingly cashless society, the way
many of us interact with our money is primarily digital. In fact, the Automated
Clearing House (ACH) Network volume reached nearly 23 billion payments in 2018, a
number that accounts for nearly 70 payments for every person in the U.S. As consumers
and businesses alike use the internet to manage money in increasingly
sophisticated ways — think automated savings technology, real estate investing
tools and blockchain-backed platforms that
enable multiple parties to share high-value assets — currency is more global,
instantaneous and accessible than ever before.
But the introduction of these new applications
for financial transactions, as well as new
completely digital currencies like bitcoin, only highlight the
inadequacy of the internet to handle them. Why is the internet in its current
state so ill-equipped to support the very innovations it has created?
It’s true that while most of our financial
interactions occur online, much of our currency itself is not designed for the
internet. While at the surface it may seem to be functioning effectively, the
lack of a unifying structure around payment types, payment providers,
currencies, APIs and more creates real challenges for anyone moving money
around online. The answer to this problem lies in the value layer.
the Value Layer?
Dwolla, the company I work for, spends a lot
of time talking about the value layer, which is meant to connect all the
disparate factors that make up an online financial transaction into one single
layer. These factors — what I call “value types” — include:
- Currency types (think USD, euro,
- Transfer types (the American ACH
network or the U.K.’s Faster Payments system or Canadian EFT, for example)
- Financial regulations (like the
widely debated Revised Directive on Payment Services, or PSD2)
This unifying layer was originally built into
HTTP protocol that runs the web as 402 Payment Required, but was never fully
completed because of the complexity of such a project. Now, the 402 Payment
Required message often appears when a transaction cannot be completed for a
variety of reasons — whether a store’s Shopify account is disabled or when
fraudulent payments are blocked in Stripe. If the value layer were in place,
problems like these would be accounted for already.
While the industry has found ways to work
around this missing layer until now, it’s becoming clearer that the loopholes
and challenges created by a lack of a value layer are unsustainable.
the Value Layer, We’re Stuck in the Past
Leaders in the payments industry need to work
together to build a value layer through which money can move instantaneously on
a global scale, regardless of currency or transfer type. This requires businesses
and experts across functions of the industry — banks, payment providers,
financial regulators, cybersecurity firms and more — to collaborate on
standardized solutions that eliminate or bypass existing hurdles.
That process will require navigating the legal
and regulatory jurisdictions unique to each currency and market, as well as
creating the actual infrastructure that, on a technical level, allows all of
the currencies to interact and transact over the internet. On another front, it
requires trust in the security of the value layer, consumers, regulators and
solution providers. All of these efforts to build the value layer can’t be
executed by one or two companies alone, but through the combined efforts of
leaders across the financial industry.
Innovation to Occur, Collaboration Is Key
At Dwolla, we’re working alongside experts
from across the industry to enable payments on the value layer. We’ve
collaborated with innovative companies like Plaid
to let customers streamline bank verification and more easily connect to the
banking system, and with Sift
to enable customers to use machine learning for real-time ACH fraud monitoring.
We’ve also partnered with Apto
Payments so our customers can issue branded payment cards
and instantly transfer funds on the ACH Network to a branded card, bypassing a
But the value layer is bigger than Dwolla or
any of our partners. Stakeholders across the industry need to team up to work
toward a reality in which billions of people around the world are connected — free to effortlessly interact
and transact with one another. As the possibilities in the fintech industry
look more promising than ever, the value layer is the only way to make these
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