Nanopay is planning to add bank processor and accounting software partners for a B2B cross-border and domestic transfer service which it says exceeds the performance of blockchain-based systems The Toronto-based firm targets the rapidly growing international payments market By focusing on the worlds largest B2B corridors including US Canada and US China Nanopay hopes to cut into the substantial number of paper check-based transactions through its platform that digitizes fiat money to securely store it and transfer it instantly Nanopays only publicly-named partner is Interac Canadas debit network The partnership involves Interac and Nanopay collaborating to add cross-border capabilities to the Interac e-Transfer P2P and B2B transfer service This means Interac e-Transfer will support real-time settlement across different currencies for high-volume remittance corridors such as between Canada and India The two firms also plan to offer transfers from Canada to China and the US Bloomberg News Nanopay is working with Canadas five largest banks on integration for the Interac e-Transfer cross-border service said George Lee product owner for B2B cross-border at Nanopay Were also in a private beta trial for our own B2B cross-border service and aim to move to a public pilot in a few months time he said Interac is open to collaborating with Canadian and foreign fintechs to enhance its product offerings In June 2018 Interac said it is working with international payments service provider Bambora to enable Canadians to use Interac Debit for e-commerce purchases from merchants domestically and cross-border In November 2017 Interac which already has an agreement with Western Union partnered with MoneyGram to support payments sent through MoneyGrams service In October 2016 Nanopay raised US 10 million in Series A funding from a group of investors including Goldman Sachs merchant banking division Nanopays crypto roots In 2012 the Royal Canadian Mint commissioned cryptography expert David Everett to develop a digital version of the Canadian currency called MintChip which eventually became part of Nanopay Everett had been involved in the development of the UKs EFTPoS infrastructure in the 1980s and the creation of Mondex digital cash in the 1990s He currently is CEO of UK-based consultancy MicroExpert and his latest project is a digital microcurrency called Tibado MintChip is an asset transfer system which provides users with cryptographically secure value stores and was designed by the Royal Canadian Mint to comply with AML and KYC regulations a contrast to the less regulated roots of bitcoin and other cryptocurrencies Users link their bank accounts to their MintChip wallet and move funds to other users in real time without an intermediary MintChip was originally intended to be used as digital cash for low-value point-of-sale purchases and for P2P transfers In January 2016 after a pilot the Royal Canadian Mint sold MintChip to Nanopay which was then a retail payments technology provider Although Nanopay has an ongoing MintChip pilot with merchants near its Toronto office it no longer promotes the MintChip Retail Platform Instead Nanopay has used the core technology behind MintChip to develop its global cross-border domestic payments platform The original idea was that MintChip cash would be stored on a chip eg on a smartphone or other Bluetooth-based device held by the user so they could transfer funds to other MintChip users in offline mode Nanopay is only using MintChip in online mode with the users secure asset stores being managed by Nanopay in the cloud said Everett The asset stores are held on a hardware security module HSM attached to Nanopays servers which acts as a virtual chip Our users funds are stored in what are effectively safety deposit boxes on our system and our clients money is held at trust accounts with our partner banks said Lee We leverage as many banking partners and networks as we can and are in the final stages of onboarding our Indian banking partners In Canada we partner with Interac and with B2B payments service EFT Canada and in Australia India the UK and Europe we use the local real-time fast payment rails To use the Canada-India corridor as an example our Indian receiving bank partners have Nostro accounts in Canada plus accounts in our name in India which are prefunded for outbound payments While Interac E-Transfer is used for business payments in Canada it doesnt include information on what invoices are being paid Lee said Because we support ISO 20022 we can provide value-added services on top of the Interac rail such as enabling clients to check the status of their transactions or to attach invoices to payments to help with reconciliation What about blockchain Nanopays bank-to-bank transfer platform has several advantages over blockchain-based approaches according to Nicko van Someren a cryptography expert who is Nanopays chief security officer Van Someren founded HSM vendor nCipher acquired by Thales eSecurity in 2008 and was formerly chief security architect of networking technology vendor Juniper Networks Nanopay doesnt use an amorphous distributed ledger in the blockchain sense van Someren said Were centralized but also replicated potentially geographically for resilience and scalability he said But we arent distributed to all and sundry as we are a closed system Instead of distributing a hardware-based secure asset store eg a HSM to every Nanopay user which would be cumbersome we provide a cryptographically-secure centralized managed service We move value between each of the stores in our system instantaneously for domestic and cross-border transfers which is faster than any blockchain-based transaction The irrational exuberance about the blockchain has reached a very high peak on the hype cycle van Someren said The blockchain has merits but I have yet to see a compelling case for any of the cryptocurrencies he said Their backers make promises about transaction speeds and low costs yet they tend to not deliver Bitcoin costs 10 per transaction and it takes minutes But to change the world of payment processing it needs to cost cents and take milliseconds which is Nanopays aim Speed meets security Van Somerens role is to ensure that before Nanopays platform goes live it has the level of security expected by the payments industry Having a solution in place to detect and reverse bad behaviors is crucial he said This is a key value proposition that Nanopay has compared to cryptocurrency firms that are trying to get into this space Its all very well claiming that anonymity is a good thing but anonymity makes it too easy for people to run off with your money Being able to keep a transactions metadata in Nanopays overall transactional journal means that Nanopay can give clients auditability on their payments and enables it to provide fraud detection and prevention van Someren says However while Nanopay aims to offer real-time settlement to eliminate the risk of default due to counterparty failure there is always a risk of fraud You have to be sure that the person authorizing the transaction is authorized to do so and they are who they say they are van Someren said Unlike the cryptocurrency community who went out all out for providing anonymity we have an indelible record of all transactions and if there is demonstrable fraud we can retrieve the funds from the recipient and return them provided they havent cashed out these funds Nanopay is looking at adding a capability to put restrictions on how soon a recipient can cash out eg a time-lock But van Someren recognizes the need to develop a clear contractual structure for clawing back payments A buyer could put a stop on a payment not because of fraud but because of a dispute with a vendor he said Were talking to regulators about the right way to handle this issue It would involve putting the senders money into an escrow account and having an arbitration clause The funds would be taken back from the recipient but not given back to the sender while the dispute is being resolved