Firm that bought Min­tChip tech seeks Cana­dian bank­ing li­cence

Nanopay Hold­ings would re­port­edly do business as a pay­ments bank if ap­proved

Ottawa Citizen - - Financial Post - GE­OFF ZOCHODNE

TORONTO A Toronto-based pay­ments com­pany that bought the Royal Cana­dian Mint’s dig­i­tal-cash plat­form and that is backed by a for­mer eco­nomic ad­viser to U.S. Pres­i­dent Don­ald Trump is now in­ter­ested in ac­quir­ing a bank­ing li­cence.

Re­cent no­tices in the Canada Gazette show Nanopay Hold­ings Inc. plans on ap­ply­ing to the min­is­ter of fi­nance for a le­gal in­stru­ment, let­ters patent, needed to in­cor­po­rate a bank in Canada. Nanopay’s bank would do business as “pay­ments bank,” the an­nounce­ment says, and its head office would be in Toronto.

Nanopay was founded in 2013 by for­mer tele­com ex­ec­u­tive Lau­rence Cooke. In 2016, it was an­nounced the com­pany bought Min­tChip, a dig­i­tal-pay­ment tech­nol­ogy de­vel­oped by the Royal Cana­dian Mint, for an undis­closed sum.

Since then, Nanopay has been sell­ing busi­nesses and banks on pay­ment and liq­uid­ity-man­age­ment products that are built on the com­pany’s “hy­brid blockchain” tech­nol­ogy. Nanopay also con­tin­ues to eye op­por­tu­ni­ties to pro­vide dig­i­tal cur­rency for cen­tral banks, such as the Bank of Canada, which has con­sid­ered the idea.

Cooke, how­ever, sees the pace of fi­nan­cial in­no­va­tion in Canada as rel­a­tively slow. Years-long ef­forts to mod­ern­ize the coun­try’s pay­ments sys­tem and the fed­eral gov­ern­ment’s re­view of open bank­ing, for ex­am­ple, are still on­go­ing. Mean­while, the global pay­ments business has re­cently become a hot­bed for in­vest­ment and rife with com­pe­ti­tion from non-banks.

Nanopay’s idea now, if ap­proved, is to open a bank act­ing as a “na­tional pay­ments utility,” Cooke said. Rather than tak­ing de­posits and mak­ing loans, it would offer fi­nan­cial-tech­nol­ogy firms and other busi­nesses a dif­fer­ent route to ac­cess­ing the pay­ment sys­tem.

“We’re hop­ing that this way we can stim­u­late the Cana­dian econ­omy, we can make all of these Cana­dian busi­nesses com­pet­i­tive at a global level and we can offer con­sumers and busi­nesses in Canada much bet­ter pay­ment so­lu­tions,” Cooke said in an in­ter­view. “The big con­cern is if we don’t do anything and carry on with the speed that we’re at right now, the big non-bank tech­nol­ogy plat­forms and for­eign­ers will come and eat our lunch.”

In ad­di­tion to not ac­tu­ally lend­ing or ac­cept­ing de­posits, Pay­ments Bank also wouldn’t offer any in­vest­ment ad­vice. As its name sug­gests, it would in­stead be all about pay­ments, which would be pro­vided via secure online chan­nels.

“The pro­posed bank will en­gage in pay­ment pro­cess­ing, clear­ing and set­tle­ment ac­tiv­i­ties for cus­tomers, in­clud­ing fin­techs, pay­ment tech­nolo­gies, large billers, pay­roll, tu­ition, rent pay­ments and in­sur­ance com­pa­nies,” the no­tice in the Canada Gazette said. “The bank will offer both do­mes­tic and cross-bor­der pay­ments ser­vices through ap­pli­ca­tion pro­gram­ming in­ter­faces (APIs) and white la­bel web in­ter­faces.”

If it gets all the nec­es­sary ap­provals, a bank owned by Nanopay could do some­thing that Nanopay it­self can­not cur­rently do: par­tic­i­pate in the na­tional pay­ment sys­tems over­seen by Pay­ments Canada. A bank­ing li­cence could also al­low Nanopay to become a par­tic­i­pant in In­terac Corp.’s debit net­work. This lack of di­rect par­tic­i­pa­tion can leave star­tups re­ly­ing on ap­proved fi­nan­cial institutio­ns, which Cooke said can cost a com­pany time, money and data. Fi­nan­cial Post

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