Pipe is creating a new asset class with help from Modern Treasury
implementation time with Modern Treasury
in annual savings by automating payment operations
Pipe transforms recurring revenue streams into non-dilutive upfront capital for growth. They use Modern Treasury’s APIs to transfer funds to their customers and to route monthly payments generated from customer contracts to financial institutions. The Modern Treasury web application provides payment controls and real time visibility into payment flows, and the reliability of the platform ensures Pipe can scale payment volumes using the same integration.
Pipe's trading platform for recurring revenues is the latest innovation in financial services. On one side, companies can trade contracts that generate predictable recurring revenues for upfront capital. Each company is rated on their own merits so they can access the best possible bid price based on their level of risk. The healthier a company becomes, the more their contracts will trade for on the Pipe platform. The other side of the platform is made up of institutional investors, all eager to purchase these recurring revenue-generating assets, which have a similar profile to fixed-income products.
Pipe’s trading platform provides direct access to the capital markets for companies of all sizes, ranging from early stage all the way to publicly listed companies. With Pipe, companies can instantly access capital to reinvest in the business without dilutive equity or raising a traditional debt facility.
Since financial institutions need to invest in contracts and businesses need to access capital directly within the Pipe interface, payments need to be a native part of the product experience. As they started gearing up for their public launch in June 2020, they realized that they needed a payments solution with the flexibility to support complex payment flows and the ability to scale their payment volume reliably.
Today, Pipe supports four different payment flows:
- Transferring funds representing the upfront capital from financial institutions to businesses.
- Debiting the business’ bank account on a fixed schedule as the customer pays the balance of the contract.
- Crediting the financial institution as the repayment amounts are received.
- Deducting their trade fee from facilitated transactions.
They need to provide both parties complete visibility into payment statuses and, to minimize payment failures and returns, also need to verify the bank account details of both buyers and sellers.
Finding the right solution
Initially, payments were not integrated into the product experience. Since Pipe was still in closed beta until June 2020, their payments volume and frequency was small enough to be handled by manually initiating wires and ACH payments through the bank portal. Once they started to find product-market fit, they realized that manual payment operations was going to be unsustainable at scale.
As they started considering different options for automating payments, they were quick to rule out directly integrating with their bank. “While servicing is a big part of our business, we realized that we don’t want to focus on building the underlying infrastructure,” said Lukas Wagner, VP Finance at Pipe. “If another company has already solved this problem, we’re better off focusing on adding value to our core product.”
They evaluated a number of third-party solutions but didn’t find any with the feature set, ease of use, and API support they needed, until they came across Modern Treasury. “Our CTO took it upon himself to test Modern Treasury using the public API documentation and he was able to build a basic integration in an afternoon,” said Lukas.
The built-in Plaid integration was an added benefit, since being able to verify bank account information during onboarding was a key requirement for them. They also liked that Modern Treasury provided a seamless web application with the same payments functionality as the API, and additional features to monitor and control payment flows.
How Modern Treasury helped
Pipe made their first payment within 2 weeks of signing the contract with Modern Treasury. Since they were still in closed beta at the time, they started off initiating payments by hand using the web application while their engineering team worked on integrating Modern Treasury into the product and implementing payment flows.
Today, Pipe has automated the entire onboarding and payments experience. They use the built-in Plaid integration to validate bank accounts belonging to financial institutions and companies before connecting them to the platform. Capital disbursements and repayments are fully automated using Modern Treasury APIs. Companies can access available capital by clicking a button in the Pipe interface to withdraw it to their bank account. Financial institutions can choose to let repayments accrue with Pipe for reinvestment, or move it to their own bank account. They use ACH and Same Day ACH for all transactions.
“Our payment operations pretty much run on autopilot today,” said Lukas. “The only manual process is someone on the finance team logging in to the app once a day to ensure the payment volume on our platform matches that on Modern Treasury, and if there have been any returns or failures.” After launching publicly, Pipe is reconciling more than tens of millions each month, an amount that continues to grow as they scale the platform. Lukas estimates that automating payments with Modern Treasury has saved them at least six figures by eliminating the need to hire dedicated staff, and saved him multiple hours a week that can be spent on more strategic activities instead.
What's next for Pipe
After finding incredible traction with early customers over the last year or so, their focus for the immediate future is scaling the platform to support larger transaction volumes by onboarding more companies and financial institutions.
As far as their payment operations are concerned, providing a transparent and reliable experience is critical because Pipe moves a meaningful amount of money for their customers. “I really don’t want to stress about payment ops at our current scale, and nor do I want to think about it when we’re 10x or 100x our current scale either,” said Lukas. “If I can sleep well at night knowing that the right amount of money was moved to the right parties at the right time, then I’m happy.”
As Pipe scales, the finance team can focus on protecting and growing the customer trust they’ve worked very hard to earn, and rest assured that every single payment is initiated, released, and reconciled on time and accurately by Modern Treasury.