August 19, 2016
Cortex MCP: Connecting Merchants and Consumers in New Ways with Mobile
By D.J. Murphy, Editor-in-Chief, CardNotPresent.com
In March of 2013, veterans of the payments industry brought Cortex MCP, a mobile payments technology provider, out of stealth mode with a platform it intends to use to “flip commerce on its head.” Co-founders Shaunt Sarkissian, the company’s CEO, CTO Michael Arner, and Rob Stringer, vice president of product development, hail from mPOS pioneer ROAM Data and credit their experience in payments at the physical point of sale with providing them a holistic understanding of payments they say many executives running mobile wallet companies lack.
“In the mobile wallet space I think there are a ton of people who come from other verticals who might not understand the intricacies and interconnectedness of the payments space,” says Sarkissian, who also spent time at CyberSource and founded Sarkcom Corporation, whose patents form the basis of Cortex’s platform.
As a result, he says, there is a disconnect between the available technology and what merchants and consumers actually need it to do.
Cortex MCP built its platform with the broad ability to deliver three things using a mobile device: secure payments that don’t require merchant hardware updates, targeted offers—with a twist, and valid digital identification and other credentials. The company is not looking to market its solution directly to merchants and consumers, but rather to license the technology to tier one payments companies and financial institutions that have already achieved a critical mass of consumer and merchant customers.
“If the mobile wallet war is happening,” Sarkissian says, “we don’t really want to win the war, we just want to build the best weapon.”
‘Intent-to-Spend’ Trumps Traditional Targeted Offers
The company offers a patented secure payment methodology that resembles tokenization but that also can be used at the POS. RCD stands for reduced currency denomination and essentially, it is a 20-digit alphanumeric sequence with an integrated PIN that correlates to a limited amount of money designated by the mobile user and drawn from any funding source. In addition, no special hardware or secure element is required on the device as no fully useable or card data is ever stored. It can be communicated via NFC, traditional barcode, QR code, terminals or mobile APIs.
A further key differentiator is that no cloud connection is required for payment, and the data can ride existing terminals and rails. For now, Cortex is keeping how it accomplishes that feat close to the vest, according to Sarkissian.
RCDs also enable consumers to exercise control of elements such as the maximum transaction amount, restrict spending to certain merchants or merchant types or how long an RCD is valid before it expires. This ability lets consumers do things like control the spending of a teen.
With a new methodology established for making mobile payments in both card-present and card-not-present environments, the founders began to think about how consumers could really get the most out of a platform like this. What they came up with was an idea that “flipped commerce on its head,” Sarkissian says.
They realized consumers could use RCDs and the Cortex platform to seek out offers from merchants. And, more importantly, that merchants would be willing to pay more for and make a better offer to a pre-qualified buyer. The company’s “Intent-to-Spend” analytics combined with its “Pre-Commerce” engine matches specific buyers with specific sellers and uses the “Lending Tree” model to generate great deals for consumers.
Like the popular Website that pits banks against each other competing to give borrowers the best rate, Cortex enables consumers to establish an RCD for a certain product costing a certain amount and uses its Pre-Commerce engine to give merchants an opportunity to compete for that business.
Consumers opt in for the opportunity to do this each time they generate an RDC, Sarkissian explains. They’ll be asked to set attributes like the kind of product they’re looking for, how much they want to pay and if they want to receive offers associated with it. Merchants, on the other hand, log on to Cortex’s portal to look for consumers who have specified what they are selling. In the world of targeted offers, it doesn’t get more targeted than knowing exactly what the prospective customer intends to buy, something that has been difficult for providers to know, until now, he says.
“A lot of financial services companies only see a sliver of a person’s relationship,” Sarkissian notes. “So how am I going to push something relevant to him on that basis? That’s always been the challenge for financial institutions. Unless they’re huge, they don’t see the whole picture of a consumer. So they’re studying a lot of analytical data to serve them offers that may or may not matter to them. But what if the consumer just told you? We’ve showed that aspect of the platform to a lot of people and they’ve kind of gone nuts about it.”
What it Takes to Leave the Leather at Home
The third leg of the stool for Cortex is one it says just about every mobile wallet provider has ignored: identification. Without including a verifiable digital version of official government-provided identification, a mobile wallet is not a wallet.
Cortex has developed its OVER file—officially verifiable electronic representation—as a way to take any credential and tie it intrinsically to the phone. Eventually, and Sarkissian admits this is the longest tail in Cortex’s value proposition, the company will offer a suite of APIs so third parties verify a digital version of an ID by scanning a QR code.
“We’re building the hooks for any issuer of any credential to come in and utilize this,” Sarkissian says.
And, while the effort to get governments on board is slow going and will take the involvement of a major partner, including a way to digitize identification could provide synergies above and beyond just the ability to show ID when necessary.
“There’s a lot of cross pollination,” he says. “If I go to make a payment at the POS and have a primary digital ID on file that’s been verified, maybe there is liability shift. Maybe my interchange is lower.”
Trends Favor Cortex
Since emerging from stealth mode, Sarkissian says growth has been ramping up and Cortex MCP is making progress wooing the tier-one players it wants to work with. He says the increasing attention given to tokenization has the company well positioned to take advantage of what he calls “the year of the new payment method.”
With the major card networks announcing a tokenization initiative earlier in the fall, Sarkissian says new ways to secure mobile payments are gaining traction and Cortex MCP is ready to reap the benefits.
“Our pedigree, the way our solution has been resonating and current trends in the payment industry are all working in our favor.”