Payoneer, Armor Payments Combine Forces


B2B payments firm Payoneer announced today (March 15) that it will be acquiring industry peer Armor Payments, a deal the companies said is about far more than market consolidation.

The legacy mechanisms behind cross-border B2B trade and payments are too outdated to handle the modern complexities and security needs of today’s businesses, the companies said in a recent interview with PYMNTS.

Payoneer CEO Scott Galit and Armor Payments Cofounder and CEO Scott Reynolds explained how their merger is looking to tackle outdated technologies to make cross-border B2B payments more secure and efficient.

The biggest gap in B2B payments and financial services both Galit and Reynolds see today is a lag in keeping up with standards imposed by digitization.

“As we see more and more businesses moving online and taking advantage of the Internet to do business cross-border, these old ways just don’t suit how businesses are looking to do business,” Reynolds said.

The B2B marketplace will be a targeted focus for Payoneer and Armor Payments coming together, the executives said. In taking advantage of online resources, businesses can now source and procure from all over the globe; the payment part of cross-border trade, however, needs an upgrade.

“We’re seeing some really exciting interest from marketplaces who, at this point, have really focused on bringing buyers and sellers together and then leaving it up to them to figure out how to complete the transaction,” Reynolds explained.

It’s an ecosystem that has forced especially smaller businesses to rely on outdated technologies, Galit and Reynolds said.


Outdated, Inadequate Payment Tools

Take the letter of credit, for instance. Reynolds noted that the biggest technological advancement to the letter of credit has been the ability for businesses to access a form online — they print it, fill it out by hand and fax it to their bank. It’s not exactly the most advanced way to safeguard cross-border B2B payments.

“The letter of credit is just not built for the Internet age,” he said. “It does do a fine job of addressing the potential risk in cross-border transactions, but it is remarkably cumbersome, time-consuming and manual.”

Payoneer’s acquisition of Armor Payments means Payoneer will integrate Armor’s Escrow-as-a-Service solution, an alternative to the letter of credit, to ensure that payment is only completed once both buyers and sellers are satisfied.

In a statement announcing the merger, Payoneer’s Galit said that this EaaS solution “fills a critical missing link for B2B transactions.”

Another point of friction in cross-border B2B payments that Payoneer and Armor are targeting is the commercial card. According to Galit, even though commercial cards are gaining traction, card products really don’t make the cut when it comes to meeting the needs of international trade.

“What you may see and hear about cards being used increasingly in B2B, it really tends to be in the travel space, these very niche types of situations,” he explained. “In addition to all of the costs and risk issues, there are also structural acceptance issues,” he added, noting that, even if a small business wanted to accept commercial card payment, they often simply can’t access the infrastructure to do so.

Reynolds agreed that while commercial cards may have their place in B2B payments — most appropriately in smaller-value transactions — they don’t serve both buyers and suppliers in the same way.

“The protection structure [of commercial cards] does a really strong job of protecting the cardholder, but for the suppliers, particularly as the size of the transaction increases, it poses some risk in terms of chargeback capabilities,” Reynolds said.


The Way Forward

Payoneer’s takeover of Armor will not only integrate each other’s solutions into their respective B2B payments capabilities but will amplify the companies’ focus on the B2B marketplace.

This, the executives said, is where B2B payments is most lacking.

“We really look at our two companies coming together as creating an opportunity to really reduce friction between buyers and sellers all over the world,” Galit noted, “and to enable marketplaces, which have become such an important driver of the modern Internet economy, to become a much more active, transacting marketplace.”

Combining forces, Galit added, will aim to heighten digitization and security in international B2B payments, not only by providing a modern alternative to the legacy letter of credit or by fulfilling payments through infrastructure more sophisticated than what can be accessed with commercial cards but also by looking at the bigger picture of empowering B2B marketplaces with payment capabilities.

In doing so, both suppliers’ and buyers’ needs are met.

Those needs are growing more sophisticated thanks to the Internet; SMEs now understand the risks of cross-border transactions better than ever and won’t settle for a payments solution that doesn’t offer protection.

“When you’re doing business with a new company that you don’t have any history with and they’re asking you to wire funds internationally before you receive the goods or service, as a customer — whether you’re a consumer or a business — there’s definitely risk in there,” Reynolds said. “And it’s pretty well-understood.”

“We are seeing small businesses start to, in general, act a lot like consumers,” Galit explained. “They are increasingly using the Internet and looking for ways to access additional information and get smarter and reduce the asymmetry that’s really plagued them in financial services.”