B2B Payments Fearlessly Go Global

Consumers don’t care about how much friction a business will face if they order goods from overseas. Thanks to eCommerce, shoppers want the products they want, from where they want. Businesses, on the other hand, are forced to face that friction head on, with both buyers and suppliers stuck in the dark about when a payment has been sent, received and what happens in between.

Payoneer is one payments processing firm that has tackled that friction head on, and a new partnership with eCommerce marketplace Newegg means the platform’s sellers can get the support, transparency and speed they need to get paid, while corporate buyers can gain visibility into where and when their money lands in the right hands. According to CEO Scott Galit, integrating with Payoneer means Newegg suppliers can get paid practically instantly — whether they are down the street or halfway across the globe from their buyer. PYMNTS discussed this new collaboration with Galit to dive into why cross-border B2B payments shouldn’t be as sluggish as they often are.

We know about your partnership with Newegg, but could you give us a bit more on the specifics about what points of friction sellers on Newegg face when they’re trying to get paid from their overseas buyers and how Payoneer is solving that friction?

SG: What we enable a company like Newegg to do is, with a single API integration, they can support sending payments essentially instantly around the world to trading partners, suppliers, merchants, manufacturers in over 200 countries. One API connection, different currencies, anywhere in the world, essentially instantly and, for Newegg, at no cost. We created an international payments system that is cumbersome, often manual to send and to reconcile, and we enable them to automate the sending and the reconciliation. We give them an API callback confirming that the payment has actually been delivered so they can close out the liability on their platform, try it out in their ERP system and things like that. So we create this fully integrated, seamless, automated global payments solution that offers, at no cost, the ability to make all other payments globally and fully automated.

On the other side, we connect sellers from over 200 countries into new ways to get paid all over the world. Sellers that are selling on marketplaces like Newegg can make and establish a single relationship with Payoneer, and they can get paid instantly from any other companies that are connected by API to our platform. And then, for any of the other places that they’re selling, we give them a unique set of tools to make it easier, cheaper and faster for them to get paid all over the world.

An example would be if you’re a manufacturer in Korea that’s selling on Newegg, Newegg just sends an API call to our platform, and the payment is delivered. If you’re a seller in Korea that’s selling to a buyer in Europe that is buying directly from you, we will give you a euro bank account that you can use. So, when you invoice, which you can do through our platform, the buyer in Europe can pay you into that local account that we’ve set up for you in euros. It’s a local payment for the buyer, and then we aggregate that and bring your payments from Newegg in the U.S. or Canada or both, and your payments from your buyer in Europe come through a single relationship with Payoneer. We give you the ability to manage all of that through online and mobile interfaces across different currencies and languages.

We really help sellers shrink the world by connecting them into the digital opportunities that are really creating huge new growth opportunities for businesses in cross-border selling. And then we help them improve their general business by giving them digital tools to make all of their selling easier and better.

The B2B opportunity that’s developing out there is one of the more interesting, untold stories. We hosted an event recently; we hosted an event in China a little over a week ago, and we had 1,200 manufacturers and merchants at the event. And we had a whole bunch of our partners that were there, and it was all about connecting manufacturers and merchants and the businesses that are helping them take advantage of digital opportunities around the world.

We help those merchants and manufacturers get paid from all those different merchants and platforms. A very important theme for us is connection, so we brought all of these merchants and manufacturers on one side, and marketplaces and other businesses on the other, into an event for eight hours to spend time together and help each other learn how to grow together and capitalize on the new opportunities that are out there.

Payoneer recently opened a new office in Hong Kong, and like you said, you just had an event in China. What are you guys seeing as some of the unique challenges faced by B2B sellers and manufacturers in that region, specifically when it comes to getting paid from overseas buyers?

SG: There are many levels of challenges. Trust is an important challenge for them to overcome. In many cases, basic connectivity — the ability to easily get paid — is something that is not so easy to do. If you’re in China, it’s not so easy to get a payment in CNY from somebody in the U.S. that needs to send you a payment. It’s certainly not easy to get it in a way that’s electronic and that allows you to get everything reconciled. It’s also not easy to get it quickly — speed is something that is important.

Service and support is also a problem. There is also the issue of the technology to help make it easy to manage and control payments wherever you are through mobile apps and things like that. Compliance, regulation, all of it. There are many different dimensions to it.

But overall, it’s just how poor the existing infrastructure is. Consumer payments went digital before consumer commerce went digital. What I mean by that is, credit and debit cards created an electronic payment infrastructure on a domestic and cross-border basis that allowed a consumer to make purchases from merchants and do it around the world in kind of a local way. If you’re in China buying something with your credit card, the Chinese merchant got their CNY in their local bank account, and you dealt with USD in your bank account.

The credit card infrastructure shrunk the world for consumer commerce. Later, it actually created a really strong foundation for B2C eCommerce to develop.

In the B2B realm, there are more and more portions of businesses that are electronic, more commercial activity that has one or more parts of the trade that are engaged electronically. But the payment infrastructure hasn’t changed in decades, and it’s this legacy, analog, cross-border payment infrastructure that doesn’t really integrate into workflow, or application infrastructure or into the way businesses are operating today.

So, what we’re doing is really trying to create this layer on top of the banking system that in the B2B world electronifies the way businesses are able to manage their payments and money movements and selling in a way that consumers and merchants selling to consumers have been able to do because of the credit card infrastructure. And credit cards just aren’t relevant for the vast majority of B2B. That’s what we’re trying to help improve — if they even just put messaging infrastructure connected into cross-border wires, when a wire gets sent and gets stuck at a correspondent bank, there would at least be a notification that came out about where it is. It’s so opaque; there is nothing that actually makes any of it easy to use.

I want to backtrack a bit. You just commented how you believe credit cards aren’t the best way to conduct B2B payments. Can you elaborate?

SG: The interchange model is expensive for the vast majority of B2B transactions and B2B flows. Right there you have a significant issue, not to mention risk of chargebacks.

If you have a $300 B2B transaction, then you’re in the realm where a credit card can make sense. If you’re in a $20,000 B2B transaction, then it’s really not likely that someone’s going to pay $600 to accept a card not present payment to get the $20,000 paid by credit card. There are a whole bunch of issues. And the chargeback risk.

The infrastructure is attuned to relatively small dollar payments for specific use cases. The reason why things like v-cards work really nicely for B2B payments for hotels, for example, is because consumers pay for hotels with credit cards, too. Even though it’s a higher average ticket, that’s just the way the hotel industry has been built. Paying a hotel with a v-card because you intermediated the buying process means that hotel is still absorbing the credit card fee. That’s an ordinary course of business. But in the vast majority of B2B environments, transaction sizes are bigger, and nobody is looking to take the risk of chargeback or take the cost of the credit card infrastructure. It’s not a scalable solution for the vast majority of B2B commerce.

Payoneer is bringing automation to the B2B payments space. It will be different for every transaction, but can you give us an idea of how long sellers have to get paid when they’re doing these types of processes manually and how much time they can save through Newegg’s new partnership with Payoneer?

SG: We have sellers that can get paid essentially instantly. A seller that is a Payoneer customer that is connected to Newegg and has Newegg send an API call means it can literally take anywhere from seconds to minutes for that payment to be delivered to that seller, where the seller is, and has gotten a confirmed receipt of the funds. And we’ve given an API callback to Newegg that the payment has been delivered. It can happen on a Saturday afternoon at 2 o’clock, or Sunday at 7 or whenever.

If a seller is due money from a sale on a Saturday morning, Newegg ordinarily needs to wait until Monday to manually upload a file through a bank system or, even worse, in some cases, go manually and initiate a wire. They need to get approval, they don’t know when it’s going to land, they don’t necessarily know the path it’s going to take, they don’t know the intermediary paths that are taken along the way. The time the payment is received depends on where you are in the world and how it’s sent, and it could be anywhere from later in the day Monday or it could be as late as Wednesday. The sender doesn’t know if it was actually sent overseas; the recipient doesn’t know if it was sent until they get a notification from their bank. It’s a really opaque, much more labor-intensive, cumbersome process that takes much longer compared to, “Here’s a notification that pops on your mobile phone on a Saturday that Newegg sent their payment.”