“The existing cross-border payments infrastructure hasn’t really changed in decades,” said Payoneer CEO Scott Galit. A stunning fact in the face of the $50T opportunity that exists in capitalizing on the flow of money between businesses on a global basis. MPD CEO Karen Webster spoke with Galit about how he is thinking about – and developing – the capabilities to “fill that gaping hole.”
KW: We often think about cross-border and talk about it in a context of the retail opportunity…I want to talk about businesses doing business with each other around the world, and in particular how the on-demand or freelance economy may be both inspiring and complicating cross-border payments. What’s your view on that?
SG: There is so much that’s published these days about cross-border consumer commerce, in particular eCommerce. I think people will be a little surprised by what is a much, much larger market, which is cross-border business to business commerce.
BCG estimates that cross-border business to business commerce will be about $50 trillion by 2020, and that’s a growth of 250 percent from 2010. Developing markets will go from representing about half of the money flow in 2010, to three quarters of that money flow in 2020.
Businesses of all sizes from a sole proprietor all the way through medium, and even larger businesses, now have new cross-border trade opportunities that they never had before…if you think about it, 10 years ago how would a small business owner in the Philippines have sold goods or services across borders?
Now they’re connected, there are new types of platforms, new types of ways to promote and connect with customers, communicate with customers, do work, deliver work and deliver products.
KW: It’s an enormous opportunity that lacks a digital payments platform to enable easy and streamlined payment. You say you’ve sought that. How?
SG: The existing cross-border payments infrastructure hasn’t really changed in decades.
Consumer eCommerce is able to piggyback on credit cards. In B2B, credit cards have never really been any meaningful part of how money moves around the world. There’s this big giant gaping hole, where there’s a need for new types of capabilities to help this digital growth opportunity come to fruition. That’s really where Payoneer comes in and what we focus on…
The first thing that we do is that we’ve actually built connections and partnerships all over the world to create the broadest toolbox of capabilities for moving money.
We’re connected into local clearing systems, local ACH equivalents in 176 countries, we’re able to deliver currency payments in 205 countries, we’re able to deliver physical or virtual debit cards into well over 200 countries, and in 30 countries we can deliver local currency checks. In 50 countries we can deliver into local e-wallets, and so we built this really broad and flexible set of payment capabilities.
We build local capabilities for our customers. So if you’re an Asian company selling into the United States, we actually give you a U.S. bank account that you can use when you invoice your customer in the U.S., it’s a local payment for your customer and we’ve enabled you to seamlessly expand your business globally, even if you’re a small business owner who otherwise really wouldn’t have access. We have an API that enables the company to pay really the whole world through a single API connection.
KW: There are lots of people who say this can only be solved by throwing the existing away and starting from scratch, and I’m speaking obviously bitcoin protocol and all the cryptocurrency enabled schema that people say really solve the problem efficiently. How do you react to that?
SG: I’ve been very cautious when talking about bitcoin really from the beginning. I have seen many more reasons why I don’t believe it is the answer to the problems, than that it is.
If we break that into two pieces, one being the currency and the other being the infrastructure, I think that the currency itself, when I hear about use cases, and I hear about all the people in all these countries that would rather have their money in bitcoin than something else, those are the same people in the same places that wanted the whole USD instead of their local currency, and the central banks in their countries haven’t wanted to allow that to happen.
And then on the other side, from a technology perspective, I think there may be opportunities…It really is bringing attention to what I think is one of the weaknesses in the way the global banking system is wired together.
We’re moving billions of dollars a year, in a heavily regulated and compliant way, fully complying with all the money laundering and terrorist financing rules and allegations that we have, dealing with all the complexity of moving money in and out of bank accounts and we can move money around the world instantly between and among parties across borders. It’s not limited to some vague idea of some distributed ledger system that someone’s got to figure out how to reestablish real trust and real certainty around.
KW: Can you give us a couple of examples of what kind of innovation you either developed or enabled on top of your existing platform?
SG: One of the most exciting opportunities in eCommerce right now is for merchants and manufacturers to sell on eCommerce platforms around the world. So we have merchants and manufacturers who work with selling on Amazon, selling on Lazada, selling on Wish, and there are a whole host of other platforms that they’re selling on. We have a partnership with a logistics and fulfillment company that actually helps a lot of those merchants and manufacturers deliver their goods all over the world, and what we’ve done with them is that we’ve actually given them an API connection into our platform…one of our customers is using us to get paid for their sales on Amazon or Lazada, and now this logistics company needs to collect its fees, they can — through our platform — and instantly collect their fees and do it in USD or euros.
KW: Handling the data and reconciliation is obviously critical, but are people looking for escrow-based kinds of payments — are you hearing more of those buyer-seller guaranteed payments capabilities that you’re also trying to address as part of your platform?
SG: We see the actual completion of a payment as really a small part of the overall set of needs of buyers and sellers operating across borders. We certainly see trust deficits that need to be bridged, needs and opportunities across the whole spectrum of financial services. Working capital was another one, dealing with all the administrative headaches and hassles around payments and so looking at how things are integrated, into the other systems and infrastructures that they use.
KW: You have been in business for 10 years. I’d love to get your perspective on how you’ve seen the world around Payoneer change.
SG: Payoneer started as a prepaid card company, and the team was smart enough to recognize that there was a broader set of trends at work that were shaping the world in a way far broader than what Payoneer could do on its own.
We went from starting with freelancers getting paid onto prepaid cards, to be able to support payments into bank accounts all over the world, to be able to support payments through local clearing systems all over the world, to being able to actually enable merchants to come directly to Payoneer to sign up and start using us as a payment service provider to help them get paid and start to get bank accounts around the world that they can use and enable them to start getting paid by credit card.
The digital link of systems and marketplaces and this whole digital economy has continued to blossom. You had companies developing the logistics and fulfillment infrastructure, to enable manufacturers and merchants to more easily deliver goods around the world, and so what happened a little bit later was this explosion of cross-border goods being traded through digital marketplaces.
We continue to adapt and evolve along with it and our payments sizes went from hundreds of dollars and now we have payment sizes that are many hundreds of thousands of dollars.
If you look out there, the distinction between online commerce and offline commerce continues to blur and that’s not just with consumers and merchants. That’s [also] with B2B and businesses that are traditional businesses that are finding new customers in new and different ways, and they all have payments needs and challenges [with] existing infrastructure [that] still hasn’t been transformed.
That’s where we really see this incredibly exciting opportunity to continue to work with our customers all over the world and help shrink the world for them.