And so began this week’s episode of The Matchmaker Is In. Payoneer CEO Scott Galit used that word to respond to Karen Webster’s question about how marketplace suppliers were paid before digital payments and players like Payoneer who enable those payments existed.
Though Payoneer is considered a pioneer in facilitating payments for suppliers whose services are procured via a digital marketplace, Galit explained that, for most of those marketplaces, the ability to pay providers of services and sellers meant using payment methods that were not only slow but also costly — paper checks and international wires.
That also began a freewheeling conversation about the role of payments in transforming marketplaces — and vice versa.
Here is an excerpt of the conversation.
KW: The friction that Payoneer solves is allowing marketplaces to pay suppliers any way they wish to be paid and anywhere they happen to be in the world. How did these marketplaces do that before you came along?
SG: Painfully! For most of them, it really was quite a challenge and also a challenge for the suppliers or the payees that they needed to pay.
Take Getty Images, one of the largest stock photography clearing houses in the world, for example. Not surprisingly, they have photographers that own rights to images that come from more than 100 countries around the world. A company like Getty has a huge volume of payments they need to make across a wide range of amounts, geographies and recipients. Initially, they relied on the traditional means of transferring value, which was the check.
They used checks in a couple of different geographies, so they would have a provider for U.S. checks, a provider for U.K. checks, international wires and ACH for payments in the U.S. As a U.S.-based company on a U.S.-based platform, they worked with different providers, each of which they had to integrate with or manage individually, and each provider had its own funds flow and reconciliation process that they needed to orchestrate and manage and their own handling process.
On top of that, Getty would have to figure out how to collect the supplier details from payees all over the world, verify and manage the payment requirements and then deal with suppliers for any other delays or other issues in the experience.
What we offer a company like Getty is the ability to connect to us via API and consolidate everything into a single, essentially free funds flow. By enabling them to be integrated with us and use a single API and fund flow, we’re integrated into their ERP system, and we actually manage the collection and verification of all the supplier details, the banking and payment details, and we offer the suppliers a wide range of choices for how they would like to be paid. All of that is offered through a single connection where we take on all the costs, the complexity, the administration, the error handling, the customer care off of the shoulders of a company like Getty with a single technical integration and a complete service model.
KW: Take us back to the beginning and how this all started. What was the seed of the idea?
SG: It really was a combination of some smart ideas and a fair amount of good luck.
The company early on recognized how the world was changing and saw two sides of eCommerce. The people that started Payoneer also saw that there was another side to cross-border eCommerce, which was that there was going to be new earnings opportunities for people all over the world and that there was going to be payment friction that would need to be overcome to ignite those opportunities.
They started by offering a prepaid card product, which was really meant to enable a marketplace to cover anybody, anywhere in the world to make payments quickly and get out of some of the high, fixed costs of international wires.
When I said luck, there were a couple of things that came along with that.
One was that the card actually started to take off, so we had ignition, and we had it because there was already a marketplace and people wanted to work as part of that marketplace and they didn’t have a great way to get paid. The other thing that became really important was that the Payoneer brand was on that card, so those same freelancers were also suppling their services on other platforms. They started to get in touch with other marketplaces to ask if they could be paid the same way. That was really the first time we saw the beginnings of the network effects.
As a result, we lucked our way into having suppliers from 200 countries around the world that knew who we were because we had those suppliers telling other marketplaces to come work with us. Since then, it’s been a long journey of really trying to not outsmart the market and just put one foot in front of the other to see where suppliers on one side and marketplaces on the other are focusing and see how we can reduce friction and address their needs.
KW: I want to go back to something you said that I think is fascinating. There’s always the chicken and egg of these matchmaking platforms, and it sounds like there was a big assist given by the supplier who worked across platforms and saw the easy way of being paid via Payoneer — and wanting that to be the “standard” in other places. That’s really interesting.
SG: Yes, and I think it makes a lot of sense. It’s very much like the situation with bank accounts — I have a couple of different bank accounts, but on a day-to-day basis, I only use one.
If you think about it from a business perspective, it’s the same thing. It’s much easier to reconcile when you’re consolidated in one place than if you’re working across several. If you’re a business owner, there is a lot of value to being able to have all of your needs met by one partner.
The hard part of being the partner is to get in the door in the first place and then provide a broad enough range of capabilities to actually meet the needs they would like to have solved. We were again lucky enough to get that foot in the door and have our wedge, and we’ve tried to follow needs the rest of the way.
KW: How much did the evolution of the marketplace have to do with your ability to scale and ignite? Is there a correlation that you guys have drawn to the success of those businesses and the success of your own?
SG: There’s no question, but I would start with the power of the internet first as a transformational force and marketplaces as really one of the best embodiments of the power of the internet to transform buying and selling and the ability to make matches. That’s really the powerful transformation.
We’ve positioned ourselves in a way where we maybe make it a bit better, we reduce some of the friction, we try to make it easier for everybody and we try to bring trust, stability, scalability and simplicity to it. There’s no question that we’ve benefitted significantly from plugging into it, and I think we’ve benefitted the overall ecosystem.
KW: In the five or six years that you’ve been at the helm of Payoneer, was there a point in time where you had an “aha moment,” where the flywheel was clearly engaged, and then it became all about getting to scale?
SG: For me, it was really even before I joined, and I give all the credit to the team that was here. I just don’t think they quite understood what they had built, so when I joined the company, they were still really focused on delivering prepaid cards as the primary way that they solved for the payment problem. But what excited me was the marketplaces, the globalization commerce, the growing opportunity and power of the small business that was perpetually underserved and the electronification of corporate payments. There were all these broad trends and themes, including also emerging markets and the power of what was developing there.
That’s nothing against prepaid cards because it’s still an important part of what we do but a piece of a much bigger puzzle. It was very much about recognizing what we were doing and the way we are creating connections, facilitating commerce to happen and how we can actually follow those paths to do more. All the pieces and parts were there; it was really just helping them round out the vision of what they actually had the potential to become, and since then, it’s just again been putting one foot in front of the other down that path.
KW: When you came into the business, you came from payments, so you knew the good, the bad and the ugly of it. Were there things that surprised you as you thought about taking it to the next level?
SG: Sure, if we have another hour, I can keep going!
But look, it’s a super complicated, intellectually stimulating and extremely challenging business, and there are just layers upon layers of complexity to it. Once you start to get your head around the AML puzzle of figuring out how to do diligence on suppliers in 200 countries and territories, then you have to figure out how to deal with the regulatory environment — an environment that was still evolving in many of those places that we were building the business. Then, you have the evolution of the banking system and where banks are alternately excited to partner with FinTech companies or looking to stop working with FinTech companies. Figuring out how we make sure our promise to our customers is that we’re always going to be on, always going to be able to do what they need us to do and how do we make that happen. That means redundancy and investing multiple times to make sure that we have infrastructure that will never get turned off. There are so many layers and challenges, which is the fun.
KW: How do you decide what verticals to attack next? There are a variety of marketplace types that you serve. Is there a particular vetting factor or filter that you use before you venture into a new part of the marketplace arena?
SG: Definitely, although I’d say part of what’s fun and also challenging about our business is that we have a push side and there’s also a pull side, which has really also served us well. One of the things we’re very good at is listening and then following, or pulling threads. We probably approach new markets like almost everybody else does, thinking about: Where are there needs, challenges and friction? How big are those needs? How large is the addressable market? How sustainable is the value that we can bring? How sustainably differentiated is that? There’s all of those things on one side, but on the other side, over half of the new clients that we sign up come to us. I’d say we have consistently been pulled into new markets. More often than not, that’s been how we’ve found ourselves in new markets.
KW: That’s a pretty high-class problem to have, Scott.
SG: It is, no question! That’s why I said we’ve been lucky across our history, and fortunately, we’ve had people that are good at paying attention, listening and pulling those threads when we’ve found a thread of opportunity.
KW: What Matchmaker out there do you admire and take inspiration from?
SG: We have so much respect for Uber and Airbnb and others, but I have to say that watching Amazon at work is really something to behold. What I admire about them is not just the way they have transformed retail — and the marketplace is such a key part of that — but it’s their relentless pursuit of the more and the better, with a long-term view of how they’re actually going to be able to transform the experience for both the consumer and the merchants and manufacturers.
Even in the face of Wall Street questions of profitability and things like that, they have just been steadfast in their long-term view and their pursuit of doing more and maintaining and achieving their vision. I see companies like Airbnb and Uber following in a path like that, but Amazon has been doing it longer, at greater scale and with such a significant impact. I really admire what they’ve accomplished.
KW: Do you have any advice for Matchmakers in waiting? All of those innovators that are looking at you and looking at the opportunity to serve Matchmakers or to actually become one. Any thoughts that you’d like to leave them with?
SG: Don’t outsmart the market. Listen to what people are doing and what their needs are to solve a real problem. If you do that and if you’re either lucky enough or smart enough to position yourself in a large enough market space, you’ll have a starting point to build something successful.