Delivering mass payments is pretty easy if a corporation is paying 50,000 payees the same amount, in one country, and everyone’s banked, says Lisa Shields, CEO of hyperWALLET. Where it gets difficult, she says, is when you’re paying 50,000 people different amounts across 80 countries in 21 different languages – and only some are banked. In a recent interview with MPD CEO Karen Webster, Shields told Webster how hyperWALLET’s global mass payments platform aims to facilitate this process across various industries, how bitcoin could bring opportunities to reach a swath of new payees across the world, and why her company goes by the term “PayPal in a box."
KW: Tell us, what is hyperWALLET? What problem do you solve, and for whom?
LS: We are a global mass payments company, and what we specialize in is serving the needs of entities that need to make large numbers. When we say large, we mean anywhere from 5,000 to 200,000 payments of low value at a time to recipients around the world. Then what we do is deliver that payment compliantly to the recipient, regardless of whether they want the funds direct-deposited into a bank account, paid to a prepaid card that we issue or someone else issues, picked up at a cash location or made to a mobile money service.
Our service is to compliantly and cost-effectively deliver payments anywhere in the world. But we view ourselves as both a turnkey payments processor and a technology provider. On the technology side, we have an in-house built PayPal-in-a-box platform that gets white-labeled for the customer. That’s where our business approach and model is a bit different from others. Our customers might be a large multinational corporations or a bank, and by providing this white-label turnkey service, we believe that we’re preserving and reinforcing the brand experience between that payer and payee.
KW: What kinds of businesses send 200,000 payments at a time, and how do you define low-value?
LS: We define low-value as anything under $3,000 an item. We use that definition specifically because around $3,000 and above is the point at which a typical foreign exchange provider will onboard the business. It’s really quite simple economically. If you’re sending someone $5,000 or $50,000 cross-border, the end-to-end wire fee, which is anywhere between $30-60, can be absorbed in either one of those payments. It can’t be absorbed in a payment that’s $3,000 or less if you’re making more than one of them.
So the median size of the payments that go through our network is $300 and that is the sweet size of commission. So our major customers are large, multinational direct-selling organizations that are paying their worldwide sales force. That specific industry has many million participants around the world who own some of or their entire livelihood. It’s a very large $50 billion a year funds flow that historically has been underserved by the payments market. So that was the sweet spot that helped us grow our business. Beyond that we have use cases and customers in market research, dividend payments, and university payments, but the majority is direct selling.
KW: Why is this so difficult?
LS: It’s not so hard if you’re paying 50,000 people $300 each in one country like the United States, and they’re all banked. If everybody has a bank account and speaks the same language and is receiving similar amounts every month, it’s pretty easy. But if you’re trying to pay 50,000 people across 80 countries who speak 21 different languages, some of whom are banked and some of whom aren’t, and most of whom don’t know and can’t recite their banking instructions, that becomes very complex – especially when your business is selling products, not payments experts. It’s been underserved because any one specific end point doesn’t represent a compelling business opportunity. It’s the totality of providing the classic single throat-to-choke that makes it a challenge for large companies to find single-source providers to solve that problem.
KW: Now I understand the focus on technology, because obviously you need to have a very fine-tuned platform to do this cost-effectively. Tell us a little bit about that.
LS: The platform has been 15 years in the making, and it became viable right after we started. Our first customers were Canadian credit unions, and it was on that basis that we adopted a white-label strategy. Right away, we had to have a platform that could send payments cross-border between Canada and the US, and white label it for 200 little credit unions. But at the end of the day, stored value or an account-based solution is necessary to overcome some of this complexity in different end points, delivery mechanisms, APIs and settlement protocols with various providers.
Some settlement protocols like prepaid card loading is real-time. Most ACHs around the world are batch – the platform and the technology has to fundamentally be cross-currency and support batch and real-time interfaces, and has to be able to support ID verification, etc.
It was a platform that grew up with the industry with regulation, but was predicated on its core on this multi-currency, cross-border concept.
KW: You mentioned earlier “PayPal in a box.” Is that literally PayPal in a box?
LS: No, it’s figuratively PayPal in a box. We use the term because the original founding business model was to be an alternative for online shopping versus PayPal or cards using funds out of bank accounts. The premise was funding a stored value wallet using good funds integrated with banks, hence our credit union customers. We spent quite a bit of time building merchant acceptance and online wizards to affix a hyperWALLET logo to a shopping website. We changed the business model to outbound payments rather than collections, but the paradigm of a PayPal-like experience for payee collection, P2P payments, has stuck. It makes it easier to understand hyperWALLET.
KW: It seems like there are so many specific use cases that have cropped up cross-border that have very distinct personalities. You talk about direct selling, but there’s obviously remittance and other things that drive cross-border movement of money. Does your platform accomodate all of those use cases, or are there idiosyncrasies in each of them that require tweaking?
LS: What we find is that the payments platform is very horizontal. Use cases typically don’t vary in core elements, which are payee choice, regulatory obligation, taxation reporting in country and more. The settlement reconciliation, regulatory and global nature is relatively unchanged for each use case. What we do find that varies by industry and use case is the front-end applications that have to face the institution making the payment and the end payee experience, whether or not brand affinity or privacy is important. For those, you need to customize the business logic on your platform.
KW: So is that a 20 percent tweak, a 70 percent tweak? What is the level of customization required for the solution?
LS: I’d say it’s a 15-20 percent tweak, depending on the complexity of the industry being served. The clinical trial industry is an example of a complex one – there’s a lot of industry-specific regulatory considerations and oversight in both the payer and payee facing interfaces. But something like dividend distribution would be an example of a 3-5 percent tweak.
KW: So it’s hard to resist the question about digital currencies and the protocol around bitcoin and other cryptocurrencies that people talk about as solving for this particular problem. The sales pitch is that it’s faster, cheaper and efficient, and it can be anonymous, therefore dealing with some of the idiosyncrasies that you described. How do you respond to that?
LS: I used to be really negative about digital currencies. But hyperWALLET has been around for more than a decade, so we’ve lived through this first wave of digital currencies in the year 2000. We had a policy, and still have a policy, to compliantly and cost-effectively deliver a payment to a payee anywhere in the world without regard to how that payee wants to consume that payment. I want to be agnostic to the delivery mechanism – that meant supporting some of the early digital currencies. But we saw firsthand the impact on our client and banking partners that transactions entering those networks were effectively untraceable. So in 2003, hyperWALLET made a policy decision to not interoperate or support virtual currency providers. This was because of the fraud and AML risk, not because we were against non-bank service providers. We are a non-bank service provider.
So this new wave of digital and crypto-currencies is born in a completely different era, both technically and from an ideological perspective. Personally, I’m massively enthusiastic about the block chain and globally distributed transparent ledgers owned and controlled by nobody. I think it’s not something to be feared, but rather something to be embraced. What can it do for you as an organization or bank, or your customers? The beautiful thing is that you can liken bitcoin to a newly discovered rare earth mineral – something that can be mined until it runs out, but has utility in that it compensates the block chain node hosters for their service to humanity. That’s what I’m most excited about.
If I’m going to let someone receive their funds in the form of bitcoin, as a payments services provider, I still have my same KYC obligations as I do with delivering a payment through any other mechanism. Do I think bitcoin will be a faster transport mechanism? Not really. You still have to do the onboarding of the payment in one jurisdiction and of the off-boarding and all end-points still have their KYC and AML costs associated with them.
What I think is fantastic about bitcoin is the opportunity its allows a payer and payee to not have to use the same intermediary, and still transact with each other. That value equally applies domestically and internationally.
KW: Don’t you guys enable that for the customers you serve?
LS: We do. We allow corporate payers to reach payees, and payees don’t have to sign up for hyperWALLET. But payees have to use a service or a member of a bank or network that we have access to reach. I see the opportunity with bitcoin for us to reach a whole new swath of payees that may be serviced by some country-specific service type or provider, like a new mobile money scheme in Uganda, that we’re not directly integrated with but whose provider also uses bitcoin. That’s very exciting for us and any other provider.
KW: How do you see the future of the business that you are in? You have a very interesting vantage point, you’ve seen the space evolve over the last 15 years. Take us to the next decade or so – how do you see space evolving?
LS: I think the future can go one of two ways, depending crucially on regulation. What’s been good in the last few years is more and more national and regional regulators are starting to clarify the position and role of money services and payment services providers. The recent guidance provided in the US to banks, which is not to prohibit or off-board all of your money services businesses but adopt a risk-based approach to this community is very helpful. If that trend continues, then I think the opportunity for payments services providers and new kinds of third parties like PayPal entering and dominating different spaces is very bright. I’m not just talking about hyperWALLET, I’m talking about really interesting B2B type businesses starting to evolve to get rid of the last holdout – paper transactions – and add efficiencies for businesses and consumers around the world.
Another way the industry could evolve is so that technology providers and banks get closer together, and that will be forced if technology innovators simply can’t get the access they need to clearing and settlement networks to independently and directly service corporates and individuals. That’s a less rosy outlook, but it’s one way the industry could evolve.
My goal at hyperWALLET is to position the company so that we can thrive in both of those scenarios.
Lisa Shields is the founder and CEO of hyperWALLET Systems Inc. Over the past 13 years Ms. Shields has guided hyperWALLET from technology start-up to a respected international payments processor specializing in low value, cross-border clearing solutions.
Under Ms. Shields’ guidance, hyperWALLET has become the de facto standard commission payments provider to the Direct Selling industry, a growing business sector with 90 million participants worldwide and over $150 billion in total sales.
In addition, hyperWALLET operates a financial services business line offering consumer-to-consumer account-based money transfer services.
Prior to founding hyperWALLET, Ms. Shields managed payments acceptance and risk management technology teams for high volume online merchants. Earlier in her career, she held a variety of technology management and technical software development roles.
Ms. Shields was a founding director of the Wireless Innovation Society of British Columbia, and speaks frequently on payment and technology issues with a personal interest in consumer remittances. She holds Bachelors and Masters of Science degrees in Engineering, both from the Massachusetts Institute of Technology.