B2B Payments

FinTech’s Window Of Opportunity For X-Border B2B Payments

We don’t need to convince anyone that the Internet has changed the game for global commerce. In the world of B2B, the Internet opened a door for businesses, especially smaller ones, to more easily connect with overseas corporate buyers (and vice versa).

Unfortunately, the infrastructure and technology behind the payments that need to occur haven’t quite matched the pace of evolution that online B2B trade has.

It’s a situation that’s opened another door for FinTech players, like Payoneer, however. According to the B2B payment company’s CEO, Scott Galit, the way that cross-border B2B trade initiated online has outpaced cross-border B2B payments capabilities is a major opportunity for businesses like his.

“We’re talking about $50 trillion a year, an absolutely massive market,” Galit recently said in an interview with PYMNTS, citing recent forecasts from research at BCG.

That price tag is fueled by businesses around the world realizing that their corporate customer base can jump when online strategies are thrown into the mix. But, according to Galit, they quickly realize their cross-border payment needs are a bit more complex than initially anticipated.

“That’s almost always the case,” he explained. SMEs, he continued, are particularly challenged by global payments when they launch international operations.

“Banks are very challenging in general to work with, especially if you’re a small or medium-sized business and you’re sending international payments,” Galit said. “You’re going to typically be immediately flagged as high-risk. It’s expensive, the tools are not great, you’re typically using international wires. It’s not a great experience for anyone involved. It’s not a digital process.”

Burdens like high overhead cost and the commitment of time and resources to customer service can weigh heavily on an SME going global, which is why companies like Payoneer are gaining traction in today’s interconnected market.

Payoneer provides clients with a single API through which companies designate only a payment recipient via a unique identifier and the amount they must be paid. Payoneer handles the rest, including currency exchange and compliance requirements.

The latest customer to outsource these cross-border payment hurdles to Payoneer is Tradedoubler, a firm that works as an intermediary between online publishers and advertisers. In a case like this, Galit explained, Tradedoubler has eight platforms working in eight different currencies across the globe. Invoices may be sent in one currency, when payment is needed in another.

There is what Galit described as a “complex spiderweb of activity” in which Tradedoubler connects those Web publishers with advertisers, advertisers must pay for ad space and publishers send invoices and generate revenue to be collected from Tradedoubler — a three-way relationship that operates across multiple borders and, in some cases, where each step of the journey is done in different currencies.

In another example offered by Galit, Payoneer client Airbnb is the kind of company that may receive payment in U.S. dollars but has to pay a property owner in Japanese yen.

Then, there are clients like Getty Images, whose subsidiary, iStock, required not only cross-border payments solutions between the stock photo site, photographers and buyers but also needed various payment methods — including checks — to be supported.

Companies like Payoneer handle this transaction and integrate that data into existing ERP systems, allowing businesses to remain compliant and manage cash flow simultaneously. According to Galit, the rise of FinTech businesses like Payoneer is indicative of the steady change occurring within the world’s payment processes in an effort to catch up with cross-border B2B trade.

Because, up until recently, banks have not necessarily been the best source of cross-border payment services for smaller businesses, Galit explained. Luckily, he sees that as changing.

“There’s no question that banks are working to improve technology,” he said. “Some will do a good job, and others will not; some will do it on their own, others will do it in partnership with providers. But it’s a done deal that the large banks are going to rework the infrastructure they use for almost everything they do, with payments certainly an important part of that.”

For some, what may first come to mind when considering an overhaul of the underlying infrastructure of financial institutions is the blockchain. But Galit said he has a difficult time imagining that the distributed ledger technology can actually be the golden ticket for banks to enhance their cross-border corporate payment capabilities.

“Having been in a bank before, there are many things about it that I struggle to see,” he said. “I’m trying to think of how the CIO of a bank explains to their IT examiner from the regulator that they don’t actually control the platform that their data is moving through, that money is moving through.”

That conversation seems a bit unconvincing, he added. But he did acknowledge the exploration of some privatized versions of blockchain tools that seem a bit more promising on payments speed and security for FIs.

More likely, however, Galit said the industry will have to spend a bit more time exploring and testing out the new technologies that will ultimately transform cross-border B2B payments.

Like so many other areas of payments innovation, advancements in global corporate payments are likely to take a bit longer than their B2C counterparts.

“One thing I think is often overlooked is that, when you get into business payments, the payment is a small part of a much broader workflow,” he said.

In B2C payments, cross-border payments are about electronic authorization and settlement; in corporate payments, however, the broader workflow involves documentation like purchase orders and invoices, payment term negotiations, logistics and the like.

And when zooming in further into the actual payments aspect of a B2B transaction, Galit said, there is a more elaborate process than what’s seen behind the scenes in B2C payments: approvals and reporting processes for accounting purposes, for example, and compliance, sanctions screening, reconciliation and more.

“There is much more involved in business payments than simply money going from one place to another,” Galit added.

With so many moving parts, it’s understandable that cross-border corporate payments remain such a challenge for businesses looking to take advantage of online, global exposure. And while Galit noted that newer technology will “change everything” — including the way traditional financial institutions run their businesses — today, it’s up to payments and FinTech players to fill the gaps for SMEs’ cross-border payment needs.

“The reason why businesses are better able to interact globally now than ever before — small business in particular — is because of technology,” he said. “The Internet has made it so everything has been flattened dramatically, but payments and banking infrastructure hasn’t really changed.”


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