For innovators and payments professionals, the good news about the world is also identical to the bad news: It is a constantly changing environment.
But globalization has its discontents — Brexit, a change in the U.S. political administration, the uncertainties surrounding China and, more recently, Russia, to name but a few. This makes the issues surrounding the secure movement of money across borders more complicated — some say more daunting, maybe even more expensive — but a massive opportunity worth seizing.
So, how to manage the good with the bad? Well, we find that an expert panel speaking off the record is a great place to start, so we put one together for Innovation Project 2017 — sandwiched in between fireside chats with Visa CEO All Kelly, PayPal CEO Dan Schulman and Worldpay NA CEO Kim Goodman. Our panel of CEOs all have one thing in common — a business defined by the interconnectedness of the world. On March 16, Flywire CEO Mike Massaro, PayU CEO Laurent Le Moal and BillMo CEO Steve LaBella will join moderator David Evans, economist and founder of Global Economics Group, to discuss what’s next for cross-border commerce in a world that looks a bit more upside down than it did a year ago.
Karen Webster caught up with Massaro to get a preview of the shape of the conversation to come — what’s new, what’s next and how to think about the connected world going forward.
The Fact Of The Connected World
The good news, according to Massaro? Globalization — barring something rather momentous happening — is here to stay.
“Once the snowball stars rolling down the hill, it is awfully hard to stop,” Massaro said. “The snowball that is globalization has been rolling for a while now, and while it is certain that there will be changes at the margin, I find it hard to believe people are going to travel less or spend less cross-border. And we are sure not to see people retreat entirely into their own borders for all their commerce and supplier relationships.”
Flywire’s bread and butter is cross-border payments, specifically large-sum, cross-border transactions. Unsurprisingly, Massaro spends a lot of time thinking about the global landscape and noted in his conversation with Webster that one of the realities of cross-border payments is that change is a constant — because there are so many moving parts.
“I think of risk with currency fluctuation as always being there; the risk of regulatory change is always there,” he said. “I think lately we’ve seen there is an increased security risk. And those are constants, and they continue. What we have found is that the thing you do is create infrastructure around them and expect them to be there forever.”
But, he noted, building infrastructure for those constantly shifting headwinds does come with its own set of challenges —particularly when it comes to how much of the infrastructure over which individual players have direct control.
A decision, Massaro said, that is one of the biggest decisions that a global commerce player has to make.
Owning The Part Vs. Owning The Whole
For Massaro — and the panel in general — the question isn’t whether cross-border commerce and money movement will continue or even if the system will change — since the answers to both of those questions are obviously yes. The more interesting topic of conversation is what kinds of business models will most successfully navigate the changes that may lie ahead.
“The fascinating question is what will happen with different players choosing to own different parts of the system versus operating it end to end. That’s where to look for stresses and pressures since, when parts change and you don’t own the whole thing, players may find themselves vulnerable — or, at a minimum, doing a lot more work than those who own the whole process,” Massaro said.
He cited the legions of smaller ISOs and processors that have sprung up in recent years and, because of the incredible pressure to demonstrate top-line growth, have been pushed into global expansion at a rate that much makes an end-to-end buildout nothing short of impossible.
“I think there are a lot of players that have expanded themselves beyond their footprint because they have to keep the growth rate up. That means they have to keep entering more and more markets, which means more and more partners because the reality is they can’t do it themselves. Even with huge amounts of investments, at some point, they can’t do it directly,” Massaro said.
Those firms then have a problem — they are only as good to go as their in-nation partners are. Building end-to-end does involve a bigger upfront effort, Massaro noted, but it has the benefit of offering control of everything under one’s purview. Players trying to own an element have had difficulties of late.
“You can start with Brexit. There are companies that shut themselves down over Brexit — and it wasn’t always because they couldn’t function, but because they were dependent on someone or a firm they weren’t sure would be able to function. So, they had to either expose themselves to catastrophic risk or shut down. A lot shut down,” Massaro said.
Plus, he noted, those smaller processors and ISOs are also seeing increased interest in end-to-end construction projects from mega-players like TSYS, Vantiv and Worldpay, and as they are more willing to “walk that last mile to the customer after doing all the really hard stuff,” the playing field is getting ever tighter.
And it’s also getting ever more interesting. If you’d like to be part of the debate over end to end versus a part of the whole, join us at Innovation Project on March 16.