From music royalties to airline vouchers, there are many reasons organizations may need to push payments to individuals in various amounts, currencies, forms and frequencies, including real time. For instance, say that a flight has been delayed and all its passengers will need accommodations for the night before catching the rescheduled flight in the morning. Previously, passengers would have had to wait in line to receive a paper hotel voucher.
Modern tech makes it possible for them to receive that payout as soon as the flight is delayed and in whatever form is most convenient: to their credit or debit card, straight into a bank account, or even in cash, so they can then take it to the hotel of their choosing.
However, as Brent Warrington, CEO of Hyperwallet, tells Karen Webster, it’s not just about coming up with a technology that can handle all that. There are “multiple layers of mud” that make payouts a particularly messy and difficult problem to solve, including the complexities of international relationships and regulations. Those hypothetical airline passengers may be from various countries with different preferred payment methods and different rules around how they can be used, Warrington said. For the airline to pay out to all of them, it must not only be able to handle the platforms and currencies of those countries of origin, but play nice with the local payment rails in those places.
That’s why it’s taken Hyperwallet three years to build the foundation, but Warrington says it’s all paying off now, as the company was just acquired by PayPal to facilitate payouts for the global giant. Hyperwallet has already made headway in marketplaces, cross-border, and the gig and digital economies. With PayPal, it can also address more traditional models and how to digitize them for the modern payments era.
Here’s what Warrington says the acquisition will mean — not just for Hyperwallet, but for PayPal and for the payouts space in general — and why it’s been such a difficult problem to solve.
This isn’t Hyperwallet’s first date with PayPal. The companies have worked together before, and Warrington said that’s part of the reason Hyperwallet chose PayPal out of a bevy of suitors.
He said PayPal has many capabilities on the consumer side and around marketplaces, which will enable the companies together to undertake different, unique types of projects that were not previously on the table for either of them.
“We’ve worked with PayPal, and we respected the Swiss Army knife of capabilities that they have,” Warrington said, adding that a positive culture fit also contributed to the decision. “We set out on a mission three years ago to ‘pay the planet,’ and we just made a giant leap to get closer to our end goal.”
What The Partnership Means
Warrington believes the greatest disruption will be to traditional ecosystems built around foreign exchange, because the capabilities that Hyperwallet and PayPal introduce together will likely add pressure to these foreign exchange agents to adapt to the times. Also disrupted will be pay-in and payout providers that don’t facilitate both functions. There is competition on both sides, said Warrington, but a unified solution creates stickiness and adds value across the board, reducing the churn effect for a holistic provider versus one that still keeps payment functions in silos.
Over the two decades that Warrington has spent in the payments space, he said he’s seen payments become less and less siloed as players begin to take a more holistic view across use cases as diverse as airline vouchers and music royalty payouts. A key to this, he said, is that leaders in the space are not just focusing on payouts, but on pay ins. That holistic point of view is at the heart of a convergence in the space, funneling into a “whole new phase of payments” that he views as a sort of renaissance.
“People are looking to their payment companies to solve problems that never used to be on the radar,” said Warrington. “It’s a head-scratcher that the airline problem hasn’t been solved four years ago. Possibly, the answer is there was a disconnect between the vouchering and payment team” — a disconnect with which he says must now be done away.
A Layered Challenge
Silos, however, are not the only obstacle for payments companies looking to solve problems like the airline voucher conundrum. As Warrington stated, there are many layers to the challenge, and payments companies that hope to solve the whole problem must first solve its constituent parts.
First, there are thousands of payment methods and types, with different instructions for how each may be used between the different countries of the world.
Second, there’s the layer of specific local players, with whom global aspirants must establish relationships so that the provider has access to local rails in each of more than 200 countries and territories across the globe. Warrington notes that this trust is hard-won and easily lost for orgs that do not prove themselves good stewards of the local payment rails.
Third, the layer that Warrington refers to as “the wrapper,” is a base of technology that supports all global payment types and allows the provider to move seamlessly between network partners, currencies, bank instructions and holidays, then assimilate all of that into a singular platform.
Warrington said addressing some of these challenges is a function of time; others depend on available technology and the organization’s understanding of it. Ultimately, though, all three must be recognized and addressed for a provider to succeed on the global stage.
“It’s a circle of trust enveloped by technology,” Warrington said. “There are no shortcuts in payments — and the same thing goes for acquiring. Building a payout platform is complex and takes a long time. Even if you started with all the money in the world tomorrow, it would still take three years, at least, to get all the money transmission licenses and global licensing — not to mention the startup process of going around to 200-plus countries, territories and regions, setting up local relationships so you can ride the local rails, which is where the real speed and efficiency are at.”
To Warrington and Hyperwallet, it’s worth the effort. Whether it’s airline vouchers, music royalties or large marketplaces, each category has its own complex problems that need to be addressed. And Warrington says it’s not just about doing the same processes at a cheaper rate. Innovation is needed, and innovating on a planetary scale doesn’t happen overnight.