SMB Sellers, Payments Surprisingly Resilient in the Face of Global Turmoil

B2B payment digitization came to the rescue during the pandemic, but it also can help businesses cope with humanity’s self-induced catastrophe, war.

Ukraine is a poignant case in point. Companies there are using digital payments to keep doing business amidst the fog of war. Overall, the Ukrainian economy has been resilient in the face of war, according to the company, as has the rest of the world, despite increased geopolitical tensions.

Payoneer Co-CEO Scott Galit recounted a case study of a Ukrainian customer that added the firm’s automated payroll services to compensate employees amid the turmoil of conflict. Payoneer also launched a new partnership with the country’s largest bank. His remarks in the company’s second-quarter earnings call reflected a theme of continued robustness in global trade despite macro headline trade tensions.

Payoneer, a payments technology company doing business in nearly 200 countries and territories, reported results attesting to the momentum of the accelerating global trend toward digitization.

B2B payables and receivables grew 66% in the quarter. The platform enables cross-border businesses to invoice, get paid, and pay their suppliers across borders and currencies without needing to open bank accounts around the world or to rely on outdated ways to move money such as wires and checks, according to Galit.

Growth was driven by:

Increased use of the virtual Payoneer Commercial Mastercard.

Improvement in cross-border travel, confirming a trend noted by PYMNTS toward a recovery in the vertical as the world emerges from the pandemic. The firm noted that this trend is more pronounced in Europe than Asia, which is lagging.

The firm also moved into the B2B2C space with the launch of Payoneer Checkout, which allows customers who sell directly to consumers to incorporate it on their eCommerce platforms.

A Massive Global Market

The health of globalization and world trade in the face of geopolitical stresses is a huge factor in global gross domestic product (GDP). On the call, Payoneer noted that the World Bank estimated 90% of companies are small- to medium-sized businesses (SMBs) — and that they account for more than 50% of jobs worldwide.

Access to financial services is a key constraint to global growth for SMBs, especially since in emerging markets, doing business across borders is often the only way to meaningfully scale.

Speaking of scale, the firm noted the network effect plays a role in its growth. Payoneer’s marketplace includes over 5 million businesses worldwide. Momentum breeds momentum foreshadowing a future which may be characterized by consolidation in the industry.

Payoneer and other firms in the space reap bottom-line benefits from increased interest rates, as 50% of customer funds are retained in its interest-bearing accounts. Rising rates may lead customers to reduce that figure, the firm said on the call.

Challenging the Online Status Quo

For online sellers, the pandemic has accelerated the trajectory that online marketplaces were bound to take.

The current status quo — in which many small, agile and highly adaptable marketplace-native firms continually chip away market shares from larger, more traditional marketplace-reliant firms — is likely to persist for the foreseeable future. But firms know things cannot stay this way forever, and fewer and fewer are willing to chain their fortunes to those of the marketplaces they have previously relied on.

Diversification is the future, and more businesses may take the marketplace-native tack of limiting the number of product offerings and marketplaces on which they sell, instead taking their signature wares multichannel.

As the world becomes increasingly digital and online transactions continue to replace brick-and-mortar ones, sales may come down to which brands can best position themselves on their terms. The larger the firm, the more likely to pursue omnichannel strategies.

Read also: Online Sellers Report

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