Scott Galit, CEO at Payoneer, tells us what it’s like to build a global network, working with Airbnb and MasterCard, and the need for new players in payments.
Kevin Xu: Let’s start with a quick breakdown on Payoneer.
Scott Galit: We have a variety of different ways that we enable professionals and small business owners all over the world, in 200 countries, to receive payment for cross-border sales. And so, to businesses, or through businesses, we deliver payments into bank accounts in well over 200 countries, we support dozens of currencies; we connect them to wallets.
We have a whole variety of ways that we move money around the world, and use all those tools to connect buyers and sellers of products and services together. We do have a strong presence in the emerging world. Our brand has become quite significant. You know, we are top thousand Alexa rating of all websites, one of the top thousand most trafficked websites in the world. And we have a top hundred presence in a number of emerging market countries.
Yet, it’s become a pretty significant driver of growth for us and it’s a really, really exciting part of what we do. We really feel like we’re empowering global commerce by enabling professionals and small business owners around the world to participate in the global economy in ways that they couldn’t before we existed. So we think that’s really exciting.
Your company has certainly grown a lot during the years. One thing that interested me was that Payoneer reported an increase in VC funding for startups. Can you tell me a little bit about your relationship building business with startups? One like Airbnb that really excites me, that is pretty huge, I think.
Yeah, I mean, look, part of what’s so exciting about our business – again, we get to see both sides of activity. We get to see technology and Internet companies that are disrupting the global economy by creating new ways for commerce to occur, and then we have professionals and small business owners all over the world that are taking advantage of those platforms to be able to earn and sell in new ways and new places, than ever before.
So a company like Airbnb is obviously a really exciting company that is creating disruption in the hospitality industry, with a tremendous amount of momentum, scale, and a vision for where they’re going. By nature of their business, it becomes global almost instantly. So what that does is it creates kind of an ecosystem that allows entrepreneurs and businesses and professionals from anywhere in the world to participate. The complexity of managing payments across a variety of sizes or a variety of different preferences, and obviously, a huge geographic scope is really, really challenging.
And so, we started to work with them, in that case, the heart of the relationship with them is an Airbnb branded MasterCard. Both Airbnb and Payoneer are available to host in many places around the world, that they can withdraw their earnings from Airbnb and we will deliver it to them. We make it available. They can also still withdraw their funds into a bank account, so that is a really important aspect of what we’re doing, as well. And there are some other things that we’re working on with them, too.
Would you say that, if startups choose to work with you, they would gain access and leverage the global payment network? It makes things a lot simpler right?
Absolutely. We can be a one-stop shop. It is not even just payments. We truly have built best in class anti-money laundering and compliance infrastructure, which, for any of these global businesses is incredibly complicated to deal with.
We also provide a tremendous amount of value. Our risk team is top notch and we have a very, very expensive interaction – you know, again, one of the challenges, as much friction as we are able to reduce through the Internet, you don’t only get the good guys, right? So, the fact is that there are people who are looking to capitalize on these platforms for bad purposes, and we bring a tremendous amount of expertise to the table and because we see so much activity coming from so many different places, we often will flag activity and transactions for our customers and partners, that they are able to now better manage their business. So there are many, many different things that we do.
But absolutely, you know, someone can come to us, plug in one data flow, one money flow, and we can enable them to make sure that people receiving payments for them in any country, basically, other than OFAC blocked countries around the world can receive payments in a variety of different ways.
Speaking about compliance, how difficult is it to adhere to KYC and AML laws globally?
It is a very, very challenging proposition. Truly – outside of our call center, we actually have a larger compliance and compliance operations team than we do technology department. So, to give an idea of just how significant an investment it is – it is very hard to do well.
And something that we really take great pride in. And we’re investing many, many millions of dollars a year, invested in that. And at this point, because we have seen so many customers sign up in so many places around the world, we also have a bigger database and more experience than anybody else has, by a lot.
So, we also understand. So, yeah, it’s a huge investment. It’s not just the know your customer structures, but regulatory infrastructure, so, we’re regulated in both the U.S. in Europe where we own electronic money institutions, and, again, these are all multimillion dollar investments, you know, we get audited by states, we have third-party auditors that come in and test our compliance program on a quarterly basis, and we have an extensive one on an annual basis. We have so many audits and reviews and things like that by third parties – it’s just kind of a regular part of who we are and what we do.
What’s it like working with MasterCard? How’s the relationship?
We’ve got a terrific relationship with MasterCard, a very, very good relationship. We and MasterCard share a lot of common interests. We are both about empowering small business owners. We are both about empowering professionals and small business owners from emerging economies, we’re both about cross-border trade and commercial activity, we’re both about facilitating and empowering global commerce and e-commerce, so, really, we see the world in many similar ways.
Overall, they’ve been a very good partner to us, and we think we have been a very, very good partner to them, and we have a very good working relationship with them. But we work with, again, we send payments through Swift which obviously is very different than MasterCard, it’s another network. We deliver payments through local ESP systems, we deliver payments through proprietary networks, so there’s a whole bunch of different things that we do. MasterCard is absolutely a really important part of our overall value proposition.
How do you capture the freelancers? The small businesses? What is your proposition to them, how do you engage them in signing up?
Well, what is the most exciting thing about our business, and I talked earlier about our brand, you know, we get literally tens of thousands of applications a month that come to us. So, our number one source of customers is other customers. We get a lot, in the freelance space, a lot of customers that come through a network of partners that we have signed up. And there really is very much a network effect.
You know, Elance, oDesk, freelancer.com, 99designs, I could kind of keep going on and on, and we have hundreds of freelance businesses that have included us as a way that their payees can get paid and where folks can sign up through links on their site to us, can sign up for Payoneer. So, that’s more of a broad distributed network of customers. The reason why they do want it is, we give them the whole network, too. There is kind of the global interoperability from the collection side. We give them other tools, if they need to get paid by a third party that wasn’t part of the Payoneer network, we give them tools to get paid by credit card or other things like that that they can use.
So, we give them the ability to get a U.S. bank account, a European bank account, or they can get USD and euro payments, so they can invoice if they have local bank accounts in those markets. And then we give them access to a major currency debit card with MasterCard, if they want to buy advertising, or things like that online, to continue to grow their business, they can do that. If they want to use the MasterCard to buy things at a local market, or withdraw funds at an ATM, or in their local bank account.
Then, we partner with companies. In the last couple of months, we hosted meet ups in half a dozen markets around the world. We did partnerships and programs in Dhaka, Bangladesh, Cairo, Buenos Aires, Manila, Islamabad, hundreds of people at each event, focusing on educating freelancers on how they can actually earn money through global marketplaces, how they can actually use Payoneer to get paid. Very, very successful. Then we end up with thousands of new customers, coming out of those. So, again, it is a super exciting place to be, where we can engage all over the world with professionals and business owners to help them, connect them, and earn money in ways that they never could in their domestic economy.
Would you say it is difficult to find a balance between signing up, let’s say, freelancers, and your hot startup of the week or just balancing your efforts in trying to sign up smaller and larger businesses?
You know what, they are synergistic. We recognize it is a complex business and we very much cultivate both sides. We invest in our sales team that goes out and finds us new companies and startups. Although, I would say, at least half of our new customers that are sending payments around the world are coming to us, rather than us having even gone to them. It’s a virtuous cycle. You know, it’s not just freelancers, by a long shot.
I mean, the fastest-growing part of our business right now is manufacturers and merchants that are selling on e-commerce platforms around the world. They are using us to collect payments. Freelance is still growing very quickly, but we have growth coming from all over. So, absolutely. The more the customers that we have around the world that sign up with Payoneer, they pick up the phone or, more likely, they send messages to the communities on message boards or inquiries in to the company that they’re getting paid by, asking them to use us, the more we give them tools that they can collect payments from businesses in the U.S. without those businesses needing to work with Payoneer.
We’re then able to go back to a business and say to them, “Hey, guys, I don’t know if you realize, that you sent $100,000 last month of payments through Payoneer to 500 recipients, in 48 countries around the world. We would like to talk about a way to integrate, give you guys access to all the great tools and capabilities and help you significantly ramp that and do a better job with your global business.” And so, it really does work hand-in-hand, that both parts are really important as we continue to build the Payoneer brand and Payoneer network.
What are your plans for 2014? Where do you see Payoneer going?
I think we are sitting in one of the most exciting parts of the payments world and even global commerce. And we’ve got a big vision. Ultimately, you know, we can enable money to move around the world instantly. And so, we put together thousands of senders and millions of recipients that are connected together in a way that allows us to provide a lot of unique value to customers on both sides. So, we had an announcement recently with Google. We had some other pretty exciting, meaningful things.
We started to roll out from large-scale companies and large-scale vendors. We had a huge ramp in engagement – with the small business owners around the world receiving payments. And we’ve got a very rapid expansion of our products as well.
When we started this year, we didn’t have euro bank accounts that we offered. Now we do, and that is now growing, you know, pretty much 50%-100%, month over month. It’s still early, but it is growing very quickly, much the way the U.S. account offering did. We have lots of new collection methods, lots of new payout capabilities. Lots of new countries where we are establishing relationships. We just established a relationship with a new partner in Korea to enable payments in Korea. A huge amount of activity with new infrastructure partners in China. We have new infrastructure we’re putting in place in Japan.
We just brought on a community manager for Vietnam. There is so much momentum in so many different directions, and we talked about, we just had a press release about Lazaro Campos joining our advisory board, and he was the CEO of Swift, and he shares our vision that, you know, there are better ways in this technology-driven world that we’re in now, that the payment infrastructure hasn’t really changed at the pace that business has. And that there are new opportunities and ways to get things better, and so, we are super excited. I mean, this is a huge year for us.
I see similarities on what you’re building and the bitcoin protocol. One of their main selling points is that they are trying to build a global payment method. It seems that what you are doing is what they have the capability of doing, except you’re compliant. Do you have any plans to accept Bitcoin? What are your opinions on it?
First of all, I appreciate – I think it is really, really insightful, what you just said about what we’re doing versus what they’re talking about the ability to do, because, you know, in general, we feel we already have the ability to do much of what they aspire to, and do it in a compliant way. My point of view of Bitcoin, you know, I would say, it’s interesting. It is fascinating to watch all of the press, all of the media attention, all of the ups and downs, and at this point, you know, I will say we’re not – have no plans to accept Bitcoin, no plans to work with Bitcoin.
We certainly pay attention to it. From our point of view, we feel really, really excited about, in some respects, them highlighting some of the problems that we believe we’re solving. And we have made a lot of difficult investments, and we think we have already started to build some of the scale and transaction activity needed, through more mainstream activity that we think puts us in a tremendous position to continue to grow.
It’s a huge, gigantic market. We’re confident that, at the end of the day, businesses, professionals, corporates are going to need money in a real currency. Regardless of what else goes on, we feel really, really good about where we are. At the end of the day, again, I really appreciate what you said, and the insight. I think you’re right on. And we feel very good about where we are and we don’t have any current plans with Bitcoin.
Any last comments?
We have kind of a basic thesis on the world, which is that the entire business world is permanently changed, forever. And businesses of all sizes, all over the world, are connecting with new types of business partners in new types of ways than they ever have. Which means there are new types of payments, I’m sure you’re seeing this all over, that create a whole lot of disruption from the business perspective.
And we try to work business back. We say, “What do we need to do to enable businesses to operate in the way they want to?”
Using technology, using compliance, and using infrastructure to help make that happen. We believe there’s a last mile for money, which is controlled by regulators and financial institutions, and we don’t really think that is going to change.
But we think that, you know, there is really a need for new players that fit between that last mile and the way businesses are trying to operate today. So, again, we’re super excited about being one of the bridge builders that helps kind of bridge that gap, which we think is a growing gap, and we’re just super excited about the business, I have to say. An unbelievably huge market with a tremendous amount of disruption happening, we think we are one of the players that’s really, really well-positioned.
Scott Galit, CEO, Payoneer
Scott Galit is the CEO and a Director of Payoneer Inc. As Global Head of Prepaid for MasterCard, Scott developed MasterCard’s global prepaid strategy and oversaw its global prepaid business. Scott was the founder and CEO of Solspark; SVP/General Manager of First Data Prepaid and EVP at Meta Payment Systems. Earlier in his career he was an investment banker at Donaldson, Lufkin & Jenrette. Scott was also a founding board member of the NBPCA.