Payoneer: ‘in a tech-enabled economy payments need to be seamless’

In today’s globalised world, cross-border transactions are increasingly becoming synonymous with success for businesses looking to stay ahead of the competition. 

However, uncertainty caused by various geopolitical circumstances continue to dictate the rules of the international payments ecosystem. Payment Expert spoke to Micheal Sheehy, Chief Compliance Officer at Payoneer, to discuss whether companies are adapting fast enough to the ever-changing regulations.

Payment Expert: Has demand for cross-border payments increased or decreased given the current economic climate?

Micheal Sheehy: In today’s globally connected economy, opportunities are becoming increasingly democratised and decentralised. Businesses are no longer dictated by size or geographic location. 

The emergence and growth of digital commerce means that anyone can sell goods and offer services from anywhere. Third-party marketplaces have redefined how we sell. The process has been streamlined, there’s no longer a need to outsource distribution. You can sell directly, whatever size your business, directly to consumers or businesses, and this is driving cross-border activity and trade at a high level.

However, current tensions with China and the US are making investors and big manufacturers hesitant over whether this is a sustainable model and how long this new era of retail will last. 

Moreover, the Russian invasion of Ukraine has created a complex web of sanctions which changes regularly as borders between sanctioned and unsanctioned villages change with control of the territory. In my view, this is a temporary blip and I fully expect cross-border activity to stabilise. 

Service providers continue to persevere through geo-political turmoil. Ukraine, for example, remains one of the largest IT markets for IT outsourcing with giants like Amazon and Microsoft choosing to source technical expertise from Ukrainian developers. Our recent report on the state of business in Ukraine revealed that 44% of Ukrainian businesses are looking to grow and 36% are still planning on hiring more staff this year. This just goes to show the incredible resilience of businesses operating in sensitive markets. 

Currently, cross-border activity is being driven by the economic downturn as customers are looking for cheaper goods and services or more cost-effective ways to acquire them. Cost is the key benefit of cross-border trade, and it will continue to be a driving factor in an increasingly competitive market.

PE: How important is it for businesses to offer multi-currency payments? 

MS: This all depends on where our SMBs are serving customers and how those customers want to pay. For example, if you’re making payments all over the world you need to prioritise mitigating against transaction fees. This means making sure that your customers have a local way to pay to avoid having to send a wire or pay interchange or acquire fees on transactions.

Consumers and businesses also want to be able to pay in their own currency because then you know exactly how much things cost and you can effectively track and manage your spending. Introducing non-traditional payments also increases the variety of methods for your customers and makes you a more attractive and inclusive business.

PE: What are the current hurdles with cross-border transactions? 

MS: Ultimately it boils down to three things: tech, cost, and speed. This is what people care about when it comes to cross-border payments.

The tech needs to enable the easiest possible process. For example, can transactions be done on a phone, can you easily set up payees? In a tech-enabled economy, processes need to be seamless to stay competitive. Cost is also particularly sensitive. Some banks still set hefty fees on transfers, and consumers and businesses want the best value for money when it comes to payments.

And finally – speed. Everyone wants payments instantly and currencies that clear relatively quickly so that they can pay suppliers efficiently.

PE: What can companies and customers do to better protect themselves against APP fraud given its prominence in international payments?

MS: APP scams are the next generation of traditional ‘romance’ or ‘kidnap’ scams. Naturally, scams evolve with technology. APP fraud works as a contingent reimbursement model – it’s essentially social engineering and can now be carried out much quicker.

ChatGPT has also had a huge impact.  Fraudulent messages used to be much easier to decipher through poor grammar and spelling. ChatGPT has removed the error margin.

Companies need strong first defence controls and an understanding of how quickly this kind of fraud changes shape and evolves. Internally at Payoneer, this looks like four things: mitigation, education, verification, and monitoring. We carry out KYC checks throughout our payments network and multiple-factor authentication works together to reduce risk.

The most important mitigation is education. It’s important for employees and customers to know what to look for. For example, does the name on an email match the address? Are hyperlinks accurately labelled? 

Most of our customers have a known source of funds and many platforms opt for a delayed payback rate to protect against fraudulent payments.

PE: How does the UK fintech sector compare to the US and what do you want to see from both in terms of collaboration?

MS: The UK is a fintech hub globally and products are light years ahead of other established markets. You only need to look at the trail of companies coming out of the UK; Monzo, Revolut, Starling Bank, which have changed the game for the industry. 

The UK is incredibly attractive for investment with many companies choosing to go public. This took a hit after Brexit, but for compliance and regulation, it’s one of the world’s most attractive markets. Unlike the rising prevalence of neo-banking in the UK, the US still leans towards traditional investments like banking and commodities. Banks in the US are still largely physical places and contactless has not swarmed the payments network in the same way that it has in the UK. 

It’s estimated that 30% of payments in the US are still cash in comparison to approximately 2-3% in the UK. In this sense, the two markets don’t really compare. Digital banks in the US don’t get the customer base that exists in the UK, so the market caters largely for traditional bankers.

PE: Your Q223 results came out in August, what were the outcomes?

MS: Payoneer is in a period of significant growth which is really exciting to see and we’re investing significantly in improving our offerings and products to reflect the global communities we serve. 

We’ve invested huge amounts in our product enhancements to serve larger ICPs, including scheduling payments, enabling multi-user access and card spend limits as well as real-time availability of funds for US-based B2B payers via open banking integrations. 

We also recently acquired Spott, a real-time data platform based in Israel that will help us drive faster underwriting decisions in our working capital business.

I’m also excited to see continued growth in key emerging markets. We’re seeing exciting growth across APAC, SAMEA, and Latin America, where we predominantly serve outsourcing and services businesses; B2B volume grew 29% year-over-year.