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Payment Week - Andrew Barnes, Managing Director___Payoneer


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Payment Week - Andrew Barnes, Managing Director___Payoneer

  1. 1. MAY 19 - 23, 2014 visit EBay Contemplates Accepting Bitcoin Make Payments With Voice-Activated Options Through Google Glass ALSO INSIDE: Underground Economy Goes Main Street – Implications GLOBAL PAYMENTS FOR ALL 5
  2. 2. 2 F E A T U R E D A R T I C L E S Felix Shipkevich FOUNDER Jason Mongiello DIRECTOR OF MARKETING GRAPHIC DESIGNER Kevin Xu EDITOR CONTENT STRATEGIST Andrew Barnes MANAGING EDITOR, EMERGING PAYMENTS Jenn Roberts Ma CONTRIBUTING WRITER Gregory Sweet CONTRIBUTING WRITER Kyle Dowling CONTRIBUTING WRITER Jane Genova CONTRIBUTING WRITER Michael Foster CONTRIBUTING WRITER Helen Wallis CONTRIBUTING WRITER David Cross CONTRIBUTING WRITER Monique Zami CONTRIBUTING WRITER Corporate Office 65 Broadway Suite 508 New York, NY 10006 2014 Lamil Media Inc. All rights reserved. The content of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Requests to reuse materials published in Payment Week should be directed towards our editor. M A R K E T P L A C E T E C H E M E R G I N G P A Y M E N T S Exclusive Q&A with Payoneer’s Scott Galit: Global Payments for All 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. S P O T L I G H T A R T I C L E 4 - User Privacy is the Next Big Thing in Payments 3 - Make Payments With Voice-Activated Options Through Google Glass I N D U S T R Y V O I C E S 6 - EBay Contemplates Accepting Bitcoin M A Y 1 9 - 2 3 , 2 0 1 4 7 - As PayPal Tests BLE Payments, Consumer Readiness Questioned 8 - KakaoTalk Prepares Money Transfer Service 9 - Apple Stores Prepare For NFC Payments 10 - Why Europe Will See Mobile Payments Success Before the U.S. 15-ExclusiveQ&AwithPayoneer’sScottGalit:GlobalPaymentsforAll 13 - Underground Economy Goes Main Street – 5 Implications 11-TheWorstCasesofInflationinHistory–CurrenciesDoubling Overnight
  3. 3. T E C H 3 Mobile Make Payments With Voice-Activated Options Through Google Glass By: Daniel Cross G oogle Glass has been at the forefront of emerging technologies and it’s latest addition is no exception. Working in tandem with its proprietaryGoogleWallet mobile payment platform, users can now manage payments using voice-activation technology. Google Glass is essentially a pair of glasses that can be controlled by voice commands or by touch through a panel worn over the right ear. The inventive new device is still in its infancy with a limited release and the payment option will only be available to users in its corporate network. A simple voice command like “send money” will allowusers to transfer funds via Google Wallet.Gmail already offers a peer-to-peer lending service by allowing users to send funds as email attachments. Hands-off payments systems are becoming more mainstream however and Google Glass is taking advantage of the possibilities. Other companies are quickly hopping on board as well. Startup Eaze recently released a beta version of its bitcoin payment app for Google Glass with Nod to Pay. Even larger companies like LevelUp and MasterCard are working with merchants to enable payment methods using Google Glass. Google Wallet is looking to get a retrofit as well in order to better support the growing need for mobile payments and hands-on technology. The integration with Google Wallet is a natural fit as new Google Glass wearers are required to set up an account in order to purchase the product. Each monetary transaction through the device will net Google 2.9% or $0.30 cents, depending on the value of the transaction. Image credit: Giuseppe Costantino
  4. 4. 4 T E C H 4 Security User Privacy is the Next Big Thing in Payments By: Gregory Sweet D uring this month’s CeBIT 2014 event at Sydney’s Olympic Park, Director of the US Cyber Consequences Unit, Scott Borg, asked businesses and governments to make online privacy a top priority. The CCU is an independent, non- profit research institute that assesses strategic and economic consequences of cyber-attacks. Borg believes consumer privacy online is on the verge of becoming a huge issue. He says too many businesses consider privacy a nuisance or compliance issue, and notes this is “profoundly wrong and dangerous.” Sacrificing Privacy For Convenience Borg is worried by comments from multinational CEOs that privacy protection is obsolete in today’s online environment. Google and Facebook’s CEOs have been quoted making similar statements. The sentiment seems to be “use our free service and we’ll provide you targeted ads and promotions to match your preference.” While information sharing has ballooned through social media, Borg argues personal privacy should not be compromised for improved user experience. The handling of this collected intelligence has the potential to completely wipe out privacy.“The challenge is to maintain all these economic advantages, while still protecting privacy so we still have these engines of economic innovation,” said Borg. Info Gathering Done In Mobile Payments In a typical credit card transaction, the involved parties get an incomplete view of the sale. Data collection is fractured so that only limited private information is transferred to the merchant, payment provider and bank. Why? Under the current structure, merchants only collect “Level 3” data: purchased items and the customer name. Level 3 data is usually not shared with other participants in the transaction. Merchants can’t identify the customer by name or obtain contact information. Image credit: g4ll4is
  5. 5. T E C H 5 Payment providers (Visa, MasterCard, American Express) receive the account number, transaction amount,and merchant identity but no information about the item purchased. The banks involved also typically receive limited information: the total amount of the purchase, where the purchase was made and the customer’s unique identity. However mobile payments could allow merchants to collect personally-identifiable contact information from consumers and transfer Level 3 data to payment providers. This new scenario could allow all involved parties (merchants, payment networks and banks) to attain complete consumer contact information and specific purchase information. This enhanced information could then be shared to solicit promotional emails and offers to the consumer. “Would you like to receive coupons or have your receipt delivered via email?” A 2013 study shows 81% of Americans objected to sharing their telephone number with a store where they purchased goods. 15% would probably allow it, while only 3% would definitely allow it. 33% would be willing to share their email address, 51% stated they definitely would not and 16% said they probably would not allow it. Americans value their privacy at the point of sale. Merchants and payment providers should consider mobile payment models that protect consumer privacy to ensure consumer expectations are respected. A possible compromise for all parties would be a uniform regulation for handling point-of- sale information. California laws preventing merchants from requesting addresses and other consumer contact information provides a favorable model for a universal policy. An opt-in standard on a per- transaction basis could empower consumers to share where they feel appropriate but block this information collection and sharing by default. Procedures To Protect Privacy Scott Borg recommends drawing a line between machine access and human access to data. Consumers are less concerned if a computer program is sifting data and displaying ads, but a human tracking their activityis a different ballgame. Borg believes giving added access to machine tracking would lessen human monitoring of our online presence. He proposes a two- step authentication process and threshold where a list of criteria would have to be satisfied by machine before human eyes could access anyone’s data. Rather than looking strictly at security, Borg stresses businesses need to address storing data differently. Customer data and personal information should never be stored in a single location, but broken up into separate components and stored in separate locations–both virtually and geographically. This provides enhanced protection against security breaches and ensures company staff cannot intrude on a complete personal profile. Consumer information is a touchy subject. Businesses must cater to America’s sensitive perception of their personal data. Creating a transparent and fair privacy policy will be a huge step towards a universal adoption of mobile payment systems.
  6. 6. 6 E M E R G I N G P A Y M E N T S 6 Digital Currencies EBay Contemplates Accepting Bitcoin By: Jenn Roberts Ma E Bay CEO John Donahoe revealed the company is considering adding bitcoin as a payment option at its annual shareholder meeting on May 13. “We think bitcoin will play a very important role in the future,” Donahoe said during a question and answer session.“Exactly how that plays out, and how we can best take advantage of it and enable it with PayPal, that’s something we’re actively considering.” Donahoe’s remarks signal a major shift in the e-commerce giant’s attitude toward bitcoin. In annual regulatory filings, eBay held that bitcoin platforms are potential competitors to PayPal, which serves as its payment processing service. PayPal is a major profit generator for eBay, representing 41 percent of its revenues last year. Notably, PayPal President David Marcus pronounced the division was not ready to integrate bitcoin late last year at the LeWeb conference in Paris. “Whenever the regulatory framework is clearer, and the volatility comes down, then we’ll consider it,” he said. Unlike traditional currencies,bitcoin is not regulated by any government body and enables near- anonymous transactions. Consequently, it has gained a reputation for facilitating illegal activity—including the notorious Silk Road scandal.In October 2013,the FBI shut down the underground website Silk Road for enabling drug transactions using bitcoin. As a result, the currency has sparked widespread concern among governments and financial regulators. Nonetheless, as bitcoin continues to grow in popularity, small businesses around the world are increasingly accepting it. In early January, Overstock. com became the first major retailer to join the bitcoin market. Bitcoin offers unique advantages for consumers that may bolster its public appeal. For instance, the processing fee for bitcoin transactions on PayPal would be less than the typical 2–3 percent because banks and clearing houses lack involvement. Donahoe’s remarks on bitcoin—which he calls “a new, exciting and emerging technology”—may have significant implications for the currency. PayPal is a global leader in digital payments, processing $125 billion in total payment volume in 2013 alone. If adopted by PayPal and eBay, bitcoin could improve its reputation and gain broader recognition as a legitimate currency. Image credit: Stuart Isett/Fortune Brainstorm Green
  7. 7. E M E R G I N G P A Y M E N T S 7 7 Card Solutions As PayPal Tests BLE Payments, Consumer Readiness Questioned By: Kevin Xu U S Consumers aren’t so open to new payment technologies, as we’ve seen with the slow adoption of NFC checkout and mobile wallets in general. Bluetooth lowenergy(BLE) beacons are a frictionless solution that may gain traction, but a recent survey shows that consumers aren’t yet comfortable with the idea. PayPal is currently testing its Beacon checkout system in Palo Alto, California. PayPal mobile app-using customers can shop at retail locations and walk out with goods and merchandise after name and facial confirmation from the merchant. This means that a customer has to check-in to a store with their phone, but never has to take out their wallet since PayPal completes all steps of the transaction. While this payment method will allow for a faster turnaround and the promising incentive for loyalty rewards and consumer data on the merchant side, are customers open to shopping with Beacon tech? A study conducted by Retale, a weekly shopping circular and deals aggregator, shows that consumers just aren’t ready. Location tracking is one of the main benefits for merchants that choose to enable BLE at their retail locations.If your phone communicates to the beacon that you’ve been standing at the LED-tv section for a while, you may receive an offer on that product to try to get you to purchase it. 71 percent of respondents do not want to be tracked while they go about their shopping. Only 29 percent are onboard with being tracked through the store, but this number may increase if location tracking is explicitly incentivized. What about the deals and offers that promise customer engagement and an increase in sales? Half of iOS users do not want to be sent push notifications for these incentives. Nearly 62 percent of Android users feel the same. These results show that consumers are clearly concerned with privacy, and that push notifications are seen as an annoyance, rather than a benefit.
  8. 8. 8 E M E R G I N G P A Y M E N T S 8 Card Solutions KakaoTalk Prepares Money Transfer Service By: Monique Zamir T he lure of the promising mobile payments industry is expanding into social networking companies as the popular Korean messaging service KakaoTalk prepares to launch a small-sum money transfer service in June (up to 100,000 won or $97) in cooperation with local banks. KakaoTalk has higher aspirations: one high-ranking banking official commented, “Once security problems are resolved so that payments and transfers over 100,000 won are possible and local banks expand the payment infrastructure via smart phones, we will live in an era where all we need is a smart phone when we leave home.” While we’ve heard this near technotopian call for a world of digital wallets before, the move to bring globally popular social networking service (SNS) companies into the burgeoning mobile payments realm is a powerful move, bringing the vast swaths of users to a simple, in-house mobile payments system. The potential is there, since KakaoTalk reports having 100 million users. KakaoTalk isn’t the only SNS company developing a money transfer service. Facebook is in the midst of preparing a money transfer service in Europe. More specifically, the firm seeks regulatory approval in Ireland for “e-money” status,enabling it to issue digital credits convertible into cash by its recipients. Facebook has also just acquired the extremely popular messaging service WhatsApp (for a hefty $19 billion), and according to a conference call with Mark Zuckerberg, Facebook isn’t looking to drive revenue from the app, instead he said, they are focusing on growth. The potential for SNS services to influence and drive mobile payments is enormous, when one considers the fast ways social networks spread information and gain users, combined with the convenience of a money-transferring service included in a SNS app.
  9. 9. 9 M A R K E T P L A C E 9 Industry Leaders Apple Stores Prepare For NFC Payments By: Daniel Cross A pple has announced plans to accept NFC payments in its stores very soon. Employees at Apple will receive card readers provided by VeriFone Systems that will allow them to accept chip-and-PIN payments. An installed NFC reader will let workers and customers exchange information at the point of sale. Apple products do not currently support NFC capabilities and the new roll-out is unlikely to change that. EasyPay is Apple’s signature mobile payment application which takes EMV chip-and-PIN, as well as mag-stripe payments. Payments made from Apple gift cards that are loaded into a customers iPhone or iPad are also accepted thanks to an update to EasyPay in 2012. Near Field Communication, the ability to send and receive data by proximity alone, has been around for a while but its application as a payment method is relatively new. The technology has already been implemented in places like urban metro systems while mobile wallets make it readily available to the public. While iPhones do not support NFC right out of the box, mobile wallet provider, Isis, adds NFC capabilities to iPhones with its Incipio Cashwrap sleeve. Apple may be targeting a more elegant payment system of their own through Bluetooth low energy “iBeacons,” which have been enabled in their US stores for push notifications and location tracking. There hasn’t been any solid evidence whether or not Apple will incorporate NFC,but whatever technology they go with (or don’t go with) will have a profound impact on mobile payments. Image credit: Matt Buchanan
  10. 10. 10 M A R K E T P L A C E 10 O nce the world’s innovator and creator of the internet, the U.S. has fallen far behind both Europe and Asia when it comes to accepting and using financial technologies and making banking more efficient. While checks are a thing of the past in Scandinavia, Germany, and East Asia, they remain the standard way to send money for millions of Americans. Even if they’re slow, frustrating, and susceptible to fraud, they remain the default in the U.S. While there are obvious benefits to checks getting replaced with a more efficient payment system, the powers that be are slow to change the status quo. Electronic transfers still take days, not seconds, to process, because regulators worry about upgrading the infrastructure that processes inter-bank payments. As NPR discovered, the payment system currently in place dates back to the 1970s, and there is little motivation to upgrade it. Unsaddled with old infrastructure and more open to innovation and progress, nations like Finland, Sweden, and Germany offer instantaneous transfers between banks—and unlike wires in the U.S., these transfers are free or cost very little. European nations have also implemented EMV and chip- and-pin standards that replaced the old magnetic strip system that’s still the order of the day in America. While the transition was not seamless, it completed years ago and all credit cards in the EU come with an embedded chip that makes fraud more difficult. This leaves Europeans scratching their heads at why the Americans are a decade behind Europe, and mobile payment usage will likely to take even longer than acclimating to new credit cards. All of this means that mobile payments will stay small in the U.S., even if they are growing at an incredible rate internationally. Back in 2012, experts said we could see mobile payments reach scale by 2020, and since that survey was released, mobile payments have more than doubled to over $25 billion. While that sounds impressive, e-commerce accounted for $364 billion in the U.S. and $1 trillion worldwide in 2012. Since mobile payments include bank transfers as well as e-commerce, this means mobile payments still account for far less than 2.5% of total online transactions. Global & Local Why Europe Will See Mobile Payments Success Before the U.S. By: Michael Foster Image credit: iZettle
  11. 11. 11 M A R K E T P L A C E 11 Global & Local TheWorstCasesofInflationinHistory–CurrenciesDoublingOvernight By: Hellen Wallis I magine sitting down for dinner and before you finish the meal, the price literally doubles. In the United States there’s a growing concern over the value of the dollar; however, when looking back at history, there have been plenty of situations throughout the world where the economy has been far worse. When hyperinflation occurs, prices can change so rapidly that money could be rendered useless overnight. This has happened before on many different occasions throughout the last century. During the 20th century, there were seventeen cases of hyperinflation in Europe and Central Asia. While the United States was never a victim, it came very close during the Revolutionary and Civil War when the government printed more money to pay for them. However, in both circumstances inflation never exceeded 50 percent. While this is still a significant increase,it’s nothing in comparison to some of the world’s worst cases. Hungary 1946 During 1946, Hungary suffered from the most horrifying inflation in history. Prices literally doubled every 15 hours, which resulted in a 13.6 quadrillion (13, 600, 000, 000, 000, 000) percent increase each month. Despite efforts to stabilize the currency after World War II, the only measure to correct the issue was to replace the currency into the forint, which had a direct conversion rate to gold and could be measured against other world currencies. By the time the currency was replaced in August 1946, the total price of every Hungarian bank note in circulation was one thousandth of an American dollar. Zimbabwe 2008 During November 2008, inflation in Zimbabwe reached a high of 79 billion percent. Prices doubled every 24.7 hours due to Mugabe’s land-redistribution program. Put into perspective, a loaf of bread cost roughly 35 million American dollars. At the time, banks issued a $100 million bill; then a $200 million dollar bill; and then capped withdrawals at $500 million, which was the equivalent to 25
  12. 12. 12 M A R K E T P L A C E 12 cents. Eventually shops began to refuse the official currency and accept South African Rand and US Dollars. When the Reserve Bank stepped in to restructure the currency in accordance with the US dollar, the inflation came to an end. Yugoslavia 1994 Between1993and1994Yugoslavia suffered from an extreme case of hyperinflation that reached an all-time high during the month of January when prices rose to 313 million percent during the month. This was a 64.6 percent increase per day. Throughout the whole period, prices increased 5 quadrillion percent. Eventually businesses began to refuse the dinar and accept the German Deutsche Mark. During the following years the Yugoslavian government struggled to restructure the dinar and had difficulties maintaining the social structure of the country over the residents’ refusal to pay bills knowing that they would be re-valued so rapidly. Germany 1923 During October 1923, hyperinflation reached 29,500 percent. The German papiermark was introduced in 1914 when the country’s gold standard was eliminated and started with an exchange rate of 4.2 US dollars. When the hyperinflation occurred residents started to suffer from a psychological condition known as “Zero Stroke” – which is a dizzy feeling caused by counting too many zeros. The government responded by issuing a redenomination and replaced the papiermark with the rentenmark, which eventually stabilized the currency. According to Arnold Hill, inflation is inevitable and you should look to source a financial expert to assist your business so you don’t suffer. While you don’t need to worry about hyperinflation on this degree, making good financial plans is certainly good practice.
  13. 13. 13 M A R K E T P L A C E 13 Global & Local Underground Economy Goes Main Street – 5 Implications By: Jane Genova T he U.S. “underground economy” has gone mainstream and has grown to about $2 trillion annually.That’s the number university researchers Richard Cebula and Edgar L. Feige calculated in their recent study of unreported income. Underground economy participants now include regular everyday people.. Gone are the days when it was dominated by Tony Soprano types, criminals, and illegal immigrants. Currently, housewives, laid off middle managers, college students, trade school graduates, lawyers and artists seem to feel no moral ambivalence and little fear about “working off the books.” The reasons for this growing trend are many. There is a shortage of “real” jobs. The stigma attached to not having traditional types of employment went with the burst of the housing bubble. All that matters is income. Employers are more willing to pay off the books in order to duck regulations, including Obamacare.TheInternet makes it easy to operate a shadow business and the implications are huge. Here are five. Lost Taxes Estimates, such as by Cebula and Feige, are that the federal government recently has missed out on about $500 billion a year in taxes. With that revenue, visionaries might have been able to be more innovative with national tax policies. There is also lost tax revenue to state and local government. Those added revenues could have prevented increases in property taxes and funded better public education. Misleading Labor Statistics Some economists keep saying that X percentage of the labor force has given up looking for a job. The reality might be that they are employed, only what they are doing for income does not show up in any official reporting system – not an employer’s, not their own tax return. The actual unemployment rate might be lower than the 6.3% the Department of Labor reported for April 2014. Keeping Consumer Economy Rolling The U.S. GDP might be higher and growing faster than what government agencies have calculated. What if that $2 trillion Image credit: Alfred Payne
  14. 14. 14 M A R K E T P L A C E 14 of the underground economy had been factored in? There is speculation that this underground cash floating around had been what kept the struggling consumer economy from collapsing during The Great Recession. It also could be why supposed jobless Millennials can purchase brand name clothes and mobile gadgets.As digital natives, there are myriad of paid tasks they can do in an online economy. In addition, cash gets freed up because it is often less expensive to hire a housecleaner off the books for example, than a franchise service which operates on the books. Since the service is so affordable, it might be used more often than a traditional cleaner, and it drives more cash into the economy. Another Explanation for the Unbanked The high number of unbanked in the U.S. might not be primarily a result of perceived excessive fees, the inability to qualify for a checking account or distrust of the system. According to a 2011 FDIC survey, 8.2% or 1 in 12 households are unbanked. Rather, those working underground are reluctant to become part of a financial entity in which funds are easily monitored by any number of government entities. Moreover, they might simultaneously be receiving entitlements such as welfare and food stamps. Funds in a checking account could attract the attention of those searching for cases of fraud. Not Paying into Social Security, Exploited Some might shrug off concerns that underground workers are not paying into Social Security and therefore will not be able to collect much or anything when they get older. After all, there is speculation that the system won’t hold up and “investing” in it is a fool’s dream. However, society is already witnessing the plight of the aging who receive a low-amount Social Security check monthly. Interestingly some of them are being forced into the underground economy, especially as service workers walking dogs,care-taking the disabled and running errands. In addition, because the underground economy is unregulated, workers can be exploited. They could receive low wages, no benefits and be exposed to environmental and safety threats. A boom in job creation could suck the life out of it. Current workers would probably trade off paying taxes in exchange for benefits including Social Security and a healthy, safe workplace. There could be a crackdown by government. Stiff penalties, ranging from fines to prison for employers and employees, could drive both into conforming with the traditional economy. With the shrinkage of the underground economy, statistics about everything from tax revenues to GDP could change significantly, while more cash can move through traditional banking and financial services.
  15. 15. I N D U S T R Y V O I C E S 15 Interviews Exclusive Q&A with Payoneer’s Scott Galit: Global Payments for All By: Kevin Xu S cott 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. Let’s start with a quick breakdown on Payoneer. 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.
  16. 16. I N D U S T R Y V O I C E S 16 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 anyof 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
  17. 17. I N D U S T R Y V O I C E S 17 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,, 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
  18. 18. I N D U S T R Y V O I C E S 18 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
  19. 19. I N D U S T R Y V O I C E S 19 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 thinkwe 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.
  20. 20. I N D U S T R Y V O I C E S 20 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.