Payoneer Changing the World of ePayments
by Aner Ravon

I was aware of the fact that ePayments were going through the most significant revolution since the invention of the credit card, but Payoneer managed to blow me away. It’s one thing to solve a real problem. Managing to simultaneously address an array of real problems, on and off the web, is a totally different story. Payoneer mastered a way to put sticking glue on both.

Payoneer’s offering is for businesses, but it is an end user product - a prepaid rechargeable debit card. The card (by MasterCard), is connected to a personal, secure, web based “checking account”. Card holders can use the card on and off the internet, collect and make payments, withdraw cash at ATMs, transfer funds in and out at their will and so forth.

Businesses, on the other hand, can use the cards to avoid the huge headache involved in managing payments. Instead of paper checks, eChecks and wire-transfers, which altogether are complicated to manage, expensive and insufficient, they can opt for a much simpler solution – issue a debit card to each payee and just credit it.

Payoneer offers the solution as a one stop shop, including issuance, management and support and all for a very cost effective price.  The company has announced this week that it has raised $4M led by Greylock Partners. It’s customer and early adopter base already includes names such as MetaCafe, oDesk, ROI Rocket and Plimus. I sat down with Moshe Mor of Greylock Partners and with Yuval Tal of Payoneer for a discussion that turned truly inspiring.

Can you pinpoint your target market?

Tal: “The sweet spot is clearly with web related companies who need to pay both companies and individuals. These companies  can now put together an effective business environment. Managing payments to a global array of individuals is close to impossible. eChecks and direct deposits are not a popular payout method even in the US and then there are all sorts of international banking and currency issues which just kill the whole thing. The result is a market that remains mostly paper based. The web 2.0 economy is dependent on the need to manage payment relationships with people all over the world. Think about paying bloggers for their journalism, for example, or about experts offering their services at expert networks. They all need a pay-out solution as a fundamental component of any business environment. Our customers have a very simple solution – they issue debit cards and then reload it on an ongoing basis without worrying about anything else”

What about the end user?

Tal: “For the individual the situation is even more painful. Take user generated content, for example. Think about what it takes to actually benefit from it as an individual. Cashing international checks is a very complicated matter for many people in many countries. Very few publishers would transfer money to personal bank accounts. This whole situation sets the bar at a point which is not cost effective or time worthy for most people and therefore withholds the huge economic potential”.

So how can another card solve a complicated issue?

Tal: “The card is the best mechanism because it’s simple and universally accepted. MasterCard cards can be used at any store, website or ATM, worldwide. Unlike pure online solutions like PayPal, you don’t need to worry about how to withdraw your earnings. The global economy has created a dire need for fluent payments from US publishers to international contributors, for example, a need that presents a huge and limiting challenge and that is easily addressed by us.”

Mor: “Let’s take a look at the big picture for a minute. The web economy started mostly as a one-directional payment flow; people paying for stuff they buy online. Over the last few years, the web economy has developed to encompass many more payment flows: people paying people (which gave rise to PayPal), people getting paid for directing traffic to web sites (affiliate networks) and more recently, for generating content. While the pay-in flow has been around for a years and therefore has been addressed by multiple solutions, the pay-out flow hasn’t. The globalization of the web added a layer of complexity that required innovative solutions like prepaid cards. So we have an underserved and a growing need”

How can you compete with better established solutions like PayPal?

Tal: “I get this question a lot but you need to understand that Payoneer does not compete with PayPal. It is the credit card companies’ strategic interest to establish position in the pay-out market and they do it with partners like us. PayPal is a great solution but it is also limited. It is much more dominant in the US domestic market and with US bank account holders. You can’t use your PayPal account to get an ATM in India, for example, but you can easily use your MasterCard card and get an ATM card there. Our solution is good for individuals that are practically “unbanked” and for people who prefer not to use their day to day back account to get paid”

This seems like an opportunity for new entrants. What is Payoneer’s secret sauce?

Mor: “Payoneer is coming into this opportunity with what we believe is the first easy-to-use and comprehensive solution. I believe that the main barrier to entry is credibility and domain expertise. Very few teams have the breadth of experience that this unique space requires. It took Payoneer almost two years to develop a platform that can provide a reliable and credible solution and they started with a team that already knew what they were doing! “

Tal: “We needed to rally a major bank behind us, then get through MasterCard and this is before addressing any “regular” start up issues. Both needed to feel very comfortable with our ability to manage this type of operation. Our deep experience with online banking was necessary just to get started. This isn’t a space you simply walk into”

What is your longer term vision?

Tal: “I believe the real benefit businesses begin to realize is the upgraded relationship they will have built with their users. An ongoing billing relationship with an individual is a very meaningful asset. It means your customer carriers your logo in her pocket, literally and metaphorically. It means your customer pay regular visits to your website. Transforming any engagement to a sustainable billing relationship carries much deeper potential for brand attachment and for additional business.

Evidence shows that people tend to spend on the web what they earn from the web. This sets the stage for much bigger economics and our customers already begin to realize that. Check out Plimus, for example. A market place for user generated software that has integrated our solution. A classic example of a web 2.0 service provider that gets it” 

Look, this market will clearly happen, the only question is whether it’s going to be us that get to lead it”

I remembered it was not too long ago that PayPal was a young, promising start up too. I have a strong feeling I will sit back and reflect on this post in a few years when Payoneer will long be a household name.

Aner Ravon
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