Payoneer CEO Scott Galit: Cross-border B2B payments seeing strong growth

Terrific. Now, really happy to have a chance to talk with you, so thanks. See you here, Scott. Let's start with the business. As you'll probably agree, fintech is a very competitive space and there are so many established and emerging players in the payment space. Where exactly does Payoneer fit in and how do you see the competitive landscape?

Yeah, Payoneer is pretty unique in how we actually fit into the world. For us, really the story of Payoneer is really a story of the digitalization of commerce globally. And so how we fit in is we've built a global platform that connects businesses of all sizes from the entire world. So we have customers that come from over 190 countries, last year supporting activity in over 7,000 corridors. And we work with very large digital businesses typically, so think about large digital businesses like an Amazon or a Google or an Airbnb and companies like that all over the world. And then the biggest part of our business is we actually work with small businesses that come from all over the world, and this can be anybody from a sole trader all the way up through actually fairly large small and medium-sized businesses. And that are using us to support their global export activity, and it could be exporting content, it could be exporting services, it could be exporting goods, if there's exporting educational training, just remote work. So there's an entire digital movement around the world where essentially small business owners from every market you can think of see opportunities in a digital world to actually be relevant globally. But there isn't an easy way for them to access money globally and to actually engage in financial and commercial activity globally. And so we built this platform, a connected digital platform, connects the whole world together and make it as easy to do business globally as it is to do business locally, with a particular focus on small businesses, emerging markets, and digital commerce. And so that's where we fit in this whole B2B digital commerce realm.

Yeah, I mean, it's... so I'll start with where the scope for growth is. And part of what's exciting is that there really is tremendous growth opportunity everywhere. But when we think about what we're doing, we tend to focus on our customers more than what we do. And what's so exciting about what's happening in the world, the most transformational change happening is that there's this kind of democratization of opportunity where now what we see is like there are smart, talented, hard-working entrepreneurs now all over the world that through technology and the internet have access to global opportunities that they just because of where they're from a generation ago didn't have as opportunity. So while we see tremendous opportunities in the United States and in Western Europe and in Australia and Japan in developed markets, the most exciting part of what we do and what I think is closest to our hearts and what makes us kind of most motivated is the opportunity to work with talented people in developing markets where we can help them achieve more than what they may have been able to a generation ago and where by being a partner and focusing on helping them grow and achieve their potential we can actually make a big impact. And so that's where we're most excited and where we think there's the biggest scope of opportunity ahead. But it really is quite global. And look, I mean, the way we think about it is even within countries the infrastructure is so much different. If you are within a highly developed market like the US or frankly at this point China domestically is super sophisticated. And so just doing business and engaging domestically is way easier in a market like that. When you think about the tools available to companies from those markets, because those are markets where the exports have been more significant for longer, the banks from those markets have gone around the world in many cases and have built infrastructure in a lot of places. And if you come from an emerging market, not only is the infrastructure locally likely to be less developed, but the local providers are less likely to be as globally relevant. And therefore your ability to get access to the tools you need to succeed around the world are going to likely be more limited. And so, and that's before you get into just technology change which makes it hard for any bank anywhere developed and developing to be relevant for digitally savvy businesses. So that's why we have so much opportunity everywhere in both the developed and the developing world, but that's where there's the biggest leapfrogging opportunity in the developing world and where we actually have so much excitement and so much traction and opportunity.

So, for sure. I mean, the world continues to change and evolve. And what I would say is that we started to really see through the pandemic, we started to see a lot of accelerated investment in digital activity. And so we've seen an accelerating wave of people around the world looking to participate in the digital economy. So application volumes have gone up, especially in developing markets. What we actually started, you know, seeing a big growth in the export of goods and actually folks recognizing that digital commerce and cross-border participation in digital goods exports, that that was the place they had to play. So now we've seen a huge change there. And even before, even local businesses that might have actually focused on their physical presence have recognized that in a COVID world, customers may not want to pay in cash, marketing to those customers, the way you engage and deal with money movements to and from, you know, customers and suppliers, all of those things need to now be more digital. And so what we see is kind of acceleration on all fronts: goods exports, services exports, the entire world of commerce even local is becoming more digital and the way businesses manage is becoming more digital. You might have people now have to work remotely but you still have to be able to operate. So if you need it, before people had to be in a place to work, now you need digital tools so people can engage together. So now software-driven business management, SaaS platforms, so all of these things are transforming how businesses engage with customers and how businesses manage, and payments are a part of all of that. And so what we're seeing is an acceleration of opportunity around this kind of whole digital transformation of payments for businesses.

Yeah, most of our partnerships last for a very, very long time. I mean, we're really privileged to not just have great partners but to really been able to nurture and grow those relationships over many, many, many years. So we've got different kinds of partners. So the one of the biggest groups of partners that we have are large digital marketplaces where in many cases as a marketplace they not only have buyers that they need to figure out how to deal with but they actually have suppliers or sellers on their platform. And again in a digital world what we've seen is in many cases those sellers come from countries around the world which creates all kinds of challenges: onboarding challenges, risk management challenges, communication challenges, and payment challenges. And so that's really the history of Payoneer was actually working with marketplaces and saying, hey look, focus on what you know how to do, getting your customers, getting suppliers to want to sell on your platform, let us take care of actually all of the hard stuff. We'll deal with the onboarding, we'll deal with the compliance, we'll deal with the risk, we'll deal with the error handling, and we'll deal with the money movement to all of those suppliers around the world. So don't worry about it, we'll take care of all of that complexity for you. And so we work with great companies like Upwork and Fiverr and, you know, Amazon and Airbnb and other companies like that. And again it's very global. So we announced this year partnerships with companies like eBay and Coupang in Korea and Bukalapak, you know, in Southeast Asia. And so there's all, I mean, and it's a huge growing global trend and again we've got amazing partners around the world. Another really exciting vector of partnerships for us is our bank partnerships. And this is kind of an extension of we also work with SaaS platforms and things like that. The banks are pretty interesting. One of the most significant themes among banks is they want to focus on digital commerce and have digital offerings, they want to focus on small businesses, and they want to help grow exports. Right, so Payoneer is this perfect partner where again in most countries the banks are going to have a very hard time offering global payment capabilities that are local around the world where exporters are doing business and they're going to have a hard time being relevant with digital marketplaces and platforms. So what we've done is we actually now integrate Payoneer, they use APIs, the bank integrates Payoneer into their mobile and online banking platforms and it's not white label, it's the Payoneer account. And now their small business customers have access to the amazing global payment capabilities that we have through their relationship with their local bank. And then they get real-time access to their money so they can see their US dollar balance, their pound balance, their euro balance and all the other currencies and all of their activity. And then 24 hours a day, seven days a week, they can pull it in real time into their local bank. And all of that is accessible through the local bank partners. So we're really excited about that because we think it creates a great new distribution channel for Payoneer but it also creates a better experience for our customers where now they have these integrated ways of accessing all of their money, their local money and their global money, and it's all interoperable in real time. So it's growing really, really nicely. In the third quarter we had over 100% growth in new customer applications through banking partners as well as volume growth. And so we're really excited about that and we think it's a super interesting opportunity to do more around the world to get more small businesses access to the great opportunities around the world.

Yeah, so we're certainly looking at it and exploring things. And I would say what we've tended to see is kind of evolving regulatory comfort and appetite for crypto around the world. And so we spent a lot of time focusing on our compliance program and on, you know, we're regulated in markets around the world. And so, you know, and even at, frankly, I think just today or yesterday there's a story that India is going to ban cryptocurrency. And so we've seen that in China. And so what I would say is that we're continuing to explore things and prepare ourselves to be able to offer our customers some capabilities. But we're doing it in a very careful and thoughtful way to make sure that we don't undermine the opportunity for small businesses to take advantage of the ability to grow exports and that we don't kind of go too far too fast into areas that may be more gray than what a lot of regulators are prepared to deal with. So we are looking at a number of things. We also communicated this quarter that we've collaborated with some big banks on a really interesting new kind of crypto platform, more in the blockchain infrastructure and central bank digital currencies. So it's called the Regulated Liability Network and it's this idea of having a shared infrastructure that brings central bank digital currencies and also digital money from the likes of companies like Payoneer and also big banks all onto a common platform. And so we're working with some big companies like Citibank and others on some super interesting and very kind of exploratory and innovative initiatives there.

Yeah, I mean, look, we're really fortunate that we have a lot of growth drivers in our business and we're executing well and our customers are continuing to see opportunities and focus on those. So what we've been seeing is that we've got really strong growth in a lot of regions around the world. And so exciting markets like Latin America, Southeast Asia, actually parts of South Asia, Eastern Europe, and so these are really high growth markets. We've been making sales investments in those markets and we've been seeing positive results. So that's been really exciting. Some of the newer partnerships on the banking partnerships that we've been pursuing and some of the marketplace partners are contributing. And then we're really driving meaningful growth of some newer higher value services that we have. So I mentioned before kind of the foundation and origin of Payoneer was working with marketplaces and the ecosystems of sellers on those marketplaces. What the fastest growing part of our business right now though is what we call our B2B APAR offering where we help businesses that are just trading with other businesses around the world across borders. That's growing much faster than the business overall. We've reported actually a two-year CAGR of over 100% volume growth in that business. It's now in the last year it's gone from being 7% of our business up to 10% of our business and it continues to grow faster than the rest of the business and it also is at a higher take rate than our business. We also talked about our digital purchasing card which is a new commercial card offering for businesses helping them not just to get paid but to better manage the way they then make purchases. It saves our customers money. We actually even have some cash back rewards programs where they can even actually get some extra value and it actually generates a lot of extra value for Payoneer at the same time. So we have a number of different initiatives that we've been investing in for quite some time that have actually been working well, providing more value for our customers. And we also reported a record number of new customers in the quarter. So as I touched on before, just the excitement around the world about the opportunity to participate in digital commerce and Payoneer is really an on-ramp to that. And so all of these things are coming together: the growth of new customers, the further penetration with our investments in a lot of high growth markets, and the introduction and ramping of these higher value services are all coming together to allow us to increase our guidance and deliver strong financial results.

So first of all, I mean, I agree that the pace is frenzied. If you look at the capital markets and venture capital activity around payments, it's also at like unprecedented highs. And so first, you know, for us in general, we always try to start with our customers, right? So we feel that if we continue to focus on our customers and listen to our customers and address what they are looking to do, that will continue to succeed and be a very relevant partner for them. Ultimately, I think what you're seeing in payments is that the, you know, point-to-point connectivity and the infrastructure under point-to-point connectivity is all getting essentially rebuilt. And so there's, you know, the way banks are managed, the way payments have been managed, all of that, there's investments in completely new infrastructure that are being made and all of that is going to move towards being more digital, more real time, more interoperable, more open. And so that from an infrastructure perspective, I mean, there's massive, massive investments and different technologies. I mean, some of this could be, you know, blockchain-based, other distributed ledger-based, others can be different infrastructure. But so there's huge investments going on there. I think where the value starts to shift in a world where there's more and more of that kind of infrastructure layer being built, part of it shifts to the customers but part of it shifts to the companies that are actually really able to package up value around that and create great experiences for those customers. And those great experiences are things around the increased complexity and scrutiny on regulation and compliance, increased scrutiny around taxes, increased connectivity with software and partners around the world where customers are doing business. All of those things that are kind of the reducing friction that stands between customers and what they're trying to do are I think where the value increasingly gets created. So companies that are able to think not just about the infrastructure but actually about the context where business is getting done and where payments are embedded, I think is where the real value gets created over time. And so we very much think about that focus on customers and focus on context and what's happening in the world around us far more broadly as opposed to just focusing on kind of an infrastructure-out or a product-out approach. And we think that's actually where the world will continue to go.

Yeah, I really enjoyed it and so thank you so much.