Scott Galit is the CEO of Payoneer, a leading private financial services company focused on digital money transfers and e-commerce payments. He sat down with Global Finance to discuss challenges and opportunities in the space for emerging financial technologies and traditional banks alike.
Global Finance: Who are your clients and how do you find them?
Scott Galit: We are a regulated, nonbank financial services provider, managing customer accounts, wiring money, and holding customers’ funds. Payoneer serves global customers and local suppliers, like photo marketplace clearinghouses and their counterpart photographers. The majority of our client business is Internet-related, but we are becoming an online financial provider to all kinds of businesses. We get over 150,000 applications a month from small businesses and professionals around the world. We evaluate applications based on risk profile.
GF: How do you screen your customers?
Galit: As a regulated entity, “knowing your customer” is important to us, including due diligence and understanding the nature of their business. Our model combines traditional tools of financial institutions with digital tools used by digital companies to manage risks, like digital signatures, unique computer IDs and fingerprints. As we are regulated in the US, UK, Hong Kong and soon, Japan, each jurisdiction has its own sanctions list that we follow. That slows things down, but the service is still much faster than using traditional banks.
GF: How do banks react to the growth of your space? How competitive is the field?
Galit: Banks and legacy methods of wiring money are our natural competitors. But it’s hard for many of our clients to manage their systems with traditional banking [strategies], which are labor-intensive and can lose payments. Banks also find many customers are too small to justify the cost of their compliance operations. We, on the other hand, support the single-application programming interface (or API) connection that is critical for e-commerce platforms and vendors, as well as different currency programs for them. Digital payment companies leverage technology better than banks can. We have introduced innovative products, like digital letters of credit for the shipping industry. But often banks are our partners. Generally, the industry as a whole is growing. Cross-border payments will reach an estimated $50 trillion by 2020.
GF: Describe Payoneer’s role in cross-border trade in emerging markets and the developing world.
Galit: We approach the world from an empowerment angle. For example, we help Bangladeshi businesses to get tools to trade internationally. Hundreds of Bangladeshi professionals learn how to grow their businesses. The entire distribution chain is reworked. New e-platforms create large-scale operations in new countries, such as Lazada Group in Southeast Asia, as e-commerce marketplaces grow faster than retail. Our industry works with all of the new platforms. Technical training can help people in the developing world reach global markets.
GF: How do you ensure that your business is secure?
Galit: We use the same cybertools that traditional banks use. We all face more-sophisticated attacks than ever before and have to invest in cybersecurity. We are audited on cyber as a regulated financial services company and as a certified compliant with Payment Card Industry Data Security Standards. Boards of all financial technology companies need people with such expertise, or people who think about risk from a broader perspective.
GF: What’s the state of the fintech industry?
Galit: As for the industry overall, there’s a lot of innovation outside of banks and need for new solutions. But there’s also a bubble with too many investments in too many companies that are not differentiated. Money will be lost. Mobile payment is one example. We focus on specific needs that are not met by available banking tools and services.
