Yuval Tal and Payoneer help grow global alternative payment systems
Technology has clearly driven the payments industry, from within and without. Today’s payment systems certainly would not be possible without the amazing computing and networking milestones achieved in the last 40 years. Interestingly, this very technology is responsible for the immense growth in the volume of electronic payments itself. We are witnessing the inevitable transition from a paper-based economy to a global economy of electronic payments. The needs created by this revolution are being met by major credit card brands and a host of alternative payment providers.
What came first, the chicken or the egg? The same can be asked about technological advancement and the volume of electronic payments. It can be reasonably argued that they both arrived at the same time, or at least traveled together. The rise of the ubiquitous Internet in the 1980s occurred at about the same time as the advent of the electronic credit card terminal. Shopping on the web would not be possible on a large scale without online credit card payments. And though a bit gruff at first, the credit card companies answered the call. Since then, the looming specter of fraud has been relegated to less than 1% of all purchases.
However, not all frontiers have been conquered, as using the Web to buy goods from another country still has its challenges. There are also challenges faced by consumers who live in countries with underdeveloped banking or monetary systems; a good example is China. Also, the term “payments” is taking on a much broader meaning. For one, payments are not necessarily used to purchase goods and services. Electronic payments are now used to compensate virtual workers, click through referral partners, and marketing affiliates.
Arguably the major credit card networks have contributed the most to the booming electronic economy. In a sense, though, credit cards have had a major flaw: They only work in one direction. It is certainly easy to buy something with a credit card, however, can you receive payments with your credit card? Traditionally the answer has been “no.” Enter the fastest growing part of the card market: the debit card. You probably have one on your person right now. Well, the infrastructure built to support these cards has also spawned two additional solutions, branded gift cards and “reloadable” debit cards.
Yuval Tal and the company that founded Payoneer have used these reloadable debit cards to solve the problem of getting paid on your card. With Payoneer, businesses and individuals can fund a virtual bank account that the cardholder can access through the debit card. This means that cardholders can receive payments through various methods and use the funds to withdraw cash from ATMs or purchase products at merchants that accept all major credit card brands.
This seemingly simple solution actually sits on top of one of the most sophisticated electronic payment networks in the world. And the term “world” is poignant in this case, because it turns out that this international network is helping to solve many of the problems associated with payments across international borders. “By partnering with a major credit card network like MasterCard,” says Mr. Tal, “our cardholders have immediate access to millions of ATMs and merchants in more than 200 countries.”
Payoneer has leveraged the network to develop specialized payment solutions for dozens of industries. With his team of engineers, Yuval Tal built a flexible platform that sits on top of the MasterCard network and allows Payoneer customers to send funds quickly and securely to various types of cardholders. According to Mr. Tal, “Our clients were looking for a turnkey online system that would allow them to set up payees quickly. This means authenticating users, issuing cards and possibly loading funds, all in a matter of hours.” “Reporting and auditing were also important,” says Tal.
Initially, Payoneer focused on the travel industry, where tourists and students required a more convenient alternative to cash and traveler’s checks. “What we found,” says Tal, “is that the system could easily be reused to support other applications.” This led to a move into new markets including affiliate networks, global freelance information workers, clinical trials, and seasonal workers.
An interesting application is the payment of global freelancers. In today’s electronic economy, millions of freelance programmers and content providers in countries like China and Russia work for companies in other countries. Paying these workers can be a daunting task. Paper checks simply aren’t enough: they take a long time to mail and even longer to clear. Bank transfers are expensive for both parties and it can take up to a week for the beneficiary to access the funds. In both cases, the worker generally needs to have a bank account. “With a Payoneer card,” says Yuval Tal, “a company can pay a foreign worker, and that worker can, in most cases, have access to the funds in as little as an hour, all without a bank account.” .
This new app is clearly a “discontinuous innovation,” meaning its impact on the market greatly changes the way things are done. Reducing the time it takes to get paid from one week to one hour is extremely important to many people. It’s also a good example of how alternative payment types, like the reloadable prepaid debit card, are displacing cash and traditional money transfer methods. People like Yuval Tal are forming Payoneer-like companies around the world and promise to make this major transformation much easier.