Israeli digital payments co Payoneer raises $180m

Karen Levy Photo: PR
Karen Levy Photo: PR

The fintech company enables manufacturers and service providers worldwide to receive payment in their local currency.

Israeli digital payments company Payoneer has raised $180 million in growth equity financing from TCV (Technology CrossOver Ventures) with the participation of former investor Susquehanna Growth Equity. The financing includes $90 million for expanding the company while shareholders sold a stake worth a further $90 million. This is the largest-ever investment in an Israeli fintech company and the proceeds from the financing will be used to accelerate global growth and to enhance an already strong and debt-free balance sheet.

Payoneer transforms the way businesses send and receive cross-border payments. The company was founded in 2005 in Israel by president Yuval Tal and former CTO Ben Yaniv Chechik and has raised $235 million to date including the latest financing round.

Payoneer CEO Scott Galit said, “TCV shares our belief that we can make a difference by empowering entrepreneurs throughout the world by offering them tools and solutions to participate, compete and succeed in the global economy. TCV’s connections with fast growing e-commerce marketplaces, global brand-building expertise and its long-term investment philosophy are the perfect fit for Payoneer and will help us propel our growth in the years to come.”

Payoneer is headquartered in New York and has its development office in Tel Aviv, which houses 560 of the company's 760 employees worldwide.

The investment follows a year of strong momentum for Payoneer, having opened new offices in its key growth markets of India, Japan and the Philippines, partnered with global marketplaces and networks Rakuten.com, Linio, Cdiscount, Tradedoubler and CJ Affiliate by Conversant and launched new billing and escrow services. Payoneer works in 200 countries.

“We have been watching Payoneer’s rapid growth for several years and have appreciated their ability to execute a unique business strategy aimed at empowering SMEs and leading digital platforms around the world to reduce the friction they face sending and receiving global payments” said Woody Marshall, General Partner of TCV, who is expected to be appointed to the board subject to regulatory approvals.

"Globes": What enabled your company to raise $180 million?

Payoneer COO and Payoneer Israel CEO Karen Levy: "Payoneer has devised a global platform that enables businesses, even large companies like Google, Amazon.com, and Airbnb, to pay their suppliers all over the world. A large proportion of the suppliers receiving payments are often businesses and service providers in developing countries. Payoneer provides them with access to new markets and customers, while removing many barriers in transferring funds around the world, reducing currency risks, and providing trust-generating mechanisms. In effect, we enable those businesses to engage in international trade, which is no trivial matter."

Why is it no trivial matter?

"It isn't easy for a Chinese manufacturer to sell his goods, for example, on an Indonesian or US platform. In general, it's not easy to reach customers. We can do it, and on a large scale."

Levy explains this in more detail: "A Chinese manufacturer who wants to sell his goods to customers in the US or the UK can use Amazon.com's platform, but there are many barriers in this. It's not easy to overcome the logistics, such as delivering goods to other countries and translating a products catalogue into international languages like English. It's also not easy to get the money for the goods efficiently and cheaply. The first thing we do is therefore to enable Chinese manufacturers, entrepreneurs and businesses in India and the Philippines, programmers in Russia, etc. to receive payment for their goods and services. The second thing is to enable the other side in the deal, such as Amazon.com, to pay the factory in China, which doesn't want its money in US dollars, and does want to receive it efficiently, safely, and cheaply. Furthermore, most global trade takes place outside of platforms like Amazon.com. Say that a factory in China has a buyer in the US, and someone has to connect them and create trust between them. Payoneer does it."

Levy adds, "On the one hand, we solve problems with international trading platforms, like Amazon.com and Airbnb. People travel all over the world, and anyone who uses Airbnb's platform has to pay and receive money. Airbnb is a US company with a bank account in California, so it's a big challenge to transfer the money to businesses all over the world. On the other hand, we solve the same problems for businesses and service providers, mainly in developing countries."

Why is it a big challenge? Each of the parties in the transaction has bank accounts, so can't they make bank transfers?

"Transferring money between banks around the world costs a lot of money and takes a lot of time. Before Payoneer offered its services to manufacturers selling goods on Amazon.com, Amazon.com itself offered them the chance to open a bank account in the US, because Amazon.com is located in the US, and so every local transaction is simpler for it - and also offered a dollar check. That's not an acceptable way of getting money, because the money is designed for production activity and things like that. It's not funny money. Every Chinese manufacturer, for example, has a bank account in China. What Payoneer does is to make the money from sales outside China accessible."

And this money goes from Payoneer's platform to the manufacturer's ordinary account in China?

"Yes. We transfer the money to him. We convert sales that were in dollars, British pounds, euros, etc. into local currency, and he can keep foreign currency surpluses with us. Whenever he wants to transfer the money to his local bank account, we do it at the price of a local transfer, not an international one. We take a cross-border world and flatten it by eliminating as many borders as possible."

Payoneer hasn't yet made an ordinary bank account unnecessary?

"No, because eventually, every Chinese manufacturer has his own local bank account, and he wants his money in it. We do make the banks' mechanism for international transfers accessible. We use the banks themselves, because in the end, the final transfer of the money is into the local bank account."

What do the banks think about it? Do they regard it as competition?

"On the one hand, we're ostensibly competing with the services they offer. On the other hand, almost everyone cooperates with us, for example, Bank of America in the US, Barclay's Bank in the UK, and Deutsche Bank in Europe. The banks have realized that they lack adequate solutions, and in order to continue being competitive and obtain a share of the global economy, which requires digitalization, they have to work with fintech companies like us. Take Airbnb, for example. This company can afford to work with any bank, but because it's an innovative technology company, it wants to work with innovative companies like itself that will provide it with payment solutions anywhere in the world."

Emphasizing the point, Levy says, "Banks still have an important role to play, but they realize that their expensive operation leaves a lot of room for fintech companies like us. They realize that they have a problem, so they're trying to see how they can cooperate with companies like us." It is important to emphasize that Payoneer's platform is designed for B2B deals, not for a deal with a private consumer.

In which other countries are you active?

"India, Bangladesh, and the Philippines. These are countries of services providers, such as programmers and lawyers. We enable them to receive money from foreign companies, instead of taking their talent and relocating to a Western country. There's an element of empowerment in the developing countries, and we're very proud of that. We have a large presence in such countries through conferences and local offices."

How do you explain that developing countries like those you mention are so open to the progress offered by the fintech industry.?

"Many of these countries don't trust the local banks, and when a recognized brand name like Payoneer comes along and offers to cut their costs and enable them to participate in the global economy, it's no wonder that they're willing to adopt our solution."

If there was a will and a need for an exit among some of the shareholders, why did you not try an IPO?

"We're in an industry awash with IPOs, mergers, and acquisitions. Our company and its investors naturally have talks about an IPO, and there's also some degree of preparing the groundwork for an IPO, such as an internal audit, observing the Sarbanes-Oxley rules, and things like that. As soon as we decide that the time is right for an IPO, I assume we'll do it. The timing isn't right yet. There has been no unsuccessful attempt at an IPO. The purpose of the current investment is to continue investing in the business, and accelerate it."

The acceleration that Payoneer is planning includes acquisitions, among other things. It made its first acquisition, a small one, this year - US company Armor Payments,, which provides solutions for devising guarantees. "We're open now to examine the acquisition of synergetic services if the acquisition makes sense," Levy comments.

Levy says that Payoneer's revenue is "substantially more than $100 million, and the company has already been making a profit for many years. We're very proud of what we're doing. This is a group of people working together to provide real value to the customers."

560 of Payoneer's 760 employees are in Israel. "We employ a lot of new immigrants, because we need people who speak foreign languages and people who have lived in other countries. Company founder and president Yuval Tal is the inspiration behind the company. It's hard to ignore his presence," Levy says.

Published by Globes [online], Israel business news - www.globes-online.com - on October 5, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Karen Levy Photo: PR
Karen Levy Photo: PR
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