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International payments ripe for cloud disruption

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17th Feb 2016
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“The international B2B payments space is broken,” according to Payoneer vice president Eyal Moldovan. “No one wants to pay 3% and the banks don’t want to innovate.”

His company, among others, is determined to do something about it.

Two of the most prominent stands at the recent Xerocon event in London were taken by cross-border payment specialists Payoneer and MidPoint, both of which offer business-to-business platforms that aim to undercut the payment services offered by banks.

Small businesss and individuals regularly conduct international transactions via ecommerce platforms such as Amazon, Airbnb, Etsy and so on. But when they come to transfer or extract funds they find themselves at the mercy of banks.

Like nature, the internet abhors a vacuum and Payoneer is one of the largest alternative payment platforms looking to grab a piece of the action. According to Moldovan, it is recruiting new users at the rate of 50,000 a month, from markets as diverse as Pakistan, Bangladesh, India, the UK and the USA.

As well as integrating with Xero, Payoneer customers can use a mobile app to raise an invoice from smartphone. The app can record the transaction internally, or submit it to a compatible accounting system.

According to Moldovan, a user in the UK will get paid in pounds in UK via the domestic banking system. The payment provider holds matching funds in more than 80 currencies in 200 countries, and is able to keep its costs low by matching funds across those accounts to transfer the required sum into the recipient’s account in their local currency. Payoneer’s fee is 1% of each payment made with the service.

Over at MidPoint, chief technology officer Dan Drogman offers a similar message: “SMEs are getting ripped off. They have to take what they get.”

Where Payoneer looks to achieve economies of scale, London-based MidPoint is using inside knowledge of banking systems to streamline money transfers and minimise exchange rates. Its transaction matching engine is driven by an algorithm that seeks the highest net possible to reduce the size of residual payments, Drogman explained.

“We offer the best exchange rate - the mid point between the buyer and seller. There is no spread, which is where [banks] hide a lot of fees,” he said. MidPoint's fees start from £10 for any transfer up to £2,000, but will drop as low as 0.3% for larger amounts. Its fee page calculates the charge for a £55,000 transfer as £257.50.

“New technology is enabling us to compete with banks,” he continued. “New tech companies have the benefit of being asset-light, so we can pass on savings that banks can’t.”

According to Drogman, “Integrations are the secret to finding new customer bases. If you integrate with Xero, you can get access to payments.”

And integrating with Xero and its partner community should attract new business to his payment platform. “Accounting practices can open the door to a high number of small businesses,” he said.

Xero CEO Rod Drury often talks about plugging Xero into the “financial web”. the emergence of Payoneer and MidPoint suggest that other entrepreneurs within the world of international finance are thinking along the same lines.

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By Marlowe52
24th Feb 2016 15:49

It's broken alright! Not sure this will fix it though!

This has been an absolute disgrace from the banks for a long, long time. If you are a small business doing work overseas you get ripped off mercilessly by the banks. Unless you are big enough to warrant paying the banks a substantial monthly fee for 'free' multi-currency banking you get nothing from the bank. Sure, you can open a currency account - but there is NO on-line banking and NO currency debit card . All payments to other currency accounts (e.g Euro to Euro accounts) have to be done by cheque or by telephone using CHAPS transfer (that's £10 per transaction, thank you very much!). As you have no Euro debit card, you can't pay anybody in Euros when you travel on business. This means you have to pay using a sterling debit card with exchange rates about 4% away from the BOE spot rate. And then when the customer pays you in Euros you have to transfer it to your Sterling account to pay off the expenses you paid in Euros in the first place - another 4% - Kerching!

To add insult to injury you also have to pay a £7 transaction charge  for EVERY INPAYMENT in Euros into your Euro account. Why? I have absolutely no idea. And because the bank hides the charge by just deducting it from the inpayment in Euros you have to work out manually for every single transaction what part was the customer payment and how much was the bank charge because, obviously, they go to different accounts in the books.

If the government were serious about small businesses exporting they would do something about this...

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