We recently looked at the rise of digital remittances. This week, we take a deeper look at the development of the digital world during the Covid-19 crisis through a conversation with Scott Galit, Payoneer’s CEO.
E-commerce overall is rising around the world – we all know that. Payoneer shared with us that they have seen 28% growth in payment flows from Chinese marketplace sellers in April. Some other categories even showed triple digit growth. How has the crisis changed both companies’ and consumers’ behaviour?
The numbers above likely underestimate the Covid-19 impact. Walmart, for example, just released their 1 February to April 30 numbers and reported 74% year on year e-commerce growth – and that’s on over $20bn of revenue (not a small base).
The takeaways from our discussion with Scott (taking into account April and May to date):
- A need to adapt to preserve value
In order to weather this crisis, companies have needed to have the flexibility to respond to external shocks by either changing products or processes. Payoneer encountered significant challenges with its recently launched working capital offering, a product based on machine learning. For any of you relying on machine learning right now, take note of Scott’s words:
“Machine learning was going to make us catastrophically terrible decisions. So we had to start making some adjustments pretty quickly to the way we managed underwriting and dealt with working capital”.
- The added value of having an ecosystem
Although e-commerce demand is up, fulfilling that demand with heavily disrupted supply chains has been a real issue for merchants. The payment players like Payoneer, Airwallex and Ebury, who have built up ecosystems where they help their customers find new suppliers and partners, have been well placed to add share or at least maintain flows.
- A positive but challenging future for freelancers
The gig economy has been growing for a number of years and is well suited to the current work from home environment. According to Payoneer’s own numbers, 60% of their freelance customers are seeing some negative impact on their business but 75% thinks things are as good or better. The biggest issue they see in the future is more competition – i.e. a deeper supply side as unemployment adds new freelance workers to the overall pool
The Covid-19 crisis has squeezed years of digital growth into a number of months. It provides a unique opportunity to gain share but not every business model from three months ago will be a good fit for the next three years.
The CFPB pushes transparency in the US
The Consumer Finance Protection Bureau published its final remittance rule this past week. The Electronic Fund Transfer Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act, established certain protections for consumers sending international money transfers.
Prior to Dodd-Frank (which came out of the last recession) remittance transfers fell largely outside of the scope of Federal consumer protection laws.
The key part is that the following has to be disclosed:
- The exchange rate
- Fee including any third party fees
- The amount that the recipient will receive net of these fees in the recipient currency
There was originally a push back on the ruling as it was thought to be too burdensome on either very small companies who process a small amount of transfers per year or small banks who equally complete just a small number. Bottom line, organisations processing less than 500 transfers per year are exempt. There are also exceptions allowed for estimating some of these costs too.