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This week: Agility Forex, Airwallex, Apple, EncoreFX, iBanFirst, Koho, optile, Payoneer, TD Bank, TransferWise, Visa, WU
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New data, new insights on cross-border payments. Every week.
 

Payoneer announced its biggest acquisition to date this week and it wasn't what you might expect. I talked to CEO Scott Galit to understand their strategy.

We also take a trip to Canada to uncover some recent major partnerships. We focus on EncoreFX's latest deal and talk to Encore's CEO and industry veteran (ex-Custom House founder) Peter Gustavson. And of course, we'll share some insights on our even richer historical pricing data and also provide an update on what's happening at Airwallex.

PS As today is General Election day in the UK, our letter is 100% politics free!

Payoneer's platform play

This week, Payoneer announced the acquisition of optile. Whereas Payoneer focuses on the payout side, optile has built a platform to support large merchants' receipt of funds (payment acceptance). Optile provides integration to the leading PSPs and a platform to control the checkout experience.

With global digital commerce sales worth an estimated $3.5tn in 2019, and with an expected annual growth of nearly 14% through 2023, this is a very attractive market segment, with many fast growing countries within in it (see our analysis here).

Our main observation on the deal is that Payoneer did not buy another version of itself just to build scale. It went to buy new capabilities instead. In Daniel Smed's words:
 
"it's not two companies doing the same thing... It's really two companies with a different focus, but their combination is very, very interesting."

What makes optile and Payoneer a complementary deal?
  • Global reach, local knowledge. While optile's operations are only focused on Europe, Payoneer has a global presence, including in the US, Asia and Tel Aviv. Optile, especially, will gain access to Payoneer's substantial customer base.
  • Increased capability to manage payments. According to Scott Galit, the thesis behind the deal was to expand their offering of services to merchants selling online. The focus is less on cross-border alone, but moves to all types of payments, with optile very focused on the checkout experience.
  • Medium-term strategy. In the medium term, Payoneer will likely be able to sell optile's products in a white-label fashion, while maintaining focus on the payout sector. This means clients will be able to achieve a greater degree of integration in their payment systems.
The platform play (yes that word again)
Over the coming years, tokenisation, which is a core capability of optile, is expected to be one of the big wins. Tokenisation allows a single checkout experience in a multi-party journey e.g. buying a flight online and then buying the rental car and hotel without having to input new payment methods on each merchant's site. 

What's next for Payoneer?
The company is currently working off a unicorn valuation of $1.5bn and we'd expect to see additional funds raised (privately or eventually via IPO) and more capability-led acquisitions. 
Who are Payoneers main competitors?

Uncovering historical pricing trends

Can the past help you predict the future? Can you respond fast enough to your competitors' pricing changes? A recent real example below from one provider in the 4,400+ corridors that we currently track.

To access live and historical pricing data on your competition globally, get in touch.

Get the best pricing data in the industry

Oh Canada, can we partner with you...

Canada has many traits of an attractive cross-border payments and FX market. It is large, understands FX and has its own currency, meaning most international trade requires foreign exchange.

The Canadian banking sector has a number of players competing with the big banking five incumbents. There are 88 total banks in Canada and over 250 Credit Unions. This makes it an interesting landscape for partnerships to compete with the big banks.

EncoreFX is the latest FX company to announce a major partnership. We spoke this week with Founder and CEO of Encore Peter Gustavson. Peter is an industry stalwart having successfully built and sold Custom House to Western Union in 2009, very much at the beginning of the modern era for challengers in the space. 

Peter highlighted several reasons why the Libro Credit Union partnership makes sense and themes can be expanded to Canada in general:

  • Credit Unions typically do not have the online products and expertise and as their clients grow, they start to lose them to the bigger Canadian banks. By partnering just with an FX specialist, the credit unions can retain the clients and still keep all their other business. 
  • EncoreFX (alongside other FX specialists) has been investing in its technology. In particular, EncoreFX has focused on payment processing and risk management platform.
  • Many financial institutions want to work with a partner who is based in Canada. EncoreFX has its back office and treasury department all in Victoria, Canada. As our table above though shows, this isn't always the case as capabilities and fit can trump a desire to stay local.

Our expectation is that Canada will mirror the US market. More financial institution partnerships will follow now that others can see major players taking this step forward.
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What's happening at Airwallex in Hong Kong

Several articles were published this past week in Hong Kong surrounding an alleged fraudulent client of Airwallex that has processed c.$18m through their platform. Airwallex's banks were issued with a letter of no consent (“No consent” letters are issued by regulators in Hong Kong to banks when they have possible concerns over a bank or client of a bank).

We spoke to Airwallex and they shed some more light on the matter:
"Recently, two former clients of Airwallex allegedly defrauded a Uruguayan company, Ciklus, for a total of US 18M. Unbeknownst to Airwallex, these two former clients used their Airwallex accounts to receive and pay out the funds from Ciklus. Airwallex conducted proper KYC (Know Your Customer) procedures and due diligence of these two companies in accordance with the law, and were not involved in nor aware of the fraud. 

Ever since we were informed of the fraud, we have been cooperating and assisting the police in their investigation of the matter, and are in frequent discussions with the police regarding the lifting of the letter of no-consent."

Stay on top of developments in the sector
On our radar this week:
Curated by FXC Intelligence's Team
iBanFirst's German acquisition
The company makes its first German acquisition buying Forexfix
Finextra
Visa Direct adds TransferWise
Visa will power real-time payments in Spain and Eastern Europe
BusinessWire
EU's latest missive on Libra
The EU delivers its (not too positive) thoughts on Facebook's Libra
Europa.eu
Apple Card to support iPhone sales
Card holders will be able to get 0% financing when buying an iPhone
9to5mac

Missed the last few weeks?

Will TransferWise reach zero-cost transfers (here)
Analysing Currencies Direct's recent performance (here)
What's driving cross-border card and e-wallet payments? (here)
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Have a great week and don't forget to vote if you're in the UK,

Daniel
Copyright © 2019 FXC Intelligence Ltd, All rights reserved.

New York | London

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