Over the last few months, I have become increasingly interested in solutions for outbound payments, especially from a global perspective. The more you talk to marketplace type businesses (Airbnb, Uber, oDesk, 99Designs, etc.), the more you notice a need for a seamless payout experience on a global basis.
It’s easy enough to accept a payment, especially if your customer can pay with credit. The really hard part is giving back someone money when they weren’t the person who made the initial payment. For example, if Dan who lives in London wants to get designers from around the world to help put together a new logo for his company, Dan might use a site like 99Designs. He would see all of the submissions, and perhaps he ends up choosing a logo from a woman named Julia based in Ecuador. The entire process is managed by 99Designs, and they can take a credit card payment from Dan relatively painlessly. Paying Julia her cut is where it becomes a lot more complicated.
Today, Julia can only get payment back in USD through 4 different options (PayPal, MoneyBookers, Payoneer or Western Union). All of these options take time, cost money in the exchange and transfer and create a ton of friction. This is not a problem faced only by 99Designs, but pretty much every marketplace with global reach is finding it difficult to make these outbound payments after a service or product is delivered. It’s a broken system, and marketplaces are hungry for new solutions and partners to help manage the complexities of their payment needs. The alternative of not having the right solution means that these types of companies are devoting a lot of time and energy in a part of the business that really should be left to a payments company.
If the seller and the buyer are both in the US, it’s a bit of an easier problem to solve. Balanced Payments is one start-up trying to make it easier for marketplaces to think about both inbound and outbound payments in a single solution. But it is a solution intended for smaller or newer marketplaces who are not truly global in nature and just need a simple method to manage payments for a unqiue business need. It’s an offering that satisfies the needs of a domestic market, but starts falling short when we think from a global perspective.
Perhaps a cleaner way to send money globally will be through the issuance of credit to an existing credit or debit card, although this is currently a relatively difficult method to get approved from a risk and underwriting perspective. Visa does allow for credits to be sent via the Original Credit Transaction, and some gateways like Braintree and Authorize.net are able to do the same. While the winds of change are probably wafting through financial institutions to think more creatively about managing risk while meeting the needs of market, I think payouts to credit cards in countries across the world (especially those with higher risk profiles) will be a difficult thing to do.
I don’t know if I have missed an offering here, and I do know that Earthport and Envoy continue to do a solid job bridging the gap as start-ups think of innovative ways to meet this growing need. For anyone who has more information on this topic, I would love to find time to connect and discuss.