Mass Payments And The Global Marketplace

Managing the “dozens of ACH islands” that exist around the worldwide in order to pay hundreds or even thousands of payments to suppliers is typically time consuming and expensive. But that’s exactly the problem that Chen Amit, set out to solve four years ago when he and a partner founded Tipalti. Amit told MPD CEO Karen Webster that Tipalti’s platform is what enables marketplaces to pay anyone in any payment method in any country in the world and makes Tipalti different from other players in the space.

Solving for the country specific and complex regulatory, currency conversion, security and authentication rules is the core of what Tipalti does, enabling new economy businesses and global marketplaces to survive and thrive. Tipalti’s core competency is enabling the regular payment to the independent contractors who provide services to those marketplaces or global networked businesses. Businesses like Lyft, Airbnb and Etsy or online ad networks who need to pay local advertisers.

“The marketplace encounters a set of challenges when managing those payments. It starts with the workflow part of things, knowing who paid, when, what payment method, what succeeded, what failed, what information can be provided, who approved it, etc. Just the workflow part is the first challenge, but the more significant challenge in that in different countries, different payment methods are optimal,” Amit told Webster in a recent PYMNTS podcast. “Here in the U.S., there is ACH and PayPal: excellent payment methods. But when you cross the border, there are different payment methods. There are dozens of islands of ACH networks around the world. Tapping into them is very significant for customers as these are very low-cost ways of effecting payment. In some countries, paper checks are the preferred method. In others, it would be a SWIFT wire message. Prepaid debit cards, Western Union, PayPal, other ewallets.”

Amit said that to support these businesses, Tipalti needs to support the payments methods that are specific to the country in which a businesses is operating, a task that is daunting for most innovators who see global expansion as an opportunity but also a complex payments puzzle. Although Amit says that many existing platforms work well when focused on one country’s transactions,  when things move to a truly global environment, things get tricky. That when Amit says that it’s not enough to simply enable a country specific payments method, these businesses need to understand the local regulations and requirements. “Let’s say I want to send a wire in the U.S.. It’s simple. A SWIFT code and account number will get the money to the destination,” Amit said. “But if you want to send a wire to the U.K., you need something called the short code. In Russia, they want your tax ID. In China, your phone number and ID number.”

For instance, Amit said that PayPal—at least among Tipalti’s customers—tends to be used for small transactions. “The PayPal average payment is about $300 while our average outside of PayPal is about $1,000,” Amit said. “If you’re getting paid significant amounts, it’s usually not through PayPal. WePay and Braintree have some solutions for marketplaces and Stripe has some solutions for marketplaces but they are all reliant on the card acquiring function and the card settlement function.” Amit says that since Tipalti acts as a layer “on top of PayPal, pre-paid debit cards, multiple providers of local bank remittances, multiple providers of wire remittances, multiple providers of cash remittances, of check remittances,” Tipalti can enable anyone to be paid in any method of payment they wish – cash, card, check, wire, direct debit – anywhere in the world. “We are a layer in all of these countries, in all of these currencies,” Amit said.

That prompted Webster to ask Amit the obvious question: Does Tipalti have any plans to leverage and monetize all of the payments-related data it collects from all of the marketplaces around the world. Amit was pretty clear that, at least for now, it’s not on the roadmap – he and his team are going to stick to their core business – payments, payments-related services, financing, payments processing, fraud and risk management. But, he said, “We do have data and sometimes it’s interesting, like the stats about PayPal and pre-paid debit and what people select in different countries. It’s interesting to see the insights you can get from this data,” Amit said. While data itself isn’t “on our horizon as a product” it clearly informs the core product roadmap in other ways.

Given Tipalti’s global footprint and marketplace customer base, Webster also asked Amit about whether there’s any demand for Bitcoin. Amit was also quick to respond. “It’s been around for five years so there’s been a lot of excitement and hype about Bitcoin early on. If it was to fly high, it should have already. The currency that will solve all of the regulatory aspects will also have to overcome the trust aspects,” he said. But, Amit conceded, “Sending a wire is all digital. It costs more than Bitcoin. It takes longer than Bitcoin. The jury is still out. It will be a gradual process. Once Bitcoin clears all of its regulatory hurdles, we will probably add it to our portfolio.”

And how likely is that, asked Webster? From Amit’s perspective, not very. “We have hundreds of thousands of payees and zero demand for Bitcoin. Truly. If there any demand, we would have served it. It’s our business,” he said. “Today, Bitcoin is more about being an investment vehicle for Bitcoin itself, many investments going into companies around Bitcoin, but very little commerce.”

It’s interesting. Uber without a way for consumers to pay conveniently and for drivers to be paid efficiently would be of little value to anyone and would have probably never ignited as a business. Marketplaces and new economy businesses are no different but come with the added complexity of marketplace operators who need to pay suppliers who can literally be anywhere in the world and wish to be paid in any number of ways. Tipalti’s platform is out to solve that problem, and in the process, help ignite an important driver of the new global economy.