For our International Payments event, we were lucky to gather regulators, banks, large and smaller service providers all focused on international payments. As a reminder, all speakers participating in a BayPay Forum event speak on their own behalf and are not representing the position of the companies they work for.
On our March 26th panel today we had Yuval Tal, CEO of Payoneer, Marc Hemmerling, Board Member of the Luxembourg Bankers Association (ABBL) and Chairman of the European Banking Federation (EBF), John Muller, Vice President Global Payment at PayPal, and Nicole Douglas, Senior Vice President International Treasury Management at Wells Fargo. To facilitate an engaging discussion, we involved very different perspectives, from the bank to a payment consolidator startup to the international e-commerce business PayPal, around the topic of international payments. Over the course of 2 hours, we looked at the licensing process of foreign companies attempting to do business in a country as well as some challenges involved in that process, including risk management (fraud, alternative currencies and data protection). The panelists gave some advice on where to start, what the requirements were to start the process and what to expect when you're on your way.
The challenge of the regulation process is not so much with the legal regulation itself but with the bank's interpretation of national business laws. Though the exact procedures vary from country to country, companies looking to do business in other countries must submit their entire business plan and meet some minimum capital requirements in order to get licensing approval. Marc Hemmerling said that, in Luxembourg, measurable 'substance' and qualifications must be indicated to the bank as well as to the national legal entity in order to be eligible for a business license. The process itself is uncomfortable, as executives must expose all personal assets, and uncertain in terms of duration, lasting anywhere from 6 months plus. The European Payment Council offers very little flexibility for startups that don’t have an eMoney license, with all incoming businesses subject to the same regulations. In the US, it depends on who you're servicing - if you handle consumer money, there is little flexibility and very high risk of being caught, but greater flexibility and lower risk for payment companies dealing primarily with merchant transactions.
The issue of fraud and risk management is ever-prevalent, especially on a global scale. It is the responsibility of the payment service provider to create a secure system which can prevent abuse and potential fraud - the prevention of fraud is key as very little can be done once money has been lost. According to Yuval Tal, there is room for innovation in the payments space but very little on the bank side as not much leniency can be allowed for many bank procedures, including license issuance and management of risks. John Muller emphasized a combination of factors to prevent fraud, including automated technologies, qualified individuals to revise the transaction, and some "transaction selectiveness" process to allow and deny certain transactions.
Another palpable risk faced by payment companies and regulators is disruption, such as alternative currencies. Bitcoin, a decentralized peer-to-peer payment network, could threaten central banks. There is little understanding across the board about how to deal with an unregulated digital currency. Muller offered that the space with greatest opportunity for valuable beneficial disruption from Bitcoin is the international remittance market whose complicated wiring processes beg room for improvement. Innovation must be done in the payments space to allow this flexibility of movement of funds.
The monetization of data is another area of contention. Muller believes that when you deal with trust, you play with credibility, and there is more to be lost than can be gained. However, to an extent, merchants expect payment services to help them with marketing analytics since these services already know something about consumer buying behaviors that can be beneficial to the merchant. A tension thus emerges between the importance of protecting data and the high profitability potential of selling this data.
So where is the biggest opportunity for business? The panelists are hopeful about Bitcoin and better integrating this currency in international and domestic markets. One panelist suggested creating merchant accounts and gateways to allow all stores to accept the disruptive digital currency. Another panelist offered that the entire process of transaction between countries, including wiring, communication, trust and credit must be condensed and improved to be made more efficient. Yet another panelist saw a need for an international e-commerce company to exist for businesses, similar to the way PayPal works for the consumer. The international payment system is ripe with room for improvement - seize the opportunity!
We want to thank again all our speakers for their time and knowledge and our sponsors without which these events wouldn’t exist. You can have access to the speakers presentations and the list of attendees below.