A Year After Its SPAC, Payoneer Eyes Growth Opportunities in Emerging Markets

Having posted strong revenue growth in 2021, Payoneer Global Inc., a provider of online money transfer, digital payment services, and working capital to businesses, sees significant growth opportunities in such markets as Latin America, Asia, the Middle East, and Africa. 

“These are regions that are in the early stages of the digital-adoption curve,” says Payoneer chief executive Scott Galit. “They are also regions populated with young, digitally savvy entrepreneurs looking to pursue global opportunities that are primarily digital. We’re still in the early days of helping entrepreneurs in these regions.”

Growth opportunities include working with companies using social-media platforms to sell and develop content, small and medium businesses that export goods and services, and companies that are building Web sites to sell direct to consumers, Galit says.

Companies such as Airbnb, Amazon, Google, and Upwork use Payoneer, which specializes in facilitating cross-border payments, to send mass payouts globally. Payoneer’s platform is also used by e-commerce marketplaces such as Rakuten, as well as freelance marketplaces. 

The growth strategies outlined by Galit are expected to build on a strong 2021. During the fourth quarter, the company posted revenues of $139.2 million, up 47% from the same period in 2020. For the full year, the company earned revenue of $473.4 million, up from $345.6 million in 2020, a 37% increase.

In addition to increasing revenues, the company reduced its transaction costs as a percentage of revenue. During the fourth quarter, this proportion fell to 20%, down from 25% during the same period in 2020. For the entire year, Payoneer lowered transaction costs to 21% of revenue compared to 28% a year earlier.

“Our investment in sales, especially in emerging markets, is working well,” says Galit. “Through our investment in sales, the payback on a new customer acquisition is less than 12 months.”

Looking ahead, Galit says the company plans to continue investing in high-value services such as accounts payable and accounts-receivable solutions for businesses and pursuing opportunities in digital cards and merchant services. Volume on Payoneer’s digital purchasing Mastercard alone doubled in the fourth quarter from the third quarter, according to Galit.

“We do more than just help sellers get paid,” Galit adds.

Another growth opportunity lies in partnering with banks and mobile-wallet providers globally. Through its partnerships with banks and wallet providers, banks can integrate Payoneer’s technology stack into their banking app. That lets a bank’s business customers that have a Payoneer account access that account through the bank’s app.

“This is a way for local banks to offer a suite of tools digitally geared to local business customers,” Galit says. 

A key factor in Payoneer’s financial results for 2021 was the company’s decision to go public through a special purpose acquisition company. SPACs, also known as blank-check companies because their sole business is to use the funds they raise via an initial public offering to acquire a private firm, have become an increasingly popular option among payments companies.

The SPAC move strengthened Payoneer’s balance sheet and provided it with the capital to make acquisitions, which are an important part of the company’s strategy going forward. 

But, arguably, the biggest advantage of Payoneer’s SPAC was that it allowed the company to tell its story in a more detailed way to investors than it could through a traditional initial public offering, especially after the Covid-19 pandemic negatively affected certain parts of its business, such as travel. 

“While some segments of our business remained down, we still managed 9% growth in 2020,” says Galit. “We were moving toward going public, but after 2020 realized it would be tough to explain all the whys behind the growth in a traditional IPO. A SPAC allowed us to break out and explain to the market what happened in 2020 and focus on projections for 2021 and 2022.”