Hyperwallet sees major opportunities to process international low-value remittances for the fast-growing gig economy. Robin Arnfield interviews Tomas Likar, Vice President of Strategy and Business Development at the San Francisco-based mass-payout specialist.
Founded in Vancouver in 2000, Hyperwallet initially provided white-labelled C2C domestic and international remittances for Canadian credit unions. It then entered the mass-payout market, enabling corporate clients to make large volumes of low-value payments to sales agents, employees and customers around the world.
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By GlobalDataThese payments include rewards, rebates, incentive payments for market research survey participants, payments to clinical trial participants, payments to marketplace sellers and contractors, and commissions to agents.
In 2015, Hyperwallet decided to focus on the B2B/B2C payout market, closing its C2C remittance platform. At that stage, Hyperwallet was particularly strong in the direct selling market, handling agent commissions for firms such as Herbalife.
However, it was quick to capitalise on the need by players in the gig economy – also known as the sharing economy – to pay freelance contractors both domestically and cross-border. An estimated 9.2 million Americans will work in the gig economy by 2021, up from 3.8 million in 2016, according to combined research from Intuit and Emergent Research.
In June 2014, Hyperwallet received an undisclosed amount of investment from private equity firm Primus Capital to fund its expansion initiatives. These included hiring a number of experienced C-level executives, opening an executive office in Austin, Texas and setting up operations in London, UK and Sydney, Australia.
“Primus Capital is still our main investor,” says Likar. “Because it is a private equity firm, Primus holds investments for a while.”
Growth
Hyperwallet has doubled the number of its payees since December 2015 when the firm said it had made payments to over 5 million independent workers on behalf of its corporate clients
“We now have 10 million payees on our system,” Likar says. “The majority of our business is B2C rather than B2B. But it doesn’t matter to us if the receiver is a consumer, a small business or a larger business. There are some implications from the compliance perspective, but, from a transaction perspective, it’s much the same whether paying a business or a consumer.”
Gig economy
“Two or three years ago, we were very strong in the cross-border sales commission field,” says Likar. “This has been a key area for us, although we also have some e-commerce marketplaces using us to pay sellers. But now the gig economy has become very important for us, and it has a very similar use case for making payments to the other client segments we serve.
“Uber drivers and Airbnb property owners, for example, need to receive low-value transfers either in real time or weekly or daily. We’re doing good volumes in the gig economy, but we see a lot of room for growth there for us.”
An international marketplace doing cross-border payments in multiple countries has to perform its own compliance and risk management, which is complex, says Likar. “So a lot of marketplaces decided they don’t want to touch payments, and we started to win a lot of business in the gig economy. The marketplaces just tell us whom to pay and how much.”
HomeAway, the largest rival to Airbnb, is a client, on whose behalf Hyperwallet pays its home-owners around the world.
“Gig economy companies are realising they need to improve their workers’ payment experience,” says Likar. “The ride-sharing platforms are very similar, and if a driver has a bad experience with one company, they can easily install a rival’s app.”
Operating model
Hyperwallet can offer its clients low-cost international remittances as it maintains local bank accounts in destination countries around the world.
“We hold working capital in accounts at banks around the world and have local capabilities in over 100 countries,” says Likar. “We keep enough funds in each local account to clear the typical volume of transactions we handle each month in that country.
“Once a month we do a top-up transfer via SWIFT to each account to ensure we have enough money there. We use local clearing systems such as Faster Payments in the UK and SEPA in Europe and send our local banks files multiple times a day telling them whom to pay and how much.”
“Our strength compared to other B2B payment providers is that our payments network was built for low-value payments,” says Likar. “Most of our clients do thousands or tens of thousands of payments a month, but most of these payments are under $1,000.
“We’re especially competitive for payments up to $5,000. Large-value transfers, e.g. $500,000, can go over our network, but the sender might do better with a bank or specialist B2B provider which knows that space better.”
While even the smallest payments require Hyperwallet to verify the receivers’ identity, a lot more verification is required for large-value transfers. “Also, we can’t send large sums like $500,000 over the local ACH networks we use for low-value payments,” says Likar.
Hyperwallet offers its clients three payout methods:
Card – transfers to Visa- and Mastercard-branded plastic or virtual prepaid cards that are issued to their recipients and bearing the client’s brand;
Portal – a multi-currency white-labelled portal bearing the client’s brand which is hosted by Hyperwallet and which offers recipients a range of payout options;
Hyperwallet Direct, a set of publicly-available APIs that enable companies to integrate Hyperwallet’s payment functionality directly into their website or mobile platform or application. This means that a Hyperwallet client can collect their payee information directly from their existing platform and application and send payments globally via Hyperwallet’s network. “This leads to a better end user experience, but it is more complex than integrating with our portal,” says Likar.
Partners
Hyperwallet has around 50 bank and non-bank partners whom it works with for paying funds to recipients, including MoneyGram, Western Union Business Solutions, SoftBank Payment Service, Earthport, and PayPal.
“These companies help us to get funds to destination countries,” says Likar. “This means that recipients have multiple options as to how they get their money – direct into their bank account, cash pickup at an agent’s office, deposit to a prepaid card, for example.”
In 2016, Hyperwallet added Visa Direct as a payout method, enabling recipients to get their funds paid to a bank account associated with a debit card. Hyperwallet offers Visa Direct functionality through the Hyperwallet JavaScript Widget. “This Widget enables clients to quickly plug into our platform and offer near real-time payout capabilities within their native application, minimal coding required,” it said in a news release.
“Our Visa Direct partnership is picking up,” says Likar. “But there needs to be more work done by us and Visa to promote the brand, as people still don’t get the concept that they can enter their debit card number to receive their funds into their bank account.”
A priority for Hyperwallet is adding new local funding methods such as mobile wallets in different Asian countries. “Because WeChat is such a popular payment method in China, we’re looking at adding WeChat,” Likar says. “Every Asian country has its own mobile wallet, so we need to prioritise which ones we add.”
In Latin America, like Asia another major market for Hyperwallet, the company is in the process of adding local currency clearing across the region, Likar says. “In Europe, we expect to get business from marketplaces following PSD2’s introduction in January 2018,” he says. “Marketplaces will need to comply with PSD2’s requirement that they use a processor acquirer for their payments, which will generate business for us.”
