Oded Zehavi, co-founder and CEO of Mesh Payments, tells the story of how B2B cross-border payments can grow with the help of virtual commercial cards and a good relationship with PSPs
What is Mesh Payments all about? What is their target market and what distinguishes the company from other competitive players in the world of cross-border B2B payments?
Mesh Payments is a US company founded by veterans of some of the leading payments companies in the world, like PayPal and Payoneer. We have built a B2B payments platform that is leveraging multiple technologies in a unique way – at the core of what we do there are commercial virtual cards, which enable us to build state-of-the-art B2B payments experiences that reduce the friction and cost of B2B payments from our clients globally. Our mission is to help suppliers and service providers get paid in a quick, cost-effective way.
We are just launching the platform and we see a lot of interest for it, as B2B cross-border payments are one of the most important topics in payments today.
With B2B cross-border payments expected to hit 14.8 billion by 2023, how would you characterize the market at this moment? What would you name as the major issues that SMBs face in cross-border payments?
Cross-border B2B payments is huge and, surprisingly, this is a market that is almost fully dominated by the incumbent banks. They are the ones who are providing most of the services, even though the banks see cross-border payments as a big challenge that sometimes also comes with risks and they don’t precisely have the technology or the capability to orchestrate transactions without friction.
On the flipside, the main motivation, when it comes to organisations – even as small as SMEs – when discussing B2B payments, is the fact that there’s still a lot of inertia and complacency when it comes to financial operations and the alternatives to the banks that these companies have in order to provide simpler, cost-effective and more transparent services. In the last two years, we’ve seen more and more technology-oriented fintechs coming into the B2B space. This is still a totally untapped market opportunity and it relates to the fact that the SMEs are facing significant challenges when it comes to banks.
Meanwhile, in the last few years, many marketplaces have opened the eyes of small businesses on the opportunity for them to start providing services not only on a domestic level, but also on a global level. This phenomena has been driving many SMEs to look for alternatives to the banks. It’s still early days, however we feel that we are well positioned to go and capture that market, which – by the way – is so big that I don’t expect to have a “winner takes all” outcome. I see many companies looking into this market and I believe that in the span of five years we might see new players dominating this market that aren’t even around now.
Mesh just announced a collaboration with Visa to help suppliers and service providers around the world accept payment using Visa virtual prepaid commercial cards. What is the global go to market strategy of Mesh and how do you manage compliance and risk at scale?
When you build a payments platform you need to ask yourself two fundamental questions. First of all, “what is your distribution strategy?” and, secondly, “how do you handle risk and compliance at scale?”. We believe that both can be achieved by leveraging the presence of the card network. In our case, we have chosen Visa as our partners as we have a strong relationship with Visa across all levels, and it helps us in many aspects.
Originally, card networks have been built mostly for B2C. We are now trying to leverage the fact acceptance is available in almost 200 countries, the fact that it has a compliance and risk structure that can be managed and offers a lot of data that can be used in order to meet compliance and risk requirements. Since most of the innovation of the last couple of years has been directed to the B2C market, we are benefiting from the Visa network capabilities, but, from the other end, we are bending the Visa network in order to meet the unique requirements of B2B payments.
The second direction in which we have looked is partnering with Visa local partners in several geographies in order to reach our potential clients. A big part of our go-to-market strategy is working with PSPs all around the world in order to enable their clients to receive B2B payments. Many clients and potential clients of payment service providers have been processing large volumes of payments outside of the traditional payments services. With Visa, we are thus creating the awareness of the potential in B2B payments and we are working alongside them to offer their clients a new way to pay that is still leveraging the existing platform that Visa has been using for so many years to orchestrate not only consumer, but also business payments.
What are the core technologies, systems and market strategies that the company is planning to implement in order to boost the quality of cross-border B2B payments and, essentially, ”speed things up”?
The Mesh platform, in essence, is built on top of the existing payment rails. We have been investing, from the beginning to integrate with the Visa network in all layers and in some local bank networks in the countries we are already operating in, in order to have full control of the settlement process of the funds – from the minute transactions are initiated by the client until it is settled by the supplier.
On top of that, cross-border B2B payments require a complex infrastructure in order to handle the risk and the compliance aspects of the transaction. We are collecting a lot of data, both from inside and outside of the payment networks, that would enable us to have insights and reduce the risk by insuring compliance of our transactions, even if they are done between two countries very distinct from each other when it comes to payments infrastructures, regulation and so on.
A lot of our initial efforts have been directed to helping suppliers and service providers in Africa, in South-East Asia, in Latin America – markets where you should have a very strong compliance and risk infrastructure to mitigate some of the challenges that the market brings to the payments landscape.
We have discovered that virtual cards are a great option to move money in a compliant and secure way between countries. However, because there are different standards and different behaviors between card issuers and merchant acquirers, we need to have in-depth integration with both sides and make sure that even if they are not using it the right way, our system will identify those glitches and will avoid any problems in transaction processing. But even more importantly, virtual cards have been an expensive options for the suppliers and Mesh is balancing those fees in a way that makes it an attractive payment option for both Bs on the B2B equation
Moving forward, how do you see this partnership growing and what are some plans that you have for next year in terms of tech innovation, partnerships and expansion?
Our focus now is to work with PSPs all around the world. We have signed a partnership with the largest PSP in Africa called DirectPay, but we are planning to announce many more PSPs in other regions that are looking to partner with us to bring B2B payments to their clients.
On the other side of the equation, we are discussing with other existing payments and technology platforms that are servicing SMEs, as they are all looking to provide more value in pay-out options to their clients and the infrastructure that we have built is able to benefit both sides – the suppliers, when they initiate the transactions, and the customers, when they want to pay globally. A lot of our efforts, in the next few months will be aimed at maturing those partnerships and open new markets.
This is an exciting time for B2B payments. I approached various PSPs and technology providers all around the world to look for partnerships that will enable them to bring value to their clients and reduce the friction that banks are creating when it comes to transacting in the B2B space.
I see more and more of these partnerships emerging and this is the key to provide a better service without the need to fundamentally change our ecosystem. We just need to create incremental progress with the existing payments processing network capacity. The most successful innovations in payments have been achieved by taking payments capabilities and bringing them to the next level. This is also one of the principles that guides us when it comes to B2B payments.
About Oded Zehavi
About Mesh Payments
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