Payoneer is a payment platform that offers a way for businesses to pay and receive money, for a low fee. Payoneer believes that the total addressable market (defined as global e-commerce volume) is $26 trillion a year. Payoneer processed over $44 billion in 2020 alone.

Payoneer works with 9 of the top 20 most valuable companies. Alongside these big names, Payoneer also has 5 million+ marketplaces and businesses, across over 190 countries.

Payoneer also offers:

Accounting integrations
Capital to small businesses
Regulatory and compliance infrastructure
Physical debit cards
Tax solutions

So, it is basically a bank that includes an accountant to help meet a business’ needs. The one product or feature that is missing is digital coins and no doubt they will be offering that soon, if anything they should make that a major priority.

Management Team

Scott Galit - CEO of Payoneer, previously a senior VP at MasterCard. Serious financial services pedigree.

Michael G Levine - CFO of Payoneer, ex-City VP and ex-CFO of Maler Technologies. MBA from Wharton.

Betsy Cohen - Tons of finance related experience, including founding Bancorp. Should be able to give Payoneer great advice for future growth.

Customers

Payoneer has some big name clients, including but not limited to:

Amazon Europe
Google
eBay
Walmart
Upwork
Fiverr
AirBnB
Booking.com

Weird right, they work with Ebay given Paypal does too. This is because they work with countries and specific clients that Paypal not accept into their platform. Investors need to understand that sometimes people have to use other platforms because they the Paypal’s or banks are NOT willing to take the risk. Sure the risk is probably higher but the amount of people that need access to capital or payment process is high when many banks in many countries do not approve people for such type of access.

Switching Costs

Integrating, setting up, and teaching staff how to use a new payment platform can be time-consuming and expensive for businesses. Therefore, when a client is set up on Payoneer, it is unlikely that they will switch to another provider. This is best seen by the >100% volume retention that Payoneer has (i.e. customers stay and increase their payment volume).

Brand

Payoneer, from what I have seen, has a strong brand (though this is obviously a subjective factor). This idea is reinforced by the presence of their big name clients. Branding is really important in FinTech, businesses need 100% confidence when money and payments are involved. This offers not only stops entrants into their market, but should also facilitate future growth and customer acquisition.

Network Effect

Imagine company A is on Payoneer and wants to pay company B. Company A suggests payment through their usual payment processor, Payoneer. Company B now signs up to Payoneer and decides to do all their payments through it etc. This is the network effect that Payoneer enjoys. This is a very powerful barrier to entry - very difficult to overcome, while also hard to create yourself.

Geographies

UNSUBSTANTIATED: Conversations on Reddit leads me to believe that Payoneer has a strong presence in Asia. If anyone has evidence, please put it in the comments.

If this is true, it should give Payoneer an edge in capitalising on the future growth of the emerging markets.

Some evidence:

The CEO has gone on record saying Korea is one of their big market focuses.
Achieved triple digit growth each year in the asian markets from 2012-2016.

Valuation and Financials

Enterprise Value: $3.29 billion

Projected 2021 revenue: $432 million

EV/2021 revenue multiple: 7.6x

2019-2020 revenue growth: 8.8%

Institutional Ownership

Payoneer has some institutional giants already invested, including Wellington Management, Dragoneer Investment Group, Fidelity Management and Research, Temasek, and Franklin Templeton.

What do I think the future holds for Payoneer? I actually think there are several exits for this company.

Growth: The company continues to grow and eventually reach billions of revenue
Consolidation: Large international payments processer buys them. Could be Paypal, Square, Stripe, First Data, etc. consolidation WILL happen in this space and I think short-term Payoneer will acquire some companies and then be sold to a bigger company. Think of this as how banks in the USA were allowed to merge in 1995 given the law that passed. Before you had 100,000 banks then it was 50,000 banks, then 10,000 banks, and now like 5,000 banks but the top 10 banks make up a large % of the business/volume.
Wildcard: CRM business buys them. What many people do not realize is that CRM’s have been changing the game. First, it was to help you sell with marketing tools, then it is to improve communication within the team, then it will be stored, and legal transactions then it will be a financial transaction. They are literally going to control the beginning to the end of the customer relationship and all of that data they possess is very valuable to help their customers grow.

Personal Note

Price Target

Bull Case: $26

Main Case: $21

Bear Case: $16

How did I get these numbers? Just educated guesses.

Disclosure I am long on the company (LEAP's and Shares)