As WorldFirst’s U.S. exit nears, a market void opens up

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It’s unusual for a seemingly healthy company’s website to implore its U.S. customers to seek out a competitor with less than a month's notice, but cross-border payment processor WorldFirst has done just that.

London-based WorldFirst has not given a reason for this, but it’s widely reported that WorldFirst is getting out of the scope of U.S. regulators in anticipation of an acquisition by Ant Financial. An earlier deal for China-based Ant to buy MoneyGram fell apart because of U.S.-China trade tensions and regulatory concerns.

Whatever the reason, U.S. customers won’t be able to do business with WorldFirst from Feb. 19. And while WorldFirst hasn't selected a specific competitor for its customers to migrate to, there's no shortage of options.

“That’s a big void, there’s a big e-commerce seller's market out there,” said Iain McNicoll, country manager of the U.S. for Payoneer, a New York-based fintech that performs many of the same services as WorldFirst. “The international online seller has a need that a traditional bank may not serve.”

One of WorldFirst's primary use cases is helping businesses receive payments in their local currencies; it also helps online sellers manage payments in international marketplaces and oversee suppliers. The company processes more than 1 million transfers a year totaling more than $100 billion, according to Top10MoneyTransfer.

There will be a substantial and expanding opportunity for someone to process e-commerce and online marketplace payments in the U.S. in WorldFirst's wake. WorldFirst was partly known in the U.S. as a processor for Amazon third-party sellers. Amazon’s U.S. sales are about $260 billion, or about half of the e-commerce market in the U.S. And about half of Amazon’s U.S. sellers are third parties who use services such as WorldFirst’s to manage payments.

WorldFirst’s own market analysis reports the U.S. is the top market for cross-border payments. There would also be a large opportunity in the Asia/Pacific region to offset WorldFirst’s loss, since that region accounts for two thirds of global transactions, yet is less than a quarter automated, according to a McKinsey analysis.

That would provide a large upside as Asian payments automate and the region’s e-commerce market expands. Also, Ant has not expressed much interest in establishing a U.S. market, saying it is satisfied with supplying payment options for Chinese travelers and part-time U.S. residents.

For Payoneer, it could be a chance to benefit from two international political battles that have businesses scrambling to support international e-commerce. Payoneer recently expanded its service to make it easier for U.S. merchants to sell overseas, and set up shop in the U.K. in 2017 ahead of Brexit.

In the U.K., Payoneer has a head start as hundreds of companies are scrambling to obtain proper regulatory approvals to execute transactions in Europe post-Brexit. In Asia, Payoneer works with Amazon, among other online marketplaces, giving it potential way to reach Amazon sellers in other markets, such as the U.S.

Payoneer has also added tax obligation services and short-term working capital for online sellers to buy more inventory as added enticements.

"With this [WorldFirst] move, we can work with more sellers than we could before and grow our business in the U.S. market,” said McNicoll, who would not disclose the company’s sales figures or international payment corridor breakdowns.

Other companies that could benefit from WorldFirst’s U.S. departure are WePay, which is now a unit of JPMorgan Chase. WePay would not comment for this story. Another candidate is TransferWise, which enjoyed healthy growth in the past year by pushing a "borderless" account designed to make it easier to execute cross-border payments. TransferWise also would not comment. Blockchain providers such as Ripple and R3, which have made a market over the past few years supporting relatively smaller-amount cross-border transactions, could also pick up business.

“This is definitely a huge inconvenience for people selling cross-border between the U.S. and other countries that need to transfer large sums of money to another country," said Talie Baker, a senior analyst at Aite Group. "WorldFirst competes on its low fees, so sellers may have a challenging time finding the same services at a competitive rate with a different company—so this move could impact overall revenues for some sellers.”

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Cross border payments Compliance U.S. U.K.