Fintech firm Hyperwallet selects Australia as gateway to Asia Pacific

San Francisco-based payout technology company Hyperwallet has selected Australia as its Asia-Pacific launchpad.

The company's Asia-Pacific operations are being led by former PayPal executive Simon Banks, now Hyperwallet's Asia Pacific managing director, who said Australia's "vibrant digital commerce and fintech ecosystems" make it a promising market for Hyperwallet.

"Australia has not only produced world leaders such as Envato, Freelancer.com, RedBubble, 99Designs, but also has a rapidly growing sector of startups with the next generation sharing economy and marketplace platforms," Banks told ZDNet.

Founded in 2000 by Lisa Shields, Hyperwallet allows marketplace businesses to pay people -- whether that be earnings, commissions, or royalties -- around the world.

"Marketplaces have been focused on creating a frictionless experience for consumers and buyers to pay in -- this is the world that Braintree and Stripe have really innovated. The payouts environment is more complex," Banks said.

While globalisation is driving companies to transact more frequently across borders, ensuring all transactions are compliant with regulations that vary from country to country is not an easy task, according to Hyperwallet.

"One day you've built a cool marketplace app, then tomorrow you're all of a sudden paying out in 100 countries, and may not have thought of the costs, complexities, and regulations involved in doing this efficiently," Banks said.

Peter Burridge, former Oracle executive and Hyperwallet's global chief commercial officer, added that the solution a business implements for domestic payouts could prove to be "completely useless" when it comes to cross-border payouts and end up causing a lot of administrative hassle.

"The cost of global expansion in the banking world is massive. In most places, you have to open an entity, then a bank account, and you'll have to have all the signatories. It's a hard world to do disbursements," Burridge said.

The other big challenge, Burridge said, is that cross-border payments typically rely on the foreign exchange (forex) market, and the lack of transparency around forex fees and rates often means that businesses have to succumb to inflated margins.

"If you're sending Australian dollars to Europe or the US, they can charge whatever they want and your payee has no visibility as to where their payment is. They have no one to call except you and they don't know how much is going to turn up. Even if you've gone to your bank and said I've got AU$1,000 and I want to send it to someone in the UK, they're going to convert that to GBP and you won't necessarily know when they're going to convert it and how much they're going to get. On the other side, they're still going to pay an incoming wire fee," Burridge explained.

"Because the money is flowing on [the banks'] rails, they are part of the delivery mechanism of that payment and they need to be paid. They bill for risk, because if it goes through their accounts, they could [inadvertently be] part of a money laundering transaction."

Hyperwallet's API, on the other hand, enables marketplace businesses to send payments as if they are domestic transactions. The company has domestic bank accounts in more than 100 countries around the world, which means that if an Australian business wanted to pay a supplier in the UK, it would initiate the payment through Hyperwallet, as well as provide payment instructions, and Hyperwallet will pay the supplier the owed amount from its domestic account.

"There's nothing going across border other than our treasury. We pre-fund [the domestic] accounts to manage demand," Burridge explained. "We're not a foreign exchange company in disguise."

Businesses can pay in any currency and accommodate a range of payout types including local bank payments, prepaid cards, virtual cards, or cash pickup, depending on the payee's preference.

Additionally, the Hyperwallet API allows an application to see where a payment might be -- similar to a delivery service's "track and trace" feature -- and provides compliance and identity verification.

"If you're a US seller for example, there are certain tax forms you have to fill out otherwise the marketplace is liable for not running a legal operation," Banks said. "If you're a US-based freelancer, we collect all the forms for you, so you don't have to think about doing it. The [freelancer] can see their balance increasing but until they've delivered these pieces, they can't get the money."

"In some countries, the seller has to provide a copy of their driver's licence, and in other countries, they don't need to provide this kind of information. All this logic is built into the platform."

Burridge said Hyperwallet is constantly being updated in line with regulatory changes. He said that the Second Payment Services Directive (PSD2) in Europe, which is expected to come into effect in January 2018, will require online marketplaces operating in Europe to either obtain authorisation as a payment institution (PI) or e-money institution (EMI) or use the services of a business that is authorised to provide payment services.

"At the risk of oversimplifying things, PSD2 requires marketplaces to decouple the pay-in from the payout. This way, the marketplace can only be an agent of either the payer or the payee -- not both," Burridge said.

"Getting authorisation as a PI or EMI is no small task. The process is confusing, time-consuming, and costly. That's just the nature of payments. For many marketplaces, the best option could be forging a new relationship with an established payout platform.

"We see the market as moving towards us."

While the company does not have the licenses to operate in China, it can still facilitate transactions in and out of China through its partners such as fintech firm Geoswift. Hyperwallet currently has more than 45 global financial partners.

"Businesses that don't want to be there (in China) but want to sell to sellers in China, we cater for that. But then if you grow and you want to create your own local entity in China, we cater for that as well. It's a single platform, it's a single API that handles all the complexity," Banks said.

As a white label service, the Hyperwallet API enables the payouts capability and experience to be embedded within the marketplace application experience without the brand behind the API being visible to the payee.

Hyperwallet is currently in the process of getting its licences sorted with the Australian Securities & Investments Commission in Australia and has already hired three staff in Melbourne and Sydney.

It has also signed on Melbourne-based enterprise marketplace platform Marketplacer as a customer.

"There are a lot of businesses in Australia that have got a lot of international participation. Their story is all about expanding internationally," Burridge said. "We think our technology can help them expand faster and compliantly."

Hyperwallet boasts more than 400 customers globally include HomeAway, TopTal, and Universe. It also has more than 330 staff in its offices across San Francisco, Austin, London, and Vancouver.

Fintech firm Adyen also enables cross-border transactions, though it focuses on the pay-in rather than the payout aspect of the transaction. Adyen's technology connects directly to Visa, Mastercard, and hundreds of other payment methods across online, mobile, and in-store environments, and supports big names like Facebook, Spotify, Uber, Airbnb, Netflix, Dropbox, Soundcloud, Groupon, Survey Monkey, and Vodafone.

Recently, Melbourne-based startup Airwallex, which also facilitates cross-border transactions by using machine learning to find the best buy-sell trade for any combination of currencies, raised $13 million from international investors including Mastercard, Sequoia Capital China, and Tencent.