Getting paid and making  payments internationally can suck. I should know, because that’s how I’m always getting paid! There are lots of options that vary in cost, timing, security, and ease of use. Here are some of the solutions I’ve recently looked at when exploring international payments:

• Your bank (wire transfers)
• PayPal
• Transfermate
• Payoneer
• Merchant processors (credit card)
• Bitcoin

Today I’ll be talking about Payoneer. Here are the two main features they provide:

1. Global mass payments for online marketplaces: They allow you to pay a bunch of people online. Think companies like iStock, Eleance, 99 designs, AirBNB that need to pay their freelancers/contractors. The draw of the Payoneer service is that these companies can pay lots of people internationally for apparently no cost (I say apparently because I haven’t dug into this area deeply).
2. International money transfers for SMBs & Professionals: You can get US and EUR collection bank accounts (even if you’re not in those countries) so that you can get paid as if you lived in them. It’s also the second part of the equation to the global mass payments solution, since payment receivers will need a Payoneer account to collect their funds.

I won’t be delving into the global mass payments for online marketplaces, but instead will be talking about the international money transfer solution. I’m here to dig into the nitty gritty and show you what it takes up to get set up with Payoneer, how it works, and how it compares against other payment solutions.
At a quick glance, the solution seems great. Payoneer provides you with a virtual US (US account and routing number) and/or EUR (European BIC and IBAN number) account, so that you can get paid as if you were a local. You can withdraw the funds via a Mastercard debit card or to your local bank. It’s also supposed to be more affordable than PayPal.

Getting Set Up

To start with Payoneer, you’ll need to put down a $29.95 annual fee. It’s not really that much money, but it may be a bit of a stumbling block for businesses that are used to going with online providers like PayPal, Stripe, or Square, where no upfront (or ongoing) fees are required.
When I signed up, I received the Payoneer Mastercard debit card in the mail, and then I used the Payoneer website to activate my card. The process was a bit confusing for me, as I thought the site was asking for my local bank account information, rather than the details on the Payoneer Mastercard debit card that I had just received.
The card acts like a credit card, except that you need to have funds on the card for it to work. In other words, you need to have funds in your Payoneer account to use it. When you receive funds into your Payoneer account, you’ll be able to access them by using this card.

Getting Paid

There are two main ways to get paid:

1. Via your Payoneer account
2. Via US Payment Service (ACH) or EU Payment Service (SEPA)

The easiest and cheapest way to receive funds is from another Payoneer account holder. They can send a transfer to you near instantly and for free (funds are available within 2 hours of initiating the transfer). It works just like sending PayPal funds between friends (free and instant as well). There are limits on the amount you can transfer, however (minimum of $20, maximum of $1,000). The catch to this is that both parties need Payoneer accounts with money in them (I’ll talk about funding your Payoneer account shortly).

These limits seem rather low to me, and would cause some friction if used as a tool to transfer money in all but the smallest of businesses.
The second way is to get a payment via the US or EU Payment service (SEPA). I’ll just describe the US Payment process here. If you’ve ever paid someone via ACH (US direct deposit or US bank transfer), well, it’s the same thing. Payoneer gives you some bank credentials and you pass that along to the business that wants to pay you.

I’ve only tried this twice. The first time was unsuccessful (I can’t confirm whether this was user error on the payer side or an error with Payoneer) but the second time was successful, using Bill.com’s vendor payment functionality.
The unsuccessful first attempt may have had something to do with type of payments that can be made. Only ACH is accepted, wire transfers are not.

“Payments to the US Payment Service must be made from a US company and can only be made via ACH transfer. Wire transfers and payments from individuals are not supported.”

Getting paid via the US Payment Service (ACH) costs 1%, while via the EU Payment Service (SEPA) it is free.

Withdrawing Funds

There are two ways to get your sticky hands on your money:

1. Mastercard Debit Card
2. Local Bank Transfer

The Mastercard Debit Card works, as far as my tests have shown, like any Mastercard credit card would. That’s pretty convenient and doesn’t cost anything (provided you’re purchasing in USD).
I tested to see if I could access the Payoneer bank feed with a cloud accounting product such as Xero. It is possible to set up a bank feed in Xero with Payoneer as the bank account. That’s the good news.

I tried the same thing with QuickBooks Online (QBO) and it doesn’t have Payoneer as an option. Since Xero’s bank feed is provided by Yodlee, Payoneer should be available in most other cloud accounting software bank feeds as well (Yodlee is the main provider for bank feeds, with the notable exception of QBO).

Now, the caveat with the Mastercard debit card is that ATM withdrawals do cost money. It’s $3.15 per transaction (and the ATM may tack on an additional surcharge). Since it’s an ATM, I believe there are probably limits on the funds you can withdraw. One workaround to ATM fees that Payoneer suggests is to pay for items with your Mastercard debit card and ask for cash back (which apparently does not incur fees). For business accounting purposes this seems like a bad idea to me.

For local bank transfers, fees vary depending on your country. Unfortunately, you can’t learn about these fees until you have an account and have enough for the minimum withdrawal amount ($200 was the minimum for my Canadian and Japanese bank account tests).

The time it takes to verify your local bank account can vary. My Japanese bank account took a few days to verify, whereas my Canadian bank account only took a few hours.

The time it takes to transfer funds to your local bank funds can vary as well. It takes 1-3 business days for local bank transfers or an estimated 3-7 business days for wire transfers. If you tack on the fact that you need to wait some time to receive the funds initially via the US or EU Payment service, you’re probably looking at about a week until you get your funds. Of course, if you receive funds via someone with a Payoneer account and you spend it using your Mastercard debit card, you can be spending your cash within a matter of hours.

Both the Mastercard debit card and local bank transfer methods are also subject to a foreign exchange rate charge. I think this is where Payoneer is really making their bread and butter. They claim the rate varies between 2% and 2.75% above the official mid-market exchange rates. So, if you’re using this service because you’re not in the US, that’ll be a significant currency exchange hit. However, if you’re using this card within the US, or to pay for items in USD, this will be of no consequence to you.

Adding Funds

As far as I can tell, you can’t really load funds into your Payoneer account yourself. This is unlike PayPal, which both lets you add funds to your account, and more importantly, pulls money from your account when you need to make purchases. This is something that PayPal can instantly do, which makes it easy to shop using PayPal. With Payoneer, however, you need to have funds in your account, received through the course of business activities.
That being said, they do have a load payment service that you can use (but you need to contact support to turn on this feature). This is mainly designed to allow you to accept credit card payments (there’s an ACH option as well, but I don’t see how this is different that then US Payment Service).
Accepting money via credit cards can incur a fee of up to 3.75% and takes 2-3 business days. The ACH bank transfer service costs 1% and takes 5-7 business days (and is only available for US accounts).
For either method, the loader decides who will pay the fee (loader or recipient).

While technically you’re probably able to self-load payments, you’ll be paying a fee and will need to wait a few days to get your funds.

Conclusion

While Payoneer may be suitable for online freelancers, I’m not too sure about Payoneer for regular businesses making and receiving international payments. I have a few concerns about the service.
Support worries me. For example, I sent in a request to turn on the load payment service and received this email in response:

Three business days! I haven’t seen a message like this in a long time.

For an online company, there are still lots of manual verifications to go through. Whether it’s sending in documents to set up the accounts or requesting access to additional features (which must be done through support tickets). I would have thought anything you need to do could be done via the single web interface. I had to sort through various areas and sites and hidden F.A.Qs to research this article. I don’t know if the average person would have the same tenacity that I do.

It was a challenge for me to gather all the information in this article and I’m still not sure it’s 100% right. There’s lots of documentation all over the place and it seems that pricing varies depending on how you signed up, how you receive your funds, and how you’ll withdraw your funds. I get that a global business can’t have a flat rate, but better transparency would be greatly appreciated, and perhaps some case studies or an online calculator that could help you figure out the costs as well. I’ve been researching PayPal, and I know their fee structures can also vary, but I think the core fee structure of PayPal is fairly straightforward to understand. Also, setting up and using a PayPal account can all be done without any manual processes.
Payoneer’s list of services overwhelms me:

• Withdraw to Bank Service
• Global Payment Service
• Card to Card Service
• Bank Transfer Service
• Credit Card Loading Service
• Mass Payout Service
• US/EURO Payment Service

When Payoneer told me about their services, they pitched it as a better value proposition than PayPal. Currency exchange is roughly the same as the standard rates that PayPal or banks would offer. So for withdrawing your money to a foreign currency, I don’t think Payoneer is any better.
For receiving funds, Payoneer may provide an advantage.

PayPal takes a big cut when receiving funds (1.9% to 2.9% plus $0.30), even if funded by a bank or PayPal balance, unless the funds are sent via a PayPal Business Payment. This is a program that is only available in the United States and allows the customer to pay an invoice via eCheck or their PayPal Balance. I’ve only seen this available in conjunction with online invoicing services like FreshBooks, Zoho Books, and Harvest. The cost is only $0.50 (which is great!). But the point I’m making about Payoneer is that you can receive funds outside of the US as if you were in it. If you were in the US, you would just get a US bank account and receive ACH payments directly, and you wouldn’t really need a service like Payoneer.
I should note that there is a PayPal friend/family transfer option where a customer sends the money to you as a friend/family, thereby waiving seller protection. The cost can range from a fee inside the US to 0.5% to 4% outside the US. You’re not allowed to do this as a business though, but I thought I’d mention it for those who may need to transfer money for non-business reasons.

If you recall, the fee to receive funds via ACH in the US is 1%. This is better than PayPal’s standard rate (1.9% to 2.9% + $0.30). So yes, Payoneer wins if a customer is willing to pay via ACH.
What gives me hesitation with Payoneer though, is that PayPal is the most popular online payment service and I think the majority of people trust it. Saying pay me via PayPal is easy, and the customer can pay via credit card, their bank balance, or their PayPal balance.
I can see situations where Payoneer would be a good choice, but I think you’d have to be a specific type of business for it to fit your needs.