Payoneer's Virtual US Bank Accounts Make International Cash Out Easier

When I last covered payment service provider Payoneer, the company had announced the collection of $3 million more in funding and the addition of iStockPhoto to its client roster. Today, the company is announcing the initial rollout of “Payoneer Virtual US Account,” a new offering that simplifies payment cash out for international payees.

The new offering allows Payoneer card holders that live outside the US to receive direct Automated Clearing House (ACH) deposits/payments without the necessity of actually having a US bank account.

Here’s how it works: Payoneer maintains a bulk of sub-accounts under its main account, which is held in an American bank. When an ACH transfer is initiated, each of these sub-accounts is referenced using its own routing and account numbers. When the funds are credited to one of these sub-accounts, Payoneer loads the funds to the associated card.

Contrary to their name, these accounts are not virtual at all. Payoneer’s thinking here is to call them virtual accounts because they only serve as channels for loading money onto their cards. The accounts cannot be used for wire transfers, they don’t bear interest, etc. I may be splitting hairs, but the name could be a bit snazzier.

The Payoneer Virtual US Account might not seem all that exciting to some, but I assure you, this is a huge deal if you are an international payee. Take the following scenario as a case-in-point:

Let’s say you’re an affiliate marketer living in Russia and you’ve just had your monthly commission deposited to your PayPal account. With Payoneer, it works like this now: you can perform an ACH transfer directly from your PayPal account to your Payoneer Virtual US Account. The funds will be immediately available on your Payoneer Debit MasterCard balance, ready for cash withdrawal from an ATM in Moscow, or available for charge at any MasterCard point-of-sale station (department stores, supermarkets, etc.).

Payoneer’s Virtual US Account program is still in pilot mode and only available to a select group of cardholders, for whom Payoneer can accurately verify the source and destination of funds.

While the program is clearly valuable to international payees, things are a bit stickier with the PayPals, LinkShares and iStockPhotos of the world whose “blessing” is necessary for the program to take off. The crux of their concern is a fear of issues related to money laundering compliance. They would prefer to avoid the matter completely rather than risk getting themselves into hot water. Their “blessing” is necessary because they may already (or can easily in the future) update their terms and conditions to stipulate that ACH transfer to payees from certain countries are barred.

The fact that Payoneer’s systems and methodologies are designed to deal head-on with international compliance issues should help it on this front. If Payoneer has been given the green-light to broaden its offering to include Virtual US Accounts, it has probably handled compliance issues to the satisfaction of its bank, which must have kept a particularly close eye on it from day one.

Many, if not most, Internet startups focus on the American market and its users. Often times this leaves international users without the access to products and services that US users find common-place. So it’s good to see a company like Payoneer simplify payments and cash outs for international payees. It might not be easy, but the rewards could be substantial.