Good afternoon, everyone, thank you for joining us today for our Corpay Cross-Border teach-in and discussion call. With me today are Ron Clarke, our Chairman and CEO, Peter Walker, our CFO, and Mark Frey, Group President of Cross-Border Solutions. Please note the presentation associated with this call can be found under the Investor Relations section on our website at corpay.com. Our remarks today will include forward-looking statements about our outlook, new products, and expectations regarding business development and future plans, and are based on that information. This discussion and any forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Some of those risks are mentioned in the forward-looking statement in today's presentation and in our annual report on Form 10-K. These documents are all available on our website.
Now with that out of the way, I will turn the call over to Ron Clarke, our Chairman and CEO. Ron?
Jim, thanks. Hi, everyone, thanks for joining today's cross-border call. We thought this call might be helpful for a couple of reasons. First, size. The cross-border business becoming quite a large part of our overall company, clocking in at about 30% of the overall revenue this year. Second is risks. We want to address the rise of the stablecoin and blockchain narrative, the implication to our business. Look, the goals today for the call are really threefold. One, a bank structure.
We do want to lay out how the very bank structure itself, namely the idea of local and licensed footprints for banks, that creates the opening really for non-banks to fill a pretty big underserved middle market need, a global need. Second, as I mentioned, risks. We do want to share our view today on how the advent of stablecoin and blockchain will likely impact the B2B cross-border business. Third, growth. We do want to lay out how we grow the business, how we grow it in the high teens, and that's through a combination of both sales and M&A. Let me introduce Mark Frey. He's the executive in charge of our cross-border business.
Has been with us from the very beginning, when we first entered the cross-border space back in 2017. Mark's really entire career has been in the B2B cross-border industry. He's got incredible knowledge of the space, terrific relationships in the industry. With that, let me turn the call over to Mark here to run us through the presentation. Mark.
Thanks, Ron, and good afternoon, everyone. We've got a lot to cover, so I'll jump right in. Our discussion today is a focused deep dive into our cross-border business. This is our largest and fastest-growing business, and importantly, one where we see a very long runway ahead. You've all had the pre-read. I'm not going to walk through the slide deck slide by slide. Instead, I'll focus on the parts of the story that really matter and go deeper where it's most useful. In terms of framing the session, I'll cover 5 key areas. First, how the market is structured and why that creates opportunity. Second, what we actually do and how we make money. Third, why we win and why it's hard to replicate. Fourth, the key risks and opportunities presented by blockchain and stablecoins. Finally, how the business compounds over time.
In terms of the market opportunity, at the very top end of the cross-border B2B market, tier 1 banks like JPMorgan, Citibank, and HSBC do a very good job of servicing large multinational clients. They have global infrastructure, deep FX liquidity, and broad relationship coverage. As might be expected, they serve a very large revenue pool, about $735 billion annually, and that is where they focus. They don't meaningfully try to serve the mid-market, in large part because their fixed cost base does not make it economically attractive to do so. It's also worth noting that while tier 1 banks are dominant in the enterprise segment, many of these institutions still rely on Corpay to be a key provider in terms of FX liquidity and payment execution in key corridors, making them some of our largest clients in our FI segment.
At the same time, tier 2 to tier 4 banks, the regional and national champions, own the middle market relationships. They're very strong domestically in lending, cash management, and local banking, but they typically lack global reach, FX depth, and modern technology, especially as it relates to cross-border. What you end up with is a clear structural gap. Mid-market companies with complex global needs, but without global banking support. In practice, these mid-market companies are often operating across multiple currencies and jurisdictions with real complexity, but without access to infrastructure or a surface model that large multinationals get from tier 1 banks. That's exactly where we target. We focus on companies with turnover between $20 million U.S.-$1 billion in revenue, businesses that are becoming global but are underserved. The mid-market segment alone represents about a $161 billion-dollar revenue opportunity.
It's growing faster than global GDP, it's highly fragmented, and we have less than 1% market share today. Stepping back, this is not just a large market, it's a structurally advantaged entry point into a large market with significant runway to grow. Focusing on what we do. At a high level, we provide 3 core services: global payments, FX risk management, and multicurrency accounts. The more important point, and the one that's often misunderstood, is how we make money. We're not just moving money and making payments. We're solving for the entire regulated cross-border workflow around the transaction. That includes onboarding and compliance, FX conversion, integration into client systems, reconciliation reporting and automation, payment orchestration, the delivery of remittance data, payment tracking, and local delivery. The payment rail itself is just one piece and a relatively small piece of the equation.
Put differently, the majority of our economics come from FX conversion in the workflow around it, not the fees related to a settlement rail. It's also important to note that we don't take market risk. We are not proprietary traders. We facilitate client flows, and we lay off that exposure in the market in real-time after netting across our portfolio. To that end, approximately 60% of our overall volume is offset by customers buying and selling in opposite sides of the same currency pair, which is a key benefit of our overall scale. As the largest non-bank B2B cross-border payments firm in the world by revenue and trading volume, our size and scale affords us a very real advantage in this area.
In terms of customers and platform, we serve more than 25,000 customers globally across 4 primary customer segments: corporates, private capital, financial institutions, and increasingly digital asset platforms. What ties them together is the need to operate across currencies, jurisdictions, and banking systems. What enables us to serve that need is a single global platform, one point of integration, one API, and one operating system. Underneath that, we built a global licensing footprint, integrated customer-facing technology, local bank connectivity, and access to multiple payment rails that allow us to meet a wide range of use cases, whether that's for time-sensitive payroll, global vendor payments, or high-value treasury flows. Whether a client is paying in Germany or settling in the U.K., we can deliver those payments in a locally optimized way through a single platform. Why we win?
We win because we built a combination of capabilities that are very difficult to replicate. That includes a global commercial organization of more than 800 highly specialized people, a single integrated technology platform, licensing across multiple jurisdictions that can take years for a single license, and deep local market infrastructure. Individually, competitors can replicate pieces of this, but replicating the full operating model at global scale is extremely challenging and time-consuming, and that's what creates the moat. We often describe it as a flywheel. Broader capability improves win rates, more customers increase scale, more scale funds further investment, and that strengthens the platform again. That dynamic has been compounding for years. Next, the key risks and opportunities related to blockchain and stablecoin.
Now, let me spend a few minutes on what is probably the most common investor question given the broader market environment, which is around stablecoins and blockchain, and both the risks and opportunities that this technology brings to the business. There are really two concerns embedded here. First, will stablecoins reduce the need for FX conversion and thus overall cross-border payment volumes? Second, will they compress FX spreads by inviting more competition into the space? On FX volumes, even if settlement moves onto blockchain rails and the underlying conversion requirements don't change, companies are still required to invoice in local currency, pay employees in local currency, settle with tax authorities in local currency, and settle obligations into local bank accounts. Treasury teams still manage FX exposure across entities and currencies.
Stablecoins can improve how money moves between systems, but they do not eliminate the need for local currency conversion, compliance, liquidity, or delivery. There's also a structural constraint here. Central banks and governments are not about to give up control of monetary policy and local currencies. We're already seeing regulation evolve in ways that reinforce the need for local currency settlement and regulated intermediaries. Money may increasingly move via blockchain in USD-linked stablecoins, but the recipients of those funds will still need them in local currency to meet their local business needs. That conversion has to happen somewhere, either at the source or the destination, and we have a platform that allows us to do either. When you step back, the idea that stablecoins eliminate FX conversion demand really doesn't hold up. On spreads, FX is already one of the most efficient markets in the world.
Spreads are typically very tight, and settlement rail costs are already very low. More importantly, spreads are not driven by the cost of moving money or the rail that is selected. Rather, they're driven by transaction size, currency pairs, workflow, compliance, tech integration, and orchestration, the full solution around the transaction, and that's where the majority of the value sits, and that's what customers are actually paying for. Blockchain or stablecoins won't eliminate the current drivers of spread and won't remove compliance oversight. They won't replace ERP integration. They won't solve local fiat delivery into bank accounts. It's also worth noting that the limitation of all native stablecoin providers in crypto exchanges is that they are very much reliant on fiat currency rails to facilitate the movement of funds on and off the blockchain through the process of on and off-ramping.
Further, while the larger players in the space are now maturing their compliance frameworks in the digital or virtual asset space . They do not generally possess the fiat currency money transmission or the capital markets licenses to support cross-border payments and risk management services, meaning that these firms are not set up to really compete and win in the FX-centric cross-border space. As evidence of this, we are increasingly seeing these native digital firms move to onboard with us as a client of our services. In this manner, we see our digital segment as a growth avenue in servicing these firms directly, earning a share of their overall economics rather than them being a competitive threat. When we think about new rails, whether it's real-time payments or blockchain or even stablecoins for that matter, we see them as additive, not disruptive to our business.
Our role is to select and orchestrate the best rail for each transaction based on cost, speed, reliability, and traceability. We're already doing this today, including integrating new capabilities into our payment network like BVNK for stablecoins and the JPMorgan Kinexys private blockchain platform. In many cases, particularly on the institutional side, we're seeing private blockchain networks scale effectively because they integrate more seamlessly into existing financial systems. They deliver the same value as stablecoins in terms of speed and lower costs, but with less operational friction while removing the need for on and off-ramping. We're leaning into this area significantly with the expansion of our private blockchain networks aimed at increasing the always-on 24/7 capability of our network. In this respect, we think that private blockchain networks will actually win the volume wars over public blockchain solutions like stablecoin.
Stepping back, we believe FX conversion demand will remain as governments protect national currencies and independent monetary policy. Spreads at the core level are already very competitive and based on factors related to transaction size and currency pair. Further, digitally native firms don't pose a competitive threat to our core business, but rather represent a significant growth opportunity as we become the primary counterparty for firms in the space who need access to our fiat capability. Our conclusion, therefore, is simple, that stablecoins and blockchain rails will find a place in B2B cross-border payments but will not replace existing national currencies. Though they will augment existing bank-sponsored rails, a strategy that we are materially leaning into. Now, in terms of our growth model. Our growth model is quite straightforward.
We retain roughly 97%-98% of our revenue annually. We add over 20% new sales each year. That drives consistent high teens organic revenue growth per annum that we can sustain with significant runway. On top of that, we layer in accretive M&A. We've completed multiple acquisitions, improved sales product, productivity significantly with each of those deals, and consolidated everything onto our single stack technology platform to optimize both the cost structure and the customer experience. Deals often add new capabilities, new geographies, new distribution, but will always deliver scale. The business grows FX volume, selling more than we lose, while adding acquired companies to accelerate growth and bolster the flywheel. To bring it all together in conclusion, we operate in a large, growing, and under-penetrated market focused on a segment that is structurally underserved by the banks who are our primary competitors.
The mid-market is a $161 billion new revenue opportunity where we just own 1% of the market share today. We built a global platform with meaningful and difficult-to-replicate competitive moat. That moat and our scale affords a significant competitive differentiation from both banks and digitally native firms as it relates to our mid-market target customers. We have a proven and repeatable growth model that compounds over time. As rails evolve, our platform becomes more useful because our clients need one partner to orchestrate them. Put simply, this is a durable compounding growth business with a long runway ahead, and we believe we are still early in that journey. With that, operator, we'll now open the line to questions.
Thank you. We will take our first question from Sanjay Sakhrani with KBW. Please go ahead. Your line is open.
Thank you, guys. Thank you for doing this. I guess first question, if we could talk a little bit about the growth algorithm and how you guys arrive at that 20% in new sales. Specifically, I guess I'm just trying to think about if that assumes the take rates remain stable or they move around, then sort of can that take rate go higher or lower depending on new products and services you provide? Maybe how does it translate if you move to stablecoins? Thanks.
Hey, Sanjay, thanks for the question. I think there's a few different ways I would look at this. If we go back and we look at the recent history in terms of that onboarding of new customers, that has been slightly accelerating from 18%-19% four years ago to now over 20%. It's been getting a little bit better. We've been selling a little bit more effectively as a percentage of the base each year for the last four or five years. There is some rate expansion in that as well. While we expand or grow the business, let's call it 18% per year, we're growing volume 16% and we're getting some take rate expansion, 1 to 2 percentage points each year. Some of that is from mix shift of just higher value products, higher solutions in new segments.
We see good stability and strength in the core business and the core geographies that we're operating in already. When we look forward, we're seeing that sales is actually accelerating as a percentage growth against the base. Rates remain firm and are growing a little bit as well. We just continue to acquire volume in the geographies and the segments that we're choosing to serve.
Okay, great. Maybe just one on the competitive dynamics. I understand sort of the bank side of this, but maybe you could just talk about even on the fintech side, if you feel like there's anyone that kinda does what you guys do specifically. 'Cause I know there is a fintech that talks about having proprietary connections to the major fiat rails, and specifically licenses to real-time networks around the world. Maybe you could just help us think about how your model compares to some of the other fintechs out there that might be doing kind of similar things. Thanks.
Yeah, great question. I'd say there are some FinTechs that have chosen to focus on sort of the embedded side of the business or the mass payments at scale, and that's a business that focuses on the rail connectivity and the geographies, and really leaning into things like ERP integrations and API connectivity to produce mass payments at scale. That is primarily a partner-driven rather than a direct sales-driven sort of growth model in terms of customer acquisition and volume acquisition. I'd say the other side of the spectrum is there are FinTech firms that are a little bit more traditional, that are largely direct sales model. They are more geographic in terms of their concentration and less global. I'd say part of what sets us apart is we play at both ends of that spectrum.
We have much broader geographic coverage in terms of the areas in which we're licensed and the geographies in which we onboard customers. We certainly have the mass payment scale, where we have embedded capability that we put into ERP systems, into accounting packages, that we do API connectivity to banks and marketplaces and other financial technology firms. We also have the direct sales business as well, where we go out and hunt and find mid-market customers and geographies, and we provide FX, cross-border payment scale solutions, and that we sell into the bank account products as well. Every one of these firms are targets for us in terms of M&A as well. We look at the traditional sort of portfolio deals that bring, you know, customers and geographies and licenses.
We look at opportunities for M&A, where we have scale players that bring new licenses and payment integrations. We also now, I'd say, increasingly are looking at the digital space as well. That's opened up a new category for us from an M&A perspective of those digitally native firms that are leaning into stablecoin infrastructure technology.
Okay, great. Thank you.
Appreciate it.
Thank you. We will move next with Andrew Jeffrey with William Blair. Please go ahead.
Hi, good afternoon. Yeah, I'll extend my thanks and appreciation for this call too. You know, you mentioned, and I think it's a very comprehensive, cogent call, Mark, you talk about the benefits of stablecoins and where they don't solve problems necessarily. One of the things I didn't hear you talk about is programmability, and I wonder if that factors into your thinking and if that influences your views on open stablecoin networks versus private stablecoin networks or closed loops like Kinexys. I wonder if you could just comment on the role you think programmability plays in these cross-border transactions, given latency, you know, time differences, you know, smart contract integration, those sorts of considerations.
Hey, Andrew, good to chat with you, thanks for the question. It is a smart question. I think programmability is going to be a key thing from a treasury perspective in particular, so doing things like international cash, overnight sweeps and cash management consolidation. We certainly see that stablecoins and the programmability of these digital solutions is super helpful in that treasury world, I would say. I would say much less so in terms of the mass payments scale, where we are processing, you know, third-party payments to thousands of beneficiaries at a single time. That programmability is I think particularly interesting in the stablecoin world rather than the private blockchain world. Yes.
Got it. Okay. Yeah, I think that's an important distinction. The other thing I'll ask about is, you know, again, I think you're 100% right about the desirability or the requirement, the need to settle in local currency. There's been some talk, if you look at some of the L1 purpose-built L1 blockchains, Plasma, I think in particular, that speaks directly to the desire to hold or have U.S. dollar exposure. Do you think open stablecoin sandwich is something that might become more pervasive? And how does that influence, again, your thoughts about sort of the revenue sources, and competitive positioning of your offering?
It's an interesting question. I would say at this time, no. We don't see necessarily that that becomes, you know, something that's more prevalent in the space. Why I would say that is because you already have firms that are moving U.S. dollars internationally in a fiat currency world. I think some of those firms will move or progress more to stablecoins rather than using traditional fiat rails to move U.S. dollars internationally and transacting business in U.S. dollar terms. That's part of the business that we do today in terms of mass payment processing, where there isn't FX side to it, but we actually just process payments at scale. I think we will see some of that business transition away from fiat rails to stablecoins.
I would say honestly, more towards private blockchain just because of the inherent operational efficiencies of moving money via that particular modality. I would say yes, you will see some cannibalization of volume from fiat into the blockchain world in that particular arena. That's a part of international commerce today. I'd say that the overall trends towards dollarization, if you will, has actually been decreasing over time. That's not to say that the U.S. dollar is going to be replaced as a store of value and unit of account for global commerce anytime soon. Certainly the overall intensity of U.S. dollar payments is declining slightly by 1 to 2 percentage points each year as other global currencies take up a little bit more of that share.
you know, we see that dollarization is actually, or the lack of dollarization is a positive trend for the business. It just needs more FX also.
Great. Thank you very much.
Appreciate it. Thanks.
Thank you. We will move next with Darrin Peller with Wolfe Research. Please go ahead.
Guys, thanks. Thanks for this. It's helpful. This is probably gonna be a bit of a basic question, but I think it'll be helpful to us and others, hopefully. You know, when you say that two-thirds of Corpay CBS revenues from clients using basically one product and then you land and expand, I think it'd be helpful if you give us a more specific tangible example of, you know, from ground up, you start with a customer, what's the one product they start with? What's next, and where does it go, and why are you winning in that ability to go to the next product? Maybe just if you don't mind walking us through a little more tangible example, like a real-life example of some of your clients, that'd be really helpful just to start.
Yeah, no, that's a great question. I'd say the vast majority of our customers in the corporate space start out using our just our basic payments products. They have third-party payments, and they have invoices in a foreign currency that they need to pay. They're, you know, perhaps upset with the service or the technology and the friction of doing that with their bank. We're able to find those customers and convince them to do business with us. They're trading FX and then instructing third-party payments that we process for them around the world. They might start out with sort of the nuisance payments if it's a large corporate. Those geographies that are just difficult to do.
Sometimes it's, you know, it's G7 or their major currencies that they're trading in their, in their business, and they just want better service and better overall operational processing. Once we get that payment flow, and we begin to win more of that payment flow, and we usually do because it's sort of a scale-based value proposition. The more payments that we process, the more efficient it becomes, so we tend to win more wallet share over time. As we get insight into that wallet share, we then begin to cross-sell risk management products. Once we have a view of how much euros they're purchasing each month, then we'll begin to sell, you know, risk management products. Our technology that allows them to quantify the risk that they're actually experiencing with those euros that they have to purchase each month.
We cross-sell risk management products to those customers. It would be, you know, the bank account products that we would sell when they expand into new geographies. That's all sort of on the corporate side. On the private markets side, it's a little bit different. We actually start out typically by selling a bank account to a new manager that's launching a fund. You have a big fund manager that's launching fund five, let's say, and they need a bank account. We can spin that up for them in 24 - 48 hours, and that's our entry point. Once the fund is actually up and running in their capital calls, then we begin to do payments for them, both operationally and potentially from an FX risk perspective.
It's a little bit different between the private market space and the corporate space, but we lead with, I'd say, simple products in some cases and then upsell them to our integrated solutions platform.
All right. That's really helpful, Mark, to get an order of operations there. I guess I just had one follow-up. On the earnings call last week, you said, you know, future corporate payments M&A is more likely to be about new geographies and new verticals. Just given you already have quite a bit of product now and the depth I think you want, you know, after today's discussion, cross-border is, you know, you mentioned a $161 billion mid-market TAM. Where do you see the largest white space opportunities? Is it by geography or vertical? Within those opportunities, which products are customers really looking for, whether it's payments or risk management or accounts or some combination?
Yeah, good question. I'd say in the cross-border space, we really see three categories of M&A that are super attractive to us. One is just sort of the traditional portfolio expansion of, you know, new geographies or adding more scale to our existing geographies. There are lots of fintech players, let's say, that are concentrated in the U.K. or in the U.S., and that we wanna add scale in those markets, and those can be attractive. Typically what we do when we acquire one of those firms is to accelerate sales, improve operating margins and operational performance, and it becomes super accretive, especially over time. I think the other thing that we're always looking to do as well is break into new geographies.
If there can be an acquisition that comes with new licenses and geographies that we're not operating in today in terms of originating markets, that's always attractive to us, and that have more in-country rail connectivity in the emerging market world or in the secondary world, that's attractive. I think the newest category that we've been looking at is the digitally native space. Those firms that are operating in the stablecoin worlds ultimately and trying to build businesses there where we can really leverage our inherent capabilities to accelerate the growth of those businesses because of what we can do from a fiat rail perspective.
Okay. Very helpful. Thanks, Mark. Thanks, guys.
Thank you.
Thank you. We will move next with Ramsey El-Assal with Cantor Fitzgerald. Please go ahead.
Hi. Thanks for this informative presentation and for taking my question. I wanted to ask about AI and how it impacts this segment versus, you know, the rest of the business. Is there anything to call out here in terms of the way you're looking at things that could be on the front end from an agentic commerce perspective on the back end? Do you think AI will have an impact here?
Yeah, great question. It's definitely something that we've spent a lot of time on, I'd say, over the last 12 months or so, and have looked at with intensity. Building AI into our workflow processing solutions. You know, getting better scale, better operational efficiency, and reducing operating expense in by embedding AI capability directly into the products themselves. Certainly on sort of our back-end processing, which is an important part of the business. We are using AI today that we're building into things like transaction monitoring from a compliance perspective, customer screening from a KYC perspective, and really just using it to drive efficiency of the head count ultimately across the business.
I think, you know, looking at our analytics have become very AI-driven ultimately as well. We are a business that competes on analytics and competes on our ability to do math. We're trying to derive intelligence from our own data and from data that we have access to in the marketplace to better target our go-to-market efforts for our direct sales business. It's certainly something that we're leaning into. Also looking at it in terms of how we price and how we serve our customers as well.
Okay. Quick follow-up from me. You guys mentioned, I think you net 60% of volume internally across pairs, customer pairs. Does that netting ratio improve as the book continues to scale? Is that a significant margin driver of the business? In other words, will margins improve as that ratio improves?
Yeah, that ratio has definitely gone up significantly over the last five or six years, you know, I think in a very meaningful fashion. I think in part, we've tried to create balance within the overall portfolio because of the operational efficiency and the gains that we get in terms of pricing. This was part of the reason why we've expanded significantly in European continents over the last number of years to better balance our portfolio of Euro-based buyers versus Euro-based sellers. There are numerous examples of where we've done that across our business. We do expect that ratio to continue to improve.
It definitely gives us an advantage in terms of how we price and, you know, how many times we cross the bid-offer spread and how much rate we get to keep versus have to pay away to the market in terms of transaction costs. Certainly, it gives us, you know, our scale and size gives us an advantage over other Fintechs because of this.
Thank you very much.
Appreciate it.
Thank you. We will move next with Nate Svensson with Deutsche Bank. Please go ahead.
Hey, guys. Thank you very much for doing this. I had a couple of questions related to the slides. I guess on slide 19 where you talk about the cost of the blockchain rails, I guess it's interesting to see that the public blockchains actually look a lot more expensive today relative to where Swift or ACH or other legacy rails are. I guess two questions here. First, is your expectation that these blockchain costs trend down over time and get to levels that some of the legacy rails are, or are there regulatory or intermediary costs that may keep those elevated going forward? Then the second question, when you talk about costs, is Corpay relatively agnostic as to which rail the client wants to choose as it relates to margins?
I would guess that those costs are, you know, eventually passed on to the client, so maybe the more expensive ones are accretive to revenue. Just wondering if there's any different margin impacts across the rails, especially with the focus on stablecoins.
Yeah. Hey, Nate. That's a great question. I would say on the public blockchain side, with respect to stablecoins, that yes, we've seen that those costs have come in. I think the cost of on-ramping and off-ramping has significantly reduced over the past couple of years. I think there's probably still more efficiency that will come from the market as adoption increases. I think gas fees are already relatively efficient. It's more the on- or off-ramp from a stablecoin sandwich that is, I think, the particularly intensive part from a cost perspective, that will come down. I would say today, private blockchain rails are very price competitive versus Swift. I'd say much less price competitive versus in-country ACH equivalent rails in each geography ultimately.
I think there will be some improvement there, but it's still, yes, to your point, public blockchains and stablecoins today versus, you know, what we're seeing in the marketplace is a relatively expensive way to move money, especially when you start with fiat and with fiat in terms of on and off-ramp. Then in terms of, you know, payment modality overall, I'd say it's quite rare that a customer comes to us and says, "I would like to specify how you send this payment." They don't say that they want it to go via Swift or in-country or real-time necessarily. They sort of describe the business challenge that they're aiming to achieve, and then we pick the right modality to solve their business problem.
If it's a payroll payment ultimately, and we're processing it one day in advance, and it needs guaranteed full value transfer, it needs to be perfectly on time, and they're relatively small transactions, so transaction cost per line item is important, we'll use an in-country rail with ACH equivalent rail in a particular market. If speed is super important, we'll lean towards either real time or we'll lean towards a private blockchain rail that will land that payment in 20 minutes or less ultimately from the time that it's processed. We're relatively agnostic in terms of, you know, it doesn't make a big difference to our economics which rail they choose. It's, it's really about finding the best solution for their particular need and then making sure that we can deliver that at scale.
Hey, Nate, it's Ron. The point we're trying to make is we don't care whether it's at $4 or at 0 that, you know, we spend $600 million or $700 million in this business per year, and we spend $20 million or something on rails. The message we're really trying to make is super-duper cheap or free rails is a yawn.
Helpful. That's really interesting color. The follow-up question I had was on slide 18 where you talk about your 55 basis point spread on average. The largest bucket of that spend coming from transaction-specific and value-added regulated workflows. Was just hoping for a little more color on those components. I know the transaction-specific stuff probably varies pretty widely transaction by transaction, customer by customer. I guess I'm maybe more interested on the value add and regulated workflow side of things. Just how have those yields trended over time in terms of their contribution to total spread? Do you see additional opportunity to continue to grow that portion of the spread calculation going forward?
Yeah, great question. Yes, we do see an opportunity to expand rates in that category over time. This comes from the value-added services of being able to direct debit the funds from the customer's account as a specific example or as opposed to them pushing a payment to us. It's about providing a reconciliation file, and not just a file that we push back to them, but we can actually push the reconciliation file into their ERP or accounting package that completes their T account entries ultimately and automates the accounting for them. It is delivering the remittance information to the beneficiary. It's doing the pre-screen and the validation of the beneficiary payment instructions to ensure that the payment is gonna flow through straight through, and there aren't gonna be any difficulties of landing that payment.
It's all these incremental things that we do to make it a more efficient workflow for the processor or for the customer so it ties up less time. You know, what we simply say to our customers is, "When you're processing payments with us, we want you to focus on your business of selling widgets. We'll take care of all the process behind the scenes, and we'll do it in an automated fashion to make this a seamless part of your business so that you can focus on running your core enterprise as opposed to trying to run a treasury operation that's very subscale for a mid-market corporate customer." That's a value proposition that resonates with these clients because they want to deploy their operational resources towards selling more clients. They don't want to build out finance departments and back office reconciliation teams.
They want to focus on growing their own front office and selling more to their clients.
Yep. Super interesting. Thanks, Mark. Thanks, Ron.
Thank you.
Thank you. We will move next with Tien-Tsin Huang with JPMorgan. Please go ahead.
Thanks so much for the education here. I wanted to ask on the distribution moat and your ability to replenish new sales to get to that 20%. I know that's a superpower of Corpay in general, but just I know in the slides, this is one and a half million in new revenue per direct seller. Is it as simple as just adding more headcount there? Tell us a little bit more about how easy or hard it is to regenerate that 20%.
Hey, Tien-Tsin. It's Ron. Let me take a stab. The first thing is I told Jim to send out a bar chart to everybody that we've done the same thing the last five years. Although we showed a bridge, I think it was, what, 24- 25, the first thing I want to report is that that growth model would look literally almost the same the last five years where we sold 20% + and lost three. The answer to the thing is it's a giant frigging planet, right? The middle market is $160 billion. We have a billion-dollar business. Think of the we originate, Mark, really in five continents, right? Tien-Tsin, this isn't a U.S. business. We get people in the U.K., the continent, Australia, everything else.
Think of just the coverage, like spots we can go, right, in terms of putting more origination power, not only in terms of like corporates, which was the whole business when I bought it. Now, like, you know, 20% of the business is these other segments, right? Like serving FIs or the asset managers, you know, like Bain or even the new guys. The playing field to go originate business is it's frigging massive. I think I asked Chad or something. It's the largest single flow. I think it the flows are like $9 trillion a day of FX money being moved. Yeah. The short answer is there's plenty of segments and geographies for us to have more coverage.
The second one, which is why we bought this company, is the product. You know, getting into the deposit side of the business, you know, not just the disbursement side, is a huge deal for us. Going back to all these people that we send disbursements for and helping them stand up, you know, new deposit accounts as they expand is the other way to get more juice, right? We don't need really any more coverage there, right? We just added this product. Look, there's plenty of opportunity. We've done it. It's mostly just more people in these different segments. I'm hoping that this deposit thing, this bank account thing will add a ton of revenue too.
Look, it may not always be 20, but it's gonna be a whopper number because, one, the thing is big, and two, the incumbents are, you know, are not great. I almost laugh to try to say this to you guys are like, "We're the disruptor." We're the people going into the legacy banks that are crummy at this thing with a new way of doing it versus, "Oh my God, who's gonna, who's gonna disrupt us." I would say of all the areas we sell in the company, this one we've got a lot of confidence in. We got a lot of really good people. Mark has recruited like, you know, the best and brightest. We pay people a lot to come out of banks like yours and stuff.
We really do have a lot of super quality people.
Yeah. No, it sounds that way. You're right. It's good to hunt and rather be the hunted. Which maybe is a good question in general there. Just thinking about the customer retention, it is high, 97%. Ron, you appreciate this. Think about ADP, right? Retention is so important for that company. What explains the high retention in your mind? Is it sustainable? Is it as simple as that there isn't a lot of competition that's developing? Is it really the, I don't know, the technical integrations with ERPs like you talked about, the pricing, the service, the tech? Or is it just as simple as limited competition?
Yeah. I think it's a little bit of that tension. I think the thing that's unique in this business is the account managers. You know, lots of, you know, those in payroll or other businesses, you know, you have account people that kinda keep track of important accounts, keep them happy and all that stuff. In this business, the account manager's like know stuff, and they actually help the client, like, figure out stuff. Like, "Oh my God, you know, currencies are moving, right, and you're not hedged properly, you know, in this area." They say smart things all the time. I think the nature of the ongoing advisory relationship between Mark's smart guys and the client keep us in there. We get a lot of wallet share gains.
You know, we might only have 20% of the business with a client, and then because the guy is smart and helping the guy, that thing grows, you know, over the year, which adds to that 97%. You know, we might lose 10% of the clients, but grow wallet share in another 20% of the clients. It's set up pretty well, I'd say, to keep the retention high for those reasons.
Okay.
I'd say the thing that I would add too is we've always had very good retention, but as we've added products and we cross-sell more products into the same accounts, that certainly makes them stickier. We see the math that retention rates improve when we cross-sell multiple products into the customer. I think the big driver, in addition to the relationship management that Ron Clarke mentioned, is the tech integration. Once a customer is integrated with us from a technology perspective, so we're integrated into their ERP or into their accounting package, or we're connected to their front-end website that they sell products on, it's very, very difficult to dislodge us from that relationship once they've made that investment.
As we've improved the tech footprint of the business and have focused on integrating our capability across all three of our products, making that available on one platform and then integrating with the client, it makes them super sticky and hard for them to leave.
Thank you both. That's great.
You got it, pal.
Thank you. We will move next with Michael Infante with Morgan Stanley. Please go ahead.
Yeah. Hey, guys. Thanks for doing this. I was just curious on the relative pricing versus the tier 2 to tier 4 banks that serve the middle market. Can you just expand on that in particular? Also why you view the fixed cost base of the tier 1 banks, you know, being relatively prohibitive for them to make shift towards the middle market.
Yeah. It's a good question. I would say, you know, the overall pricing in the marketplace is relatively efficient, so we don't aim to win based on price. We need to be price competitive. We win on the value-added service. We win on the technology, and we win on the customer centricity and our ability to act fast. We don't necessarily need to price better. We price sort of at market to a certain extent versus the regional banks in the tier 2 to tier 4 category. I think the biggest driver of why we don't necessarily see the tier 1s come down into the market is, it's the fixed cost base, yes, but it's just the size of the TAM that's available in the enterprise space.
If you say overall that it's a $900 billion market ultimately in the cross-border arena from a revenue perspective, you know, $750 of that or $735 of that is in the enterprise space. They can spend all their time there, and it's a very target-rich environment, and they trade share with the other tier 1 banks. It's not as fertile a hunting ground for them to come down into the downmarket space. I would say the other part of it though too is you really need specialization in order to win in this space.
A corporate banker that is selling financing and selling, you know, overall corporate banking solutions, M&A liquidity to a customer is not really going to have the FX expertise to come downmarket and to really compete with us when it comes to a business that has the needs that are intensive in terms of either cross-border payments or FX spends. It's the specialization, I think, rather than the generalist approach of the big banks that allows us to win. I'd say the other thing is it's really, really hard. Even if the tier ones come down to the mid-market space and they've got good technology, they're just not very customer-centric, and they're pretty slow in terms of the way they do things. I'll give you a specific example.
If you're a mid-market customer and you want to open up a bank account, so you're operating in the United States and you want to open up a bank account for your new division in Europe, it might take you anywhere from two to six months to get that bank account open if you're banking with a JPMorgan or a Citi. That's a very real and normal experience. Versus with us, we'll have that account open in 24- 48 hours, if not faster. So that customer centricity, the ability to be agile for the technology to just simply work in the mid-market space, it's really how we compete and win even when we do come across the Citis and the BofAs.
Hey, hey, Michael. It's Ron. A different view to me is just it's where the game is for the big guys. There wouldn't be tier 2 and tier 3 and tier 4 banks, right? If the big guys could serve the whole world. Like, this is just one product, right? They're really in the game of lending, and their game is the giant companies that they hold all these deposits for and do all the lending. It'd be a little weird in a way, "Oh, hey, I'm gonna take 1 of my products and go run into a different market and, hey, work on that," or whatever.
I think it's more like, you know, they have three or four big products, mostly lending, and so they focus their stuff where the rest of their business is and leave kind of the acorn-y stuff to regional and local banks that have a lot of relationship people. I think it's pretty normal, right, that it's that way. In fact, they even look to people like us and other people to try to resell, right, to be more arms and legs for them. It, it's a pretty natural structure to things. The great thing for us is we compete with people who are good at local deposits and lending but don't have a footprint anywhere else. Obviously, they don't have people that know much.
I tell Mark all the time, I expect you to do better, like the guys serving the mid-market company are just, they're not super good at the product that we offer.
Yeah. No, no pressure, Mark. As you guys sort of look at the innovation in the space, mainly with respect to some of the on-chain FX providers, how do you sort of assess the solutions being built within that ecosystem and the probability or lack thereof of expansion between or beyond the crypto and digital asset natives to, you know, traditional corporates in the middle market, for instance? Thanks, guys.
Yeah. It's a good question. I would say, you know, we're a consumer of payment rails as well, so we're always looking for new technologies, new payment rails, new methodologies to move money, whether that's in-country connections or real-time rails, private blockchain, public blockchain. We're used to scanning the market looking for the best ways to move liquidity, the best ways to organize ourselves in terms of our bank accounts. That's something that we've been doing for, you know, the entire time that I've been in this business, is just constantly scanning for, you know, better ways to run backend operations. It's sort of a natural pivot for us to be able to look at this digitally native space now, public and private blockchains and to continually scan for new technologies that we can use.
The other part of it is because this is a focused segment for us, we have specialist people that all they do is look at the blockchain universe, and they're looking at opportunities in the stablecoin space. They're looking at opportunities with digitally native firms, whether they be crypto exchanges or stablecoin providers or firms that are offering an adjacencies, doing tokenized deposits or tokenized lending, whatever the case might be. This is a big area of focus for us and has been for a few years. Thankfully now it's a segment that's beginning to take off because we've been doing that skunk work now for the last two or three years.
Thank you. Once again, if you would like to ask a question, please press star 1 on your keypad now. We will move next with Mihir Bhatia with Bank of America. Please go ahead. Your line is open.
Hi. Good afternoon, and thanks for taking my question. Very helpful presentation, and quite informative. I guess one question I did have, though, was just how does spreads vary by customer segment or by product? Like, you know, as your customer segment starts shifting maybe towards a little bit more waiting for digital asset platforms, does that affect where the spreads, that 55 bid spread that y'all had, would that change? Similarly with like, you know, just the product between spot versus hedging, does the spread vary greatly?
Hey, let me take the first part and then I'll turn it to Mark. On the payment side, you know, which is this blockchain stablecoin thing right now running risk management contracts, the answer is it's incredibly efficient. Don't think about an average. We probably don't have a single transaction at 55 basis points, right? We have a massive distribution.
Right
on that 55. Think about the R squared is completely related to transaction size. Think about some small little payment, you know, $300, right, is the payment.
Hey, we're gonna charge, you know, $20 or something, or $10. It's 300 or 600 basis points, but it's no money. It's the spend is tiny.
The revenue per tran is tiny. Go to a real transaction, you know, $5 million or $50 million. We get 8 or 10 basis points, we get thousands of dollars for the transaction. The main thing that I want people to get here is there is no such thing as an average. There's a curve that's incredibly efficient when we look at the R squared. I don't want people hanging the phone up, "Oh, someone's gonna go in and just pick off these stupid guys at these banks. They don't know what they're doing." There's a lot of people working in this space for a long time that, to Mark Frey's point, are pretty smart at it. As I mentioned before, the rails are meaningless. They're nothing to the cost structure.
They're all free forever. They have no impact on anybody. The game here, guys, is acquiring client spend and transactions. He who does that wins. If you acquire a lot of big transactions to move like $50 or $100 million, like from the asset guys, you make lots of revenue because you're providing like a lot of liquidity, like a giant amount of liquidity for the guy to make the trade. I just hope everyone hangs this thing up with it's pretty efficient. It's on a curve that makes sense. We're pretty good at it. Innovation in rails is not the key. The innovation is going to be in selling guides. The key here is to Hinge's point, he who gets more customers and more big pieces of payment spend will be the one that grows revenue.
I think that's exactly right. I would offer just a couple of other things, is that the average spread between the payments business at scale and the risk management business is very, very similar. There's not a lot of delta between those two. What we do see is the more that we sell technology and integration into the customer, the stickier it is over time, and the more rate we get over time as well. This is a big part of our focus and has been for a number of years, is really selling the ERP integration, the technology adoption across the business. We do see slightly higher rates the more integration that we have, the more embedded we are with the customer. That's really a key part of the focus after we've acquired the customer.
All right. Got it. No, that's super helpful. Thank you.
Thanks.
You're welcome. Thank you.
Thank you. As a reminder, that is star and 1 on your telephone keypad if you would like to join the queue. We will move next with Ken Suchoski with Autonomous Research. Please go ahead.
Hey, good afternoon, Mark and Ron. Thanks for doing this. You guys provided some really helpful detail on the 18% organic, I think 16% volume, 2% yield. Just on that 16% volume growth, I mean, how much of that is, say, new logos versus just wallet share gains with retained accounts versus corridor expansion? Maybe related to that, when you work with a client, is there a typical percentage of their cross-border flows that you ultimately capture?
Yeah, great question. I'll sort of tackle it, the last part first. I would say overwhelmingly, we become the customer's primary provider. Ours is sort of a wallet share game. Yes, there is always an incumbent bank that we're trying to dislodge. Once we land a customer, certainly is trying to expand and grow as much wallet share as we possibly can. I'd say in that first year, we almost always establish ourselves as the primary liquidity provider, with the bank sort of being the redundant provider or the fallback. In terms of the overall churn rate, when we say we retain about 97%-98% of our revenue, there's certainly some structural loss, just like any business.
You have customers that go out of business, customers that are acquired from an M&A perspective, whatever the case might be. We make up for that with some wallet share expansion in particular customers. That's how we get to the 97% or 98%, because of that little bit of portfolio churn. In terms of, you know, the growth that we get of 16%, it's predominantly new logos. It is signing up new accounts and then deliver volume. I would say over the first 12- 18 months, really begin to scale that volume. We start off with maybe 20% wallet share and hope to get to 80% or 90% wallet share within the first 12- 18 months.
Hey, it's Ron. Just because it's 100%, 'cause that's how we define it. For us, when we give you that bridge and we say whatever the page said, "Hey, it's 21%," we literally say you had to be a new logo here in calendar 2026, and then we count the revenue just from those new logos. The wallet share thing is in the retention number, in the 97%. I want to be clear, we define it to be 100%.
Right. Okay. That makes sense. It's like a net, it's a net number on the 97, net of all the moving pieces.
Yeah. Think of that as their base clients. We have the client...
Right.
We have more or less. You just look across. Some we have more, some we have less, but when you get all done, we keep 97% of the revenue from all the base clients that we had.
Right.
Is the way we think about it.
Okay. That's really helpful. Ron, I know, I mean, lodging has been one of the problem children in recent years, but I recall you saying that you like that business because there's negative working capital. Could you guys just talk about the working capital needs to run this cross-border business? I heard the 60% netting, but just outside of that, what does that look like? How do stablecoins change that, if at all? Thank you.
Yeah, that's a super good question. The great news is on the payment side, it looks a lot like our full AP business, where there really, there isn't any working capital. We mostly work with good funds. You're a company, you wanna make a EUR 10,000 payment, I come grab, you know, $13K from your business, I convert it, and I send it. Payments, I'd say that it's kind of balance sheet light. On the risk management products, think of like forwards and options, there is some kind of be ready, right, if currencies move, to have some balance sheet to make our counterparties whole while we're waiting to kind of call money, if you will, from clients.
The great news, and one of the dirty little secrets of why we bought Alpha in the fall was the deposits. What I'd say to you is, we expect in the next year or two for this thing to be a total positive working capital business where we're getting deposits from clients. We're holding deposits from clients while we're also using capital sometimes short term to pay our counterparties. That would be the hope, that this would be kind of close to a zero working capital business going forward.
The other area where we do use blockchain payments ourselves, both stables and private blockchain is to move liquidity from one jurisdiction to the other after hours, ultimately. Trying to reduce the trapped cash that sits in Asia and our sort of follow the sun capital market and our follow the sun operational market, where our pool of cash starts up today in Asia, then it travels to Europe, and then it comes to North America. We don't have any liquidity, materially speaking, that gets left behind in accounts at the end of the day anymore after the wire goes because we can use private blockchain to move that money after cut-off time. That allows us to be quite a bit more capital efficient today than what we've historically been.
Yeah. Great.
Yeah. Great.
Awesome. Thank you, Mark. Thanks, Ron.
Got it.
Thanks again, guys. This is Jim. We don't have any more questions on the phone, but I did have a few emailed in that I'm gonna tee up for the guys here at the table. The first is, what stops digital payment providers from adding the FX capabilities that they currently need Corpay for?
I think what we're seeing is a trend in the marketplace is those digital firms are partnering with firms like us to be able to deliver that capability because it takes a lot of time to get the money transmission licenses to set up liquidity with banking partners, to build the infrastructure that is FX-centric, you know, the rail connectivity in the fiat currency worlds. You know, the competitive mode that we have is really just difficult to swim across ultimately. I think what we're seeing very actively in the marketplace is these digital firms are partnering with companies like us to become their fiat rail providers, and they're leveraging our strength and capability to do the on-ramp and off-ramp. We're providing the treasury liquidity for FX at scale for them rather than them building it themselves.
Hey, you had asked this, Darren. I don't know if you're still on, but it was a pretty good question about the couple of products and stuff. You know, hey, you tend to start with payments and then get risk management. When we bought the business, you know, we're a payments company. I'm like, "Oh, we have payments," and I meet Mark's company. I'm like, " I don't like this. What is this risk contracts and this stuff? Like, what is this stuff? Do we need this?" The question that someone asked earlier is the other reason the native blockchain stablecoin guys are dead on the thing. Like, they can't just go to a company and do payments.
We've learned that once you get in there and you figure out what the payment flows are, there's risks that service around the currencies, and the client wants to basically protect against that. They're gonna have to go get 800 of our people that know how to do this. You're back to, again, it's another moat that clients want both payment capability and risk management contracts. Not only do they need licenses and liquidity and stuff, they need people that know stuff to be able to write these contracts and advise clients. Like anything, it is a way hard thing to be in and have all the things you need to win in the space. Not easy.
Great. Thanks, guys. Next question is, what are potential reasons why your clients are not using blockchain versus why versus some providers, other newer public providers are quoting large and increasing blockchain transaction volumes that appear to be taking share from the incumbent players?
We are seeing, I'd say, pretty spectacular growth in our private blockchain rail, placement. You know, if we look at our overall business today, I'd say at the beginning of 2026, we sent about 40% of our payments via Swift, ultimately. By the exit of 2026, we expect that that will probably be reduced to less than 15% of our payments, and that will be largely cannibalized by private blockchain. We are seeing significant growth in those private blockchain rails, because of the inherent advantages that they're always on 24/7, they're programmable, they're traceable, and they're, you know, near real time in terms of delivery and, you know, more cost effective than ultimately, stables. The other part of why they're winning is it's just a little bit more operationally efficient as well. There's less friction.
There isn't a need to do on-ramp and off-ramp. When we think of it in terms of our own payment processing, you know, we are definitely shifting towards the private blockchain rails, and that is winning in our own minds because of those efficiencies, and I think we're seeing that in the broader marketplace as well. You're going to see the big network providers that provide these private blockchains are going to begin to disintermediate Swift rather materially. I think you're going to see transaction counts grow way faster on private blockchain than you will on public blockchain stablecoin rails.
Hey, it's Ron. My only add on the thing is, you know, whatever Chad says, it's, you know, $9 trillion a day. Like, I don't want people to miss, like, the existing rails are pretty good. They get most of the money there the same day. As you saw on the page, they're cheap, in fact, cheaper than blockchain. I don't want people to miss this, like, this thing works pretty good. With that said, there's clearly a role for timing that gets outside of the banking hours, right? The 24/7 nature. That, that I think is our view that they're not necessarily faster. There's all kinds of instant FedNow, other kinds of ways in different countries to move things, you know, instantly, and you saw the page, to move it cheap.
Our sense is when the world gets clear on this, there'll be some percentage of payments, particularly ones that need to move outside of the banking hours and system that would go into this, quote, "new category," but that lots of it would still stay on rails that have been working pretty well. I don't think it's a complete flip-flop, would be the message to you guys. Look, I think we've taken the time today, and again, we hope the goal here was to try to provide a bit more briefing on the business. I do want you to take away that we like it. You know, I like the thing. I don't know if you like these numbers. Our view is the thing is pretty durable.
This is giant, you know, playing field to go after, lots of places and lots of segments. We've got tons of capabilities. We're gonna embrace these new things, you know, to the extent that they're useful and stuff. The message we wanna give people is also no cherry here to go crush the economics. It's super efficient, follows a super smart curve in terms of size and stuff. The message to everybody is, hey, we're marching on with a plan to double this thing again over the forecast period. I think it'll land out. Thank you to all you guys for making time and answering the questions today.
All right. Thank you. I think, we're finishing up. Thank you, everybody.
Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.