All right, everyone. I think we can get started. Good morning, everyone. My name is Jing Zhang. I work at the UBS Payments Equity Research Team led by Tim Chiodo. I am thrilled to be here hosting a fireside chat with Payoneer. Allow me to introduce you, Bea Ordonez, Chief Financial Officer at Payoneer. Bea, thank you so much for joining us today.
Thank you for having us here. We're excited to be part of this conference.
Awesome. A lot to unpack for the recent development of Payoneer, but let's kick it off with a quick state-of-the-land update for Q4 intra-quarter trends. Anything particular you want to call out related to macro or company-specific trends, and then related, any callout that's worth highlighting for the holiday shopping season?
Yeah, happy to dive into that a little bit. So look, we noted in early November when we reported our Q3 results that marketplace volumes, so those are the volumes that come into our ecosystem from marketplaces like Amazon, Walmart, Mercado Libre, and so on and that are going to sellers that operate on our platform, our customers. We noted that those marketplace volumes were somewhat soft. We've seen similar-ish trends, I would say, in November. I think it's worth noting for these purposes, given that we're talking about that holiday season, that we see marketplace volumes coming into our platform on a lag, right? So the sale takes place on Amazon or eBay or whatever marketplace it is. The seller doesn't get paid for a week or more. So in November, we've seen sort of volumes more or less in line with October.
We don't yet have good visibility into the true holiday spending season. We haven't seen that post-Thanksgiving break holiday volumes begin to hit. In terms of the macro, look, we can certainly see, and we talk to our sellers in China and APAC and have a really strong franchise there. We see that they are adapting their behavior to the macro environment, adapting their behavior to the tariff environment. We've seen our sellers really broadening their distribution channels. We hosted just recently an event in Latin America for our China sellers with Mercado Libre, one of the big marketplaces in Latin America. So we see strong interest from those China sellers in looking to sell into markets more broadly and more globally. We see those same sellers adapting their distribution channels and their logistics and operations, adapting their pricing, and also looking at their portfolio of SKUs.
So what we see in terms of that macro impact is those sellers really looking to pivot their strategy in various areas. More broadly in Payoneer, look, our B2B franchise, it's about a third of our revenue. We actually saw acceleration in the volumes coming from B2B customers in the last couple of months. We expect the fourth quarter volume performance to be in the high teens. That's coming up from about 11% in Q3. And we also saw really strong travel spend. Perhaps this is indicative of that K-shaped economy that we're reading so much about. So really strong travel spend coming through, and that's contributing to strong payout volumes in our enterprise business. So look, what I'd say about the holiday period, like I say, we don't have strong visibility into the back half, the true holiday period.
We do see diverse performance across the marketplaces in our ecosystem, which I think is kind of interesting, right? So we have everyone from Amazon and Walmart to Etsy and eBay and sort of hundreds, frankly, of marketplace relationships. And we see that they don't all perform similarly in all instances, which I think is probably indicative of shifting consumer spending patterns, shifting seller behavior. So it's interesting to see really that diverse ecosystem in action.
Awesome. We really appreciate the detailed update. Next few questions, I want to dive deeper into the cross-border B2B business. As we know, cross-border payments remains a complex space with lots of barriers of doing business, especially for SMBs. Can you walk us through some of the challenges around cross-border payments or cross-border B2B and related, or more importantly, how does Payoneer use your financial stack to address these challenges?
No, happy to do that. So look, as you say in your question, right, cross-border SMBs are remarkably complex. It was actually surprising to me when I joined Payoneer sort of close to three years ago. We do a lot of market research in the space. I'll share a couple of stats. Roughly 55% of SMBs that we've surveyed, and these are small SMBs, GMV anywhere from $10,000 a month to as much as $1 million. So that's still a pretty small company overall. 55% have global AR and AP needs, accounts receivable, accounts payable. Two-thirds have entities, legal entities outside of their home jurisdictions. What does that mean? It means that relatively small companies are dealing with surprisingly complex treasury operations in effect, multiple currencies coming into their company, multiple accounts payable needs in multiple jurisdictions and countries.
The local infrastructure or the legacy financial infrastructure isn't well placed to solve for those. You're dealing with multiple financial institutions, many currencies, and you don't have a lot of internal sophisticated systems. You're dealing with a correspondent banking system or rails that are slow, cumbersome, expensive. What does Payoneer do? We deliver a financial stack that allows those SMBs to effectively be paid, hold currencies, and pay in multiple currencies across multiple trade routes. They can do that within a single platform and within a single user interface.
Those are great insights. And you touched on currency management. So when we talk about cross-border payments, we can't skip the FX component. How do you deploy multi-currency management for your customers? And what is the underlying strategy Payoneer utilizes to maximize your currency conversion monetization opportunity?
Yeah, look, 100%. It's one of the very real complexities that our customers are facing. And again, that user interface that we provide, that platform of services, allows a company, a small company, to get paid in many currencies, to hold those currencies for as long as they wish within the platform, and to pay their suppliers, their vendors, their employees, their contractors in multiple currencies and in different jurisdictions. And so in effect, the nearly two million customers that we serve can be truly local both to the customers they have and to the suppliers and vendors that support them. And they can utilize local real-time payment rails to get paid and ultimately to pay those vendors. So I'll give you an example because it's easier, I think, to connect to.
So a seller on Amazon or Mercado Libre can get paid by that marketplace in that local market in the local currency. Perhaps that's U.S. dollars. They might incur bills in that same currency. They can hold those dollars and pay on those local rails. They can convert. They can use one of our AP products to do that. And we monetize along the way. It's just one aspect of our monetization strategy. We look to those FX transactions. We look to what currency pairs, the relative liquidity, the kind of product that the customer is using, whether they're using an FX lot contract, for example, or just a spot. And we monetize accordingly. And it's really part of that broader monetization strategy.
Right. Appreciate the insight. I do want to follow up on this fascinating FX topic and drill down to the product level question for Payoneer. So you recently announced the renewal of your Mastercard agreement to support multi-currency card offerings for cross-border AP needs. Can you break down the mechanics of offering a cross-border card product? And around the FX conversion monetization, how is it different from the current networks handling the FX piece?
Yeah, it's a great question. Look, we've seen really strong momentum with our card product as part of that broader AP suite of products. We have about $6 billion in usage on that card product in the last 12 months. And in the third quarter, we grew that volume by 19%. And to your question, look, we have a multi-location, multi-currency issuance model. And that really allows our customers to pick the card and currency combination that best meets their needs, best fits their local needs and their cross-border needs. And in that sense, our card is a much better fit than a locally issued or a bank-issued card for those customers because it allows them to avoid unnecessary and expensive FX conversions. Again, that example I gave you, I think, is instructive. You're a seller in, let's say, Vietnam. You get paid via Amazon in dollars.
You have logistics and advertising costs with Amazon in dollars. Our card allows you to avoid unnecessary friction and FX conversion along the way. While at the same time, and I think this is worth noting, what we see on that card is still a high percentage of cross-border usage, right? So as an example, our U.S.-issued card, we see between 30% and 40% cross-border usage on that card. That compares to a corporate card issuer in the U.S. who might see less than 10% on the average. What does that mean for us? It means higher yield, higher interchange, better yield dynamics overall. And it allows us to offer a better value proposition to our customers in the form of rewards and cashback.
So it's a powerful part of the model, and it's been a powerful part of how we've continued to drive more value and really drive take-rate expansion in our business.
Beautiful. I think we covered the cross-border business section quite well. But to sum it up, maybe a quick hitter on the competitive landscape and the differentiation you would like to highlight for Payoneer, whether it's in terms of products or geographic and your infrastructure differentiation that put you into a well-positioned competitive space.
Yeah, no, for sure. Look, it's definitely a dynamic competitive landscape, right? In the marketplace business, we see strong competition predominantly out of China, well-known names like Airwallex and WorldFirst. More broadly in our B2B franchise, we're largely competing against local banks and legacy sort of financial players. And as you think of that competitive landscape, obviously local banks aren't going to be able to deliver the multi-currency sort of functionality that these cross-border businesses need, while global banks really aren't focused on that SMB space. Similarly, as the payments landscape and the financial landscape evolves, we're seeing strong regional players pop up, neobanks and fintechs. So it's a hyper-dynamic environment. What do we think are the moats around their business? I think there's several, right? So one, it's our global scale and reach. We have customers in 190 countries and territories. And we service 7,000 trade routes.
We can do that based on a really complex infrastructure of payment providers and financial institutions in our network. Over the years, we've built a highly resilient network that allows us to move upwards of $80 billion of volume through our ecosystem. We've built a really broad ecosystem of players in the e-com space and more broadly, so hundreds of marketplace relationships, as I've said. We continue to add really important marketplace relationships. We were just appointed the strategic payout provider or one of them for TikTok. That's an exciting win for us. We recently added Best Buy as a marketplace that we serve. We've been ramping up with Alibaba, which is a marketplace that we added earlier in the year. We've been ramping up with Etsy, which is a marketplace that we won in early 2024.
So a broad ecosystem of marketplaces, and we continue to add and grow that ecosystem. And again, two million customers operating on it. And then I would call out the licensed and the compliance infrastructure moat around the business. So we are licensed in multiple countries that allow us to operate and onboard customers in those countries. And we continue to add licenses to our ecosystem. We're in the process of adding a license in India, also in Canada, in Israel. So we continue to expand that regulatory moat. And then I think the final point I would call out is, look, we're focused very much on the SMB and on solving those problems for the SMB, an area that is underserved by sort of traditional financial services. And we are local to the customers that we serve.
We have client success managers and support with boots on the ground in 35 countries. Those folks have real deep local market expertise that they use to support the customers in those regions.
Awesome. We appreciate you breaking down the competitive landscape. And we believe there's still a lot of untapped space in cross-border and in B2B for all the major players to continue penetrating.
I think that's right.
So moving on to a very exciting topic, which is your roadmap to profitable growth. Your recent performance put you well on track towards your medium-term targets despite a volatile macro. So a two-part question. Can you expand on the strengths of your business that helped you navigate the macro uncertainty? And then looking ahead, when we tie together your medium-term growth algo of mid-teens revenue growth, 25% Adjusted EBITDA margin to a revenue growth acceleration to 20% plus beyond 2026, can you help us unpack the trajectory embedded in these targets?
Yeah, for sure. Look, we've been really pleased with how the business has performed with what has been, to your point, a really volatile macro environment overall. The business has performed in line with the medium-term targets that we set in, I think it was September 2023, mid-teens growth, Adjusted EBITDA margins above 25%. So the business, to your point, has been really resilient despite that volatile macro. You know, I think I'd call out a few things. One, it's a diverse business, right? The sellers that we serve are diverse both in terms of the geographies where they sit and also in terms of the mix of goods and services, the mix of discretionary and non-discretionary spend. So we see a diverse portfolio of business that makes us somewhat more resilient to some of the kind of more volatile aspects of the macro.
It's worth calling out a couple of sort of stats here. 40% of our revenue doesn't touch the U.S. at all, right? So we're in the e-com space. The U.S. is obviously a super important market in terms of an importer. 40% of our revenue doesn't touch the U.S. China has obviously been in the spotlight given the tariff environment. Roughly 30%-35% of our revenue comes from China. And if we break that down further, roughly two-thirds of that is China to the U.S., and roughly a third of that is China to rest of world. So again, a pretty diverse sort of mix of business there.
You know, double-clicking a little bit more into that marketplace performance over the last kind of couple of quarters, look, I think it's fair to say that marketplace volumes have likely been supported by some of the stockpiling of inventory or sort of pulling forward of inventory that we've all read about that sellers did in the earlier part of the year, and obviously also by relatively stable spending behavior, right? So what we've seen to date, despite a kind of mixed bag of economic indicators, is pretty stable sort of overall spending behavior. Shifting to just B2B for maybe a quick moment. Look, B2B business, as I've said, is about a third of our core revenue.
It's about 80% services, so much less exposed, obviously, to tariff pressures and really focused on regions like LATAM and APAC that have been our fastest growing regions for really a couple of years now. As I think of the drivers to revenue acceleration, I think what I would call out first and foremost is the size of that addressable market, as you've said, in the B2B space, right? So a third of our revenue today growing more quickly than our marketplace business. Our strategy is really to continue to penetrate that massive market. We've sized it as anywhere up to $6 trillion, continue to add customers where we're really sort of well-positioned from a product-market fit perspective, growing ARPU, which we've done for five consecutive quarters.
We've grown ARPU above 20%, cross-selling our value-added services, our checkout product, our workforce management product, our card product, driving better retention, and again, really capturing sort of that upmarket cohort where we're growing more quickly. So that's our focus. That's how we unlock growth. Obviously, the macro environment remains dynamic. Obviously, it's fair to say that that marketplace business is more exposed to weaker U.S. consumer trends, but we're very focused on sort of driving that business forward into the long term.
Awesome. And part of the building blocks of your growth trajectory is your mix shift into upmarket. And you recently highlighted your $10,000-plus ICPs continue to drive volume growth as part of your strategy to mix shift into larger customers. And through that, we see benefits such as larger balances corresponding to these customers and then, of course, greater adoption of product offerings. So how do these benefits reflect on your key financial metrics? Related to that, more on a qualitative concept, when you highlight these upmarket customers are using your platform as a bank replacement, what are the main differentiators that provide this customer stickiness? And is there any product attachment rate that you want to highlight?
Yeah. No, happy to touch on a few of those. Look, we highlighted again in November, and I think in various sort of calls along the way, that we're continuing to evolve our strategy to move upmarket to larger customers, to customers with multiple entities, with more complex needs. We've begun to share some data, so I'll share it here again. So customers who do more than 250,000 of GMV per month on our platforms, that's 3 million a year, make up roughly 30% of our core revenue. And in our B2B franchise, they make up about 50% of that revenue. And to your question, what we see with that cohort is higher attach rates in terms of the products they use. Makes sense, right? They have more complex needs. And we also see the best logo, volume, and net revenue retention of sort of our portfolio among that cohort.
They're also likely more resilient to sort of those macro environment sort of factors than smaller customers. So all of that informs our strategy to continue to move upmarket to solve for that complexity. And we're seeing it show up in those financial metrics as data points, as you noted, right? Three-quarters of consistent mid-teens growth, top-line growth, even against that volatile macro. ARPU, as I said, ex-flow income up 22% in Q3 and up for five consecutive quarters by more than 20%. And we see more adoption of our high-value services. So our workforce management business, it's a business that we acquired about a year and a half ago, more or less. We're continuing to cross-sell that into our customers, more adoption of our card products. And that's really driving the take-rate expansion that we're seeing in our business.
You know, look, the bank replacement, it's a really interesting sort of part of the value prop, right? And again, it goes to sort of the multi-currency needs of these customers and how underserved they are by sort of more traditional banks. We're seeing sort of more customers using us as a bank, holding funds on our platform for longer. We have $7 billion approximately in customer funds that sit on our platform, excuse me. That grew 17% the last two quarters. So we see increasingly that customers are using our platform as a pseudo-bank, if you like, to really run their cross-border operations.
That's a really detailed answer on upmarket. And I think related to that, we can shift gear a little bit to SMB marketplaces. So do you want to touch on SMB? You highlighted missing a digital volume growth in SMB marketplaces in the recent quarters. More of an industry question and then related to Payoneer as a follow-up. So in the e-commerce landscape, we believe there has been a secular shift of SMBs being aggregated to platforms and marketplaces, a lot of those Payoneer works with. So can you provide your perspective on the rate of change for individual SMBs being aggregated to the platforms and marketplaces? And for Payoneer specifically, how is the take-rate optimization or expansion opportunities looking like going ahead from here with the SMB trends?
Right. Yeah, no, look, absolutely. It's a super interesting space, right? So I would say in terms of how saturated marketplaces are, we see differences both at the marketplace level and at the geo level, right? So for marketplaces with really well-established third-party distribution channels, Amazon is the most obvious example of that, right? It's pretty difficult for new SMBs to win the Buy Box, right, to penetrate into. So you would say that those kind of marketplaces are pretty saturated. It takes a lot of upfront investment to win that Buy Box and to win sort of the ability to sell on marketplaces like Amazon. I think equally, though, given the tariff environment, we're likely to see that some of those marketplaces begin to diversify their channels to have less concentration risk, frankly, versus more tariff-exposed countries and to have a broader mix.
For marketplaces that are maybe earlier in their journey in terms of third-party distribution, who are either expanding or deepening that third-party seller base, we do see opportunity for newer SMBs and established SMBs to enter. We saw that with some of the emerging marketplaces in China like Shein and Temu. And really, if I bring it back to sort of the Payoneer, again, we're expanding our ecosystem of marketplaces. And one of the value props that we use in order to do that is our ability to connect marketplaces who want to diversify or enter that third-party seller sort of ecosystem. We connect those marketplaces with high-quality sellers who are already operational and have strong businesses. And we call it our Green Channel offering. It represents a real sort of value proposition to both our sellers.
We give them sort of access to demand and to marketplaces who want to get access to supply. So Best Buy is a good recent example where we're serving those needs. So again, as I think of Payoneer and how we're leveraging sort of take-rate expansion and geo-diversification, we're leveraging both of those things, right? So we've been able to deliver revenue growth of 15% this year. And we're focusing again on that upmarket segment, those higher GMV-producing customers. We're driving strong growth in APAC and LATAM, where our take-rate is about 2%-3% versus the aggregate take-rate, which is 1.2%. And we're driving strong adoption of our higher take-rate products, right? So our card products, we talked about it a little bit. It's about a 3% take-rate. And we continue to see strong adoption, particularly among that 250-plus, that $250,000 of GMV-plus.
The adoption rate among those kind of customers is about 50%. So again, using all of those tools to really expand our ecosystem, drive value-added services, grow into higher take-rate regions is what has allowed us to continue to drive growth.
Beautiful. Thank you, Bea. So we have a few minutes left and two important topics I do want to hit on. One is on your pricing philosophy. Payoneer recently has gone through a pricing philosophy change from a one-size-fits-all model to a more adaptive pricing model, which makes a lot of sense. But can you walk us through the change of strategy and how do you tie this change into product-specific pricing opportunities from here to drive more monetization opportunity?
Yeah, happy to do that. So look, you're absolutely right. We've evolved our pricing strategy a fair bit. I joined coming up on three years ago. And really what we saw then within the portfolio was sort of elements of the portfolio with customers that had, frankly, upside-down economics where we really needed to reset how we looked at that portfolio of business. We also became, over time, much more nuanced in terms of our by-product, by-route pricing. It had been, to your question, pretty one-size-fits-all. And we really needed to ensure appropriate monetization of FX, more nuanced route-based pricing, and so on.
As I look out really sort of 2025 and forward, and really 2024 is when the work began, we've developed a much more segment-based pricing approach and one that is, frankly, much more sophisticated and dynamic, which seeks to capture share of wallet, really grows with our customers, differentiates and bundles our products in a way that we think can drive more adoption overall. So it's gone from a one-size-fits-all with upside-down economics that really needed to reset to really sort of fluxing now into a much more sophisticated and dynamic model that will grow with those larger customers over time.
Perfect. We have about a minute left and what's a better topic to end this fireside chat than talking about stablecoin for cross-border? Our team has done some work on stablecoin, and we believe it is important to have a healthy respect for stablecoin adoption, particularly given the cross-border angle of this payment method compared to other emerging methods that could be more domestic focused, like account-to-account or buy now, pay later. On stablecoins, can you share Payoneer's strategy around adoption and then very excitingly, the upcoming stablecoin wallet functionality in 2026? Maybe tell us more about that.
Yeah, look, we're actually really excited in the stablecoin space. We see it as part of a broader innovation in cross-border payments. You see it in local payment schemes in Brazil and India that you see these super mobile-first real-time schemes, seeing a ton of adoption, and stablecoin is another sort of payment rail and another way of storing value, and we view it against that lens, right, so as we look to sort of the ecosystem that we've built, it's really all around orchestrating and connecting those different payment schemes, those different stores of values and currencies, and doing it in a way that is seamless to the customer and removes friction, so that's where we see the opportunity for Payoneer, right, we're able to really seamlessly integrate our network of payout providers, our network of money movement rails, and provide that seamless integration to stablecoins more broadly.
We're excited to be launching a stablecoin wallet functionality in early 2026 and think that we can really solve for that last-mile challenge that exists in really translating the promise of stablecoins that today is largely within sort of a crypto-native ecosystem into something that has real-world utility by providing the ability for customers who are getting paid in stablecoin to ultimately off-ramp it to their local economies, to their local use cases, to whatever payment rail, frankly, they want to utilize to operate their business.
That's awesome. We really, really appreciate all the detailed insights. And then on behalf of the UBS team, Tim, our lead analyst on our team, and then the entire UBS Equity Research crew, thank you so much for joining us today.
Thank you. It was really great to talk to you.
Thank you so much.