Online sellers who ship orders internationally have several challenges: translation, delivery, taxes and returns often top the list.
But what about the fundamental issue of receiving the income from sales they’ve made? For many marketplace sellers, just getting their money back home is not a problem: Amazon and eBay (through PayPal) will send funds to a bank account in your own country, conveniently converting currencies along the way.
So why would sellers use a third-party company like World First to handle their foreign exchange needs? What do they have to gain from doing that?
World First, a fast-growing company with its headquarters in the UK, has won numerous awards and established an outstanding record of customer feedback here on Web Retailer. In the apparently simple business of changing money from one currency to another, what could it be that sets them apart?
To find out, I spoke with World First’s Chief Commercial Officer Alex Sullivan. We talked in-depth about the company and their services for online retailers.
Andy: How did World First get started? What was the initial focus and why did you start providing services for online sellers?
Alex: World First was launched in 2004, and started with the aim to offer services to people that the banks just weren’t reaching. It was as simple as that. The founders came from a banking background, and they could see the big companies getting a level of service that others weren’t getting access to.
In the first year or so the private business really, really started to take off because around then a lot of people were buying homes overseas. The focus on the business side, with the corporate and ecommerce businesses, started in 2006. It came from two directions. One was that customers were saying to us they needed to get access to bank accounts, to be able to sell overseas. At that time none of the marketplaces, including Amazon, had any international payment facility. So it was very much customer-led.
Also we had come in saying that we would offer services to small businesses, and part of that was supplier payments, and hedging and protecting from rate fluctuations. So that business was born. Typically that’s how a lot of the things at World First have happened, because customers were saying to us, “We want to be able to protect against rate fluctuations, but we don’t just want to be locked into a rate.”
How long have you been at World First, and how has the business changed since you joined?
I’ve been at World First nearly 10 years, and I’ve been in the FX and payments industry another couple of years on top of that. So I’ve seen this space in all conditions over the last 12 years or so.
When I joined World First I was employee number 10, and we’re now somewhere between 350 and 400 people globally. When we launched we were just in the UK, and now we’re very wide-reaching with offices in the US, Asia, Australia. It’s a very interesting space to be in, as cross-border is changing and increasing. Payments as an industry is really motoring and starting to change. I think we’ll see even more dramatic change over the coming years. It’s a really interesting space to play in – great fun – and definitely keeps you on your toes at the moment.
Foreign exchange seems simple in principle but it gets complex and confusing pretty quickly. How much do businesses need to know to use your service effectively?
We’ve actually got some survey data, that said one of the biggest barriers to entry for cross-border trade was FX [foreign exchange] and the perceived complexity. There were a handful of other things up there like VAT and logistics, but the complexity and fear of FX was one of the top barriers we saw come back.
So that’s what we see our job as, to get rid of complexity and turn it into a language that our customers can understand. The customers that we work with are small businesses, and this isn’t their main focus. It’s a by-product of something that they need to do, to achieve what they want to achieve, typically cross-border trade through online marketplaces. So I think that is our role. It shouldn’t need an instruction manual, it should be easy to use, it should be simple.
To the customer, it’s just moving money from A to B. Is there complexity underneath it? Yeah, there is. But not that a customer needs to worry about. There is a perceived complexity, but our job is to get rid of that and just make it easy to help you move money in the way that you want to.
Why do businesses selling internationally through Amazon and eBay come to you? Is it just that you can offer them a better exchange rate for transferring funds back home?
Well, price is one part of it for sure. If you compare our pricing to Amazon payments or to PayPal, you’ll find that our pricing is lower. That is one part of it, but there are lots of others. One is customer service. We’re available 24 hours a day in local language. While lots of customers like to go online to manage their account, they also like to speak to people. They often have challenges that we help them with, and we have a very experienced team.
We have an online system that allows them to go in and manage their own money, not just set disbursement dates, so they can get their money quickly when they want it. Our customers don’t want one payment coming in here, one payment coming in there. It’s difficult to track, different rates, different processes. So they have all of their marketplace revenues coming into one place. They can move money back home as they want, make supplier payments, or do whatever they need to do with that money. So there’s certainly an ease of use benefit.
Then obviously merchants want money in their home territory currency. Some marketplaces don’t have any payment system at all for cross-border sales, so it enables them to sell to places that they couldn’t otherwise reach. One of the things that we’re doing with customers now is helping them get onto new marketplaces to increase their cross-border sales.
Are there some countries where Amazon and PayPal (for eBay sales) don’t send payments?
Absolutely, there are a number. China is a major one. We make payments to China in renminbi the next day online, and we’re the only company to do that as far as I’m aware.
Asia as a whole is not as well covered in terms of payments. That’s something that the marketplaces currently don’t do that World First does.
How are you helping sellers get set up new marketplaces?
One of the things that we’re really focusing on is how we help our customers grow. We’ve started to work with marketplaces to help them provide cross-border payments using World First, and also help our customers sell on more marketplaces. In the last month we launched partnerships with Newegg in the US, and Cdiscount and PriceMinister in Europe.
All of them have special offers for World First customers. There’s a discount for World First customers selling on Newegg, for example. And we’ve worked with Newegg to make it easy for our customers to get onto their marketplace. Newegg will pay through the World First system, so it’s another barrier to entry that’s been knocked down for merchants.
We’re just launching relationships with some of the inventory systems, which is about us saying, “We know that if you’re going to sell on multiple marketplaces you may need an inventory system to be able to do that.” That’s one of the ways that we’re trying to help customers grow. Another example is that we launched a partnership with CreditEase in China, who do working capital loans based on marketplace sales data, so it’s much quicker than the traditional way of lending. World First customers get a beneficial rate on that credit.
That’s something we would like to continue to build. We want to work with the industry to make it easier for our customers to grow, whether it’s VAT or whether it’s logistics, whether it’s working with marketplaces. We want to try and tick off those boxes.
So do customers come to you with their other cross-border challenges?
Customers will tend to approach a marketplace first, typically Amazon, and a lot of their needs are taken care of through that process. But the sort of things that still come up are VAT, bank accounts, tax, translation, customer service. Getting a bank account is one that we look to address with them, so they don’t need to go onshore and open up physical bank accounts, we do that for them.
As competition increases, our customers want to diversify in terms of marketplaces and countries. As they start to add other marketplaces, some of that complexity increases, because FBA isn’t viable or the logistics can’t work, for example, so they need to solve their own logistics challenges.
A lot of our merchants are in Asia, and sell goods to the US. You need customer service in the local language, but the marketplaces have different requirements around it. Some are happy with an email, and some need you to have onshore telephone systems.
There are some common denominators, but there are also quite varied challenges, because our customers vary. Someone who has a small number of SKUs isn’t too bothered about inventory management. Someone who has a large number and a decent margin might be worried about solving logistics problems themselves. One customer will go onto a marketplace because the margins are better and they can afford the extra cost, the next won’t because their product is lower margin and the logistics are more expensive. We tend to see the same issues, but it’s individual in terms of actually solving it.
If a business wants to start using you, what’s involved in the process? Is there a lot of admin to get through?
It’s not particularly onerous. You can either register online, or do it with one of the team on the phone. You give us some information and an ID check, as you’d expect with any financial services product. Typically the process is all covered within about an hour, certainly within a day.
In terms of the process from there, it’s very simple. You can instantly open any of the bank accounts that you need globally. There’s no time delay. You are given all of the bank account numbers, and you simply need to plug them into Amazon Seller Central, or into the payment system for the marketplace that you want to pay into World First, and that’s it. The money will start to come in. You’ll have instant access to our online system, and instant access to a personal account manager.
However you want to book transactions, whether you simply want it to happen automatically on a set date, over the phone or online, you can do it any time day or night. We pay out in over 200 currencies, and we can pay to any bank account in the world. So it is incredibly simple.
We don’t have any minimum business size, and there’s little or no difficulty in terms of opening an account with World First and getting set up. There’s no charge, and there’s no commitment to use us. You can register, get access to the account, and if you want to use us you do and if you don’t, don’t. We exist to make life easy. We’re a small business ourselves, only 10 years old, so we know what it’s like.
So let’s say I’m selling on Amazon and I have a fixed payout frequency from Amazon. Once I’ve set up with you and entered the bank account number into Seller Central, that payment from Amazon goes into the World First account and it stays in the currency of the sales?
Yes, it stays in the local currency. Then you can do whatever you want to do with it. You can pay it out in that currency, you can convert it and pay it out in another currency. You can make supplier payments; you can pay it back to your own account. Whatever you want to do.
You’re gaining flexibility, by putting all of your money into one place where you can manage it. It’s trackable, it’s quick, and it’s better priced than having it go straight into your home bank account. Bear in mind, with that flexibility there are also costs. If you have it go into your local currency, and then back out into another currency, you’re going to be hit twice on exchange rates.
When someone opens a bank account with you, is that a shared account of some kind or is it really just their own account?
It’s a World First account and it is specifically for that merchant. That means, for example, if there was an issue with one seller it won’t affect any others in terms of receiving bank accounts. It is a completely segregated protected account; “ring-fenced” I guess would be the common terminology for it.
The approach that we have had since the business started is that you protect customer funds. Being open, we did that long before there were rules that said that’s what you need to do. Our view is we’re a very prudent business and that is good practice. A customer’s money should be safe fundamentally, that is the basics of what you would expect from dealing with a business like us, that we would make sure your money is safe and never at risk.
Exchange rates are moving all the time, so how should a seller decide when to bring money back into their home currency and bank account?
There’s no crystal ball and there’s no magic, day, time, or month when rates are better. It isn’t really possible to predict when the “best rate” is going to be. So you’ve got two ways of managing it. One is that you take a view and you say, “I’m going to book it when I book it and I’m going to take the rate at that time.” The disadvantage is that if it goes against you then you’re losing on your core margin, and if it goes for you then you’re gaining on your core margin.
The other way to do it is to lock rates in advance, which are called forward contracts. So you fix rates for a period of time for some or all of what you know you’re going to sell. That gives you a guaranteed rate. The advantage is that you know the rate of exchange you’re going to get based on your sales, so you get a guaranteed margin. The disadvantage is that if the rate improves in that time you don’t get access to that improved rate – you have a fixed rate.
Customers approach it in totally different ways, it depends on their margin and it depends on their mindset. Some would rather have a guaranteed margin, and manage that with us. Some would rather just take the view that sometimes it’s up, sometimes it’s down. But as for getting the best rates, when they book through us they know what they’re getting, and it’s as good as they can get access to. In terms of the predicting the actual market rates sadly that’s the impossible.
More often than not customers will opt for simply getting their money at the best rate that they can, and doing whatever they want to do with it. A proportion will try and protect the rate, mostly bigger sellers. But most people are focused on their products, and they want to know that the money comes in quickly and efficiently at the best rate possible. Typically I think any further complexity is avoided.
You’ve explained very clearly the bank accounts that you offer, and also touched on forward contracts. Are there other services that you provide for online sellers?
We provide supplier payments as well as payments back to their own bank account. The advantage is that they don’t need to do two conversions. They can have it come in, in any currency, then go straight out rather than having to go into their home territory and back again. There’s also ease of use: the money is in the account, all the beneficiaries are stored, so it’s a few clicks of a button and the money is paid.
We are a payments business, that is what we do all day every day. We focus on great customer experience and speed of payment. We did a world record exercise for the fastest international transfer, and had money cleared in a bank account in Germany in under seven minutes. Everything is focused on just making it work.
Our customers have mountains of things to do, they’re very busy people. They want to be able to go online at any time, click a button and the payment’s done – they don’t need to worry about it. It’ll be there instantly and there’ll be no problems, that’s what customers expect from us.
Do you have a specific team that works with online sellers?
We have people all around the world who are specifically account managers for ecommerce customers. But we are also heavily involved with the industry. We work with partners that are specifically focused on the ecommerce industry. We go to events, we talk to people, we have regular feedback sessions with customers where we talk about their challenges. And again, we do that globally.
And we talk to partners about what they’re seeing and what their challenges are. We have a collaborative approach to how we improve our product, what we do next and how we can best work, to try and make life easier for customers. Some of the feedback we get from customers is that we have a very experienced team. We were one of the first businesses, if not the very first business, to do this. We were doing this before Amazon, so we’ve got nearly ten years of specific ecommerce payments experience.
We also work with partners to come in and educate our account managers, so the partners we bring in also do training for our team. We also go and register with every single marketplace – we go through the process and immerse ourselves in it. We are a very customer-centric business. All of our growth has been through doing a good job for customers, customers telling customers, and staying with us ultimately.
There hasn’t been any big acquiring spree, it has been very organic. People have told us how to make it better, so we’ve made it better. That’s one of the things that we really try and focus on here.
Are there any foreign exchange issues that are unique to ecommerce businesses?
We see some of the sellers that are doing cross-border now wanting to get into more challenging markets, where the competition is lower or the margins are higher. With that there does come some additional challenges, because of the currencies that they deal in. It’s one thing to deal in Euros, it’s another to deal in Mexican peso and Brazilian real – the payment systems are more complex for a start. So that’s one thing we are hearing more and more from customers, “How can you get us into a place that’s really difficult currency wise?” And we’re happy for people to talk to us about that.
Of course with those currencies they tend to be more volatile. These guys can be reliant on the FX rates to maintain margins. The level of volatility that you might typically see in euro could be very different to what you might see in Brazilian real for example. I think the importance that currency has in the businesses is going to grow and become more of a focus.
Why is customer service important in your business? Aren’t most people just going to manage their accounts online and never need to contact you?
Customer service to me covers a multitude of things. We focus on technology as well as people, so I think great customer service is giving the customer what they want when they need it. For a customer who just wants to go online, make a payment, and go away again, great customer service is making that seamless – making sure that the money arrives as quickly as it can, that there are no intermediary charges, that they get the best rates. It can be as simple as that.
In the background our technology is doing lots of things to make that happen: what’s the best way to pay it? What’s the quickest way to pay it? It’s making lots of decisions that a customer doesn’t need to worry about. Customer service to me is that the experience should be the way that the customer wants it. A lot of our customers go and book rates over the weekend, for example. That to them is great customer service. It doesn’t matter that the markets are closed, that’s what they expect from us and that’s what we give them.
For others it’s that we’re three rings away, and there are no automated voicemail systems. You get straight through to a personal account manager, and they will look after you in your local language and time zone. Why would people want to talk to someone? There’s lots of reasons, and it may have nothing to do with moving money from A to B. They may have another challenge that they just want an opinion on. “I’m thinking about going into this country, who do you know? What partners have you got that can help me do that? What challenges would I face in terms of moving money from A to B?”
If I think about great customer service, then as a consumer Amazon is brilliant. I don’t think I’ve ever spoken to them, but I can go in and in one click it stores everything – it just works. Our approach is the same: it should just work. I’ve had that feedback from customers, “I move money from A to B, it does what it does.” But it is very easy for it to not work. There are plenty of reasons why someone will come to us and not do it another way because, in the past, they’ve waited days for their money – that impacts their business heavily. Those things need to work and we need to be consistent at them. And when a customer wants to pick up the phone, we’re instantly available and we’ll help them out.
What changes do you think are on the horizon for online sellers who trade internationally?
I think there will be a lot. It’s really still quite a small proportion of people that are doing cross-border now. The marketplaces and other businesses in this space will start to make it easier to do, and more people will come into it. So for those only doing domestic that creates opportunity, but for those doing international already, it increases competition.
Margins are going to stay a hot topic, because you’ve got FX volatility and you’ve also got increased competition. Equally though, as more customers come in and buy more goods, that might drive down the costs of logistics. That’s going to be interesting.
I think access to more marketplaces, new countries, new territories is a lot of what we hear, and a lot of what I think will be happening over the coming years. It’s getting easier to plug into multiple marketplaces, because the marketplaces are integrating with the inventory systems and they’re making it easier to connect and be able to sell on them.
Then more and more marketplaces are looking to people like us to help them solve cross-border payments. They’re coming to us and saying, “We want to switch this on, we don’t want to be a payments business, can we partner with you to do this?” And you see more marketplaces doing lending, like Alibaba and Amazon now. I think there’ll be more of these collaborative approaches, and the barriers to entry will become lower still. That creates opportunity, but it also creates competition.
Alex, it’s been fascinating hearing more about World First and your thoughts on international ecommerce. I really appreciate you sparing your time, and I hope your success continues.