Executive Interview: Transpay’s Mike Carlo on cross-border payments

First Published on 5th January, 2017

Every market has its own payment mix, mandates, checkout and risk management considerations. When you think about the scale of global travel, monitoring these multinational regulations is a rigorous process.


Payouts are a complex process that entail one organization making mass payments to different recipients and bank accounts. With payouts, merchants have the opportunity to manage for cost reduction and efficiencies. A merchant can manage the process to be in their best interest versus with a consumer conversion that requires more flexibility.

As being witnessed with payment acceptance, travel companies are embracing an array of cross-border payment options for a local payout experience.

This is a welcome change as cross-border payments have progressed rather slowly over the years, mainly owing to the fact that one has to adhere to stipulated regulations. In the past, one had to deal with issues related to fees, long payout timelines and archaic banking networks. While initiating cross-border bank transfers, travel organizations encountered slow transactions and opaque funds flow. This was because funds had to go through multiple financial institutions to get to the ultimate end recipient. Each stop along this correspondent bank network also comes at high cost, as each financial institution charges a fee for handling the transaction. But now travel brands are increasingly trying to process payouts locally, bringing down the number of financial institutions involved, and ultimately reducing the cost of sending mass payouts.

“Instead of relying solely on standard global payment services like wire transfers, expect 2017 to boast new global payout methods allowing suppliers to simplify cross-currency transfers using local currency funding,” says Mike Carlo, Global Head of Travel Payments, Transpay.

Among other major trends for 2017, Carlo expects cost-management to gain prominence among travel companies planning to rationalize international funds transfers. He further added, “(Also) as the world becomes more interconnected through new technologies, manual invoicing practices will gradually decline across the industry. From the elimination of fax for hotel bookings, to refund payouts for distressed airline passengers, the travel industry is eagerly moving towards more scalable payout solutions to automate settlements.”

Ai’s Ritesh Gupta spoke to Carlo about cross-border transactions. Excerpts:

Ai: How do country-specific licensing requirements or developments such as Brexit and volatility in the Chinese market impact cross-border transactions? How such developments impact cross-border exchange for merchants, PSPs and consumers?

Mike Carlo: While it’s still too early for to know the full impact of Brexit, current market and currency volatilities, as well as potential government imposed sanctions, illustrate the need for merchants to pay close attention to the regulations associated with cross-border payouts.

Each country and financial institution has its own set of regulations, including anti-money laundering (AML) policies, which are frequently updated. When you think about the scale of global travel, monitoring these multinational regulations is a rigorous process and often requires outsourcing to companies with a dedicated staff, tasked with ensuring compliance.

Ai: Every market has its own payment mix, mandates, checkout and risk management considerations. What peculiar developments would you like to share as far as cross-border payments is concerned? Can you talk about this in the context of a market like China?

Mike Carlo: While not as expansive as payment acceptance, there are several complexities to supplier payouts, specifically in the area of cross-border transactions. For example, there are limitations to sending payments to individuals in markets like China, which has tight restrictions on the available pay-in options for the country; preferring instead to rely on its own currency.

From a B2B perspective, there are few truly global options, and merchants are traditionally left with costly electronic funds transfers like SWIFT and bank wires that take a long time to settle. Unlike payment acceptance, payouts are not about conversion but instead focus on cost management, so anyway to localize the payment experience and reduce cost, is critical to streamlining the process.

Ai: Funds sent internationally are subject to a number of regulatory and compliance standards. Can you explain what these standards are all about? In case countries lack requisite standards needed for movement of money, how can it impact business?

Mike Carlo: In the travel sector the main compliance standards focus around “knowing your customer” (KYC) and AML policies. Considering the number of global transactions occurring in travel, the industry wants to ensure it’s not aiding money laundering or supporting terrorism. For example, AML risks can arise when illicit fund transfers are masked as a hotel booking or a ground package purchases to small and unknown suppliers. To avoid this risk, financial institutions and companies like Transpay will check recipients against watch lists like OFAC OSC.

Ai: Talking of an area like airlines issuing refunds on cancelled flights or OTAs need a payout option for making commission payments, how can travel companies handle such routine transactions in an optimal manner?

Mike Carlo: The best practice would be to partner with an organization that manages, long-tail and to challenging markets. Merchants with significant presence in a few markets can oftentimes handle payouts in those markets themselves (opening a local bank account etc). However, the infrastructure and management required to process payouts makes it virtually impossible to scale this for every country.

Ai: Overall, how is the travel industry looking at real-time payouts in the B2B arena?

Mike Carlo: They are not but we’re looking to change that in 2017. If you look at the competitive nature of online selling, travel payments has focused on getting the largest amount of transactions in the door, and have spent the last 10 years fine-tuning the acceptance process. However, for every dollar in, there is a dollar out and very few companies have investigated to cost of sending payouts.

Ai: Can you talk about challenges that arise when applying e-wallets to global mass payouts?

Mike Carlo: The biggest challenge is eWallet acceptance and costs associated with it. Wallets are largely a consumer-based solution, so they are a viable solution for B2C transactions but not when applied to B2B payouts.

Ai: Can you explain how fraud risk on cross-border sales, which tends to be higher than domestic e-commerce transactions, has shaped up?

Mike Carlo: Fraud is much more of an acceptance challenge. Payouts are merchant pushed, so fraud is not part of the equation. The bigger issues in payouts center on AML and KYC risk.


Ai is set to conduct the 11th Airline & Travel Payments Summit (ATPS) this year.

Date: 3 May - 5 May 2017   

Location: Berlin, Germany

For more info, click here


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