Payments fintech Payoneer is building out “direct-to-consumer”, or D2C, services in a bid to outflank bigger rivals such as Stripe and PayPal. For the company’s Southeast Asia regional head, Miguel Warren, this is about getting ahead of where new types of e-commerce are popping up – and keeping pace with how entrepreneurs are marketing themselves to a global audience.

The idea is to support young, online entrepreneurs, particularly in fast-growing markets such as the Philippines and Vietnam, as they look to service their customers worldwide. “We work with entrepreneurs in new forms of e-commerce that are opening new markets for themselves,” he said.

The D2C space is biggest in the US, where Payoneer expects it to reach $150 billion in gross merchandise value this year.

From salaries to checkout

One of Payoneer’s D2C clients in the US is Capital Club, a professional community and incubator for entrepreneurs. Its president and co-founder, Luke Belmar, was on hand in Payoneer’s Hong Kong office to speak with DigFin about a new wave of Gen-Z led online businesses that are growing fast and need payment solutions.

Capital Club uses Payoneer to facilitate salary payments. It has begun to recommend this to the 25,000 entrepreneurs who are its members. “Most of our entrepreneurs are in ecommerce, and they struggle with PayPal and want an alternative to Stripe,” Belmar said.

The service is especially relevant for helping entrepreneurs pay their own employees – who are usually remote and often scattered around the world. Therefore they need solutions that cross many borders.

Warren says Payoneer began D2C last year as an employee-payment service, to complement the fintech’s more traditional B2B cross-border payments work. But it has expanded this into a checkout service (supported by another global payments company, WorldPay).

Belmar says entrepreneurs in his network are taking this up. “It began with employee payments but the checkout service is huge for entrepreneurs,” he said.

Serving the new breed

For a fintech like Payoneer, the D2C business forces it to work more closely with startup businesses. “This helps us understand how customers work,” Warren said. “Entrepreneurs are more sophisticated in how they scale. They can go from a pop-up store, selling on eBay, to entering new international verticals and opening B2B portals in just a year or two.”

This new generation of entrepreneurs is also young.

“They began as 23-year olds serving a local need,” Warren said. “Now they have a need to sell on Amazon or other international platforms, and they need a payment structure they can take with them.”

Social media is a big enabler of this new wave of online entrepreneurs. 

Belmar has millions of followers on TikTok. His posts can get up to 10 million views in one day.

“E-commerce is about infotainment,” he said. “It’s not just about paid [online] traffic, but using social media to drive organic revenues.”

TikTok is the most important platform today, he says. Unlike others, it does not charge users to make their posts visible to all of their followers. (Posts on other social media platforms may only reach 10 percent of a followership, as the platforms deliberately restrict reach.) Instead, TikTok’s algorithm wants to feed as much content to its users as possible, to keep them hooked.

And while most TikTok videos are teenagers goofing around, there is a lot of content being created for products – increasingly by big corporations. Belmar showed a TikTok video created by Emirates, featuring a cheap cutout of a cat see-sawing its way on top of a photo of a passenger jet.

Meme merchandizing

The production value is abysmal, but it has a certain stupid charm – and seven million views. That’s a lot of attention for something that probably took one person half an hour to produce.

“Big companies are using cheap memes and jokes to target younger buyers,” Belmar said. “A cat meme is relatable. People buy people, and our entrepreneurs are using memes to funnel customers to their brands. They’re moving away from paid media and sponsored ads.”

Warren says this is the dynamic that is driving the D2C segment, because it’s cheap and breaks down cultural barriers. “Social media helps a Korean company market itself to people in the Philippines.”

This phenomenon also helps explain what Elon Musk is doing at Twitter, where he seems to be alienating many of his advertizers but is trying to build a subscription-based business. “E-commerce is behind the trend of moving away from paid ads to subscription-based models,” Warren said.

As more merchants leverage social media, they can find ways to compete against large, established brands. This is driving both employment in the gig sector as well as sales. The jokey culture of social media is changing how buyers perceive value, which in turn is creating new requirements for payments and other services behind the scenes. And then the most established D2C merchants transition into becoming more serious B2B customers who need an array of cross-border payment solutions.

“It’s the cat meme for the win,” Belmar said.