Is Payoneer a Bank? (All You Need to Know)

As an experienced finance writer, I often get asked whether fast-growing payment services like Payoneer qualify as banks. With over 4 million customers globally, Payoneer squares up against banks in some areas but differs in others. In this comprehensive guide, I‘ll unpack if Payoneer acts as a bank with detailed research and insights.

Overview: Understanding Payoneer

First, let‘s cover the basics. Payoneer is a financial services company founded in 2005 that specializes in online money transfers, digital wallets, and business payments. Some key facts about Payoneer:

• Payoneer has 4 million total registered users from over 200 countries as of 2022 (source).
• Over $100 billion has been transacted via Payoneer as of 2021.
• More than 2,000 corporations and marketplaces trust Payoneer including Amazon, Airbnb, Getty Images (source).

With Payoneer, freelancers and businesses worldwide can request payments from clients and customers into their Payoneer account balance. Funds received can be held in balance, withdrawn to a bank account, sent to other Payoneer account holders or accessed via the Payoneer debit Mastercard.

So in many ways, Payoneer offers services resembling a bank: money transfers in and out, currency exchange, debit card functionality etc. However, there are still clear distinctions between traditional banks versus a fintech provider like Payoneer.

3 Key Differences Between Payoneer and Banks

While Payoneer handles some financial transactions similarly to banks, there are a few functional differences:

1. Payoneer Does Not Provide Loans or Interest

Unlike a bank, Payoneer does not issue any loans, credit cards or interest-bearing savings accounts. As a payment processor, Payoneer strictly facilitates fund transfers rather than lending its own capital. Without any lending risk, Payoneer cannot pay customers interest on held balances either.

Over 75% of banks‘ revenue comes from interest earned on loans and credit cards (source). Payoneer does not generate such interest revenue.

2. Regulation Status Differs

Banks are heavily regulated financial institutions that must comply with central bank requirements around solvency, auditing and governance. For example, US banks are regulated under Federal Reserve policies and subject to strict capital requirements.

As a global payment intermediary, Payoneer is not considered a regulated bank and thus does not need to apply for a banking charter or comply with intergovernmental banking regulation. So regulation is much lighter on Payoneer versus deposit-holding banks.

3. Funds Storage Approach Diverges

A core function of banks is securely holding deposited funds on behalf of customers and financial system participants. Banks store money long term and facilitate lending through these deposits.

By comparison, Payoneer does not store or hold funds long term. Money transferred in stays temporarily to facilitate withdrawals elsewhere. Without lending out deposits, Payoneer cannot act as a "bank" in the traditional sense and depositors take on risks.

So in summary, while Payoneer offers digital financial services, its lack of lending/interest income and short term holding of funds means it differs fundamentally from a bank.

Payoneer Pros and Cons for Consumers

Given the analysis above, is Payoneer still useful from a consumer perspective if it does not operate as bank? Let‘s examine some key pros and cons:

Payoneer Pros

• Seamless way for businesses to receive international client payments
• Low fees structure at just 1% per transaction (source) makes receiving foreign payments affordable
• Debit card provides ATM/purchase access globally on funds received
• Account dashboard and transfers simple to set up and use

Payoneer Cons

• As a non-bank entity, funds have risk if Payoneer has financial issues
• Slow transfer times of 2-5 business days, longer than leading fintech apps
• Added currency conversion costs when receiving then sending funds
• Debit card has $3 ATM withdrawal fee applied domestically and $4 internationally (source)

So consumers must weigh up Payoneer‘s payment transfer utility against its inability to store funds securely long term without lending services.

Conclusion: Payoneer Offers Payment Tools But Lacks Core Banking

In closing, Payoneer is not a bank. By central bank and regulatory standards, it lacks:

• Lending and interest-bearing services of deposit banks
• Mandated asset reserves to back balances
• Audited protections for consumers offered at banks

However, for facilitating global customer payments and money transfers, Payoneer still offers helpful functionality. Though funds ultimately reside with regulated banks or consumer wallets.

Do you utilize Payoneer currently? Or do you prefer traditional banking services? Let me know your experiences with Payoneer so far and if you have any other questions!