When Paypal competitor Payoneer has raised $8 million in a Series B financing from Greylock and Carmel ventures. That brings the total the company has raised to $14 million. (Greylock led the Series A).

Payoneer’s advantage over Paypal in the micro-payments arena is that it makes international payments easier by not requiring a bank account for verification. Websites like iStockPhoto or Metacafe can issue pre-paid Mastercard debit cards to their customers and transfer funds electronically to the credit card account. The account can be used as a regular electronic payment transfer system as well similar to Paypal.

The Israeli startup (whose headquarters are in New York City), will use the new cash to fund expansion into more markets and invest in technologies to detect and prevent fraud and abuse by criminals and terrorists.

If you are going to go after a niche in the payments industry, international payments is about as big a niche as you can get. But it can also be a dangerous game in the post-9/11 world.

When I last covered payment service provider Payoneer, the company had announced the collection of $3 million more in funding and the addition of iStockPhoto to its client roster. Today, the company is announcing the initial rollout of “Payoneer Virtual US Account,” a new offering that simplifies payment cash out for international payees.

The new offering allows Payoneer card holders that live outside the US to receive direct Automated Clearing House (ACH) deposits/payments without the necessity of actually having a US bank account.

Here’s how it works: Payoneer maintains a bulk of sub-accounts under its main account, which is held in an American bank. When an ACH transfer is initiated, each of these sub-accounts is referenced using its own routing and account numbers. When the funds are credited to one of these sub-accounts, Payoneer loads the funds to the associated card.

Contrary to their name, these accounts are not virtual at all. Payoneer’s thinking here is to call them virtual accounts because they only serve as channels for loading money onto their cards. The accounts cannot be used for wire transfers, they don’t bear interest, etc. I may be splitting hairs, but the name could be a bit snazzier.

The Payoneer Virtual US Account might not seem all that exciting to some, but I assure you, this is a huge deal if you are an international payee. Take the following scenario as a case-in-point:

Let’s say you’re an affiliate marketer living in Russia and you’ve just had your monthly commission deposited to your PayPal account. With Payoneer, it works like this now: you can perform an ACH transfer directly from your PayPal account to your Payoneer Virtual US Account. The funds will be immediately available on your Payoneer Debit MasterCard balance, ready for cash withdrawal from an ATM in Moscow, or available for charge at any MasterCard point-of-sale station (department stores, supermarkets, etc.).

Payoneer’s Virtual US Account program is still in pilot mode and only available to a select group of cardholders, for whom Payoneer can accurately verify the source and destination of funds.

While the program is clearly valuable to international payees, things are a bit stickier with the PayPals, LinkShares and iStockPhotos of the world whose “blessing” is necessary for the program to take off. The crux of their concern is a fear of issues related to money laundering compliance. They would prefer to avoid the matter completely rather than risk getting themselves into hot water. Their “blessing” is necessary because they may already (or can easily in the future) update their terms and conditions to stipulate that ACH transfer to payees from certain countries are barred.

The fact that Payoneer’s systems and methodologies are designed to deal head-on with international compliance issues should help it on this front. If Payoneer has been given the green-light to broaden its offering to include Virtual US Accounts, it has probably handled compliance issues to the satisfaction of its bank, which must have kept a particularly close eye on it from day one.

Many, if not most, Internet startups focus on the American market and its users. Often times this leaves international users without the access to products and services that US users find common-place. So it’s good to see a company like Payoneer simplify payments and cash outs for international payees. It might not be easy, but the rewards could be substantial.

This is an especially good week for payment service provider Payoneer which is announcing it has received the remaining $3M of a $4M Greylock investment , and a new deal with iStockphoto.

Payoneer offers Web-based businesses a method to pay their members/users/partners by way of prepaid debit cards. The fully-functioning debit MasterCards are issued to payees worldwide and can be used online, at points-of-sale, or at ATM’s for cash withdrawals in local currency.

The 800-pound payment service provider is PayPal of course. (PaidByCash is another competitor). However, while PayPal is the top online payment service when it comes to person-to-person transactions, it is far from perfect in other respects, especially when it comes to international payments. For payees residing outside the US, PayPal cannot match the ease and simplicity that Payoneer offers when it comes to receiving their funds.

PayPal requires a bank account to transfer funds internationally. To confirm the bank account, PayPal makes a micro-deposit (a few cents) into the account, and then has the payee report back the exact amount, thereby “proving” account ownership. The problem is that for this process to even take place, the banking institutions in the country where the payee resides must support EFT (Electronic Funds Transfer). Not all countries do. For example, India, China the USSR countries, and some Latin American countries don’t. (Incidentally, this wacky process is why I still don’t have a PayPal account… I’ve gone through it 4-5 times in the past few years… The micro-deposit doesn’t register in my account immediately and by the time I remember it, I’ve already made the purchase in some other manner).

On Payoneer, account verification—a PayPal staple—is a non-issue. Anyone worldwide over 13 can get a card and get paid. Cards require one-time shipping and are then loaded and re-loaded electronically by Payoneer. Convenience-wise, the hassles and high fees normally associated with Wire Transfer and Check payments are greatly reduced or, when a bank is involved in the process, averted completely.

Other than the expected back-office goodies, Payoneer offers its business customers a branding and retention tool in the form of a co-branded MasterCard (see examples right).

Payoneer is also announcing the addition of iStockphoto to its client roster. By the end of the year, iStock will begin offering Payoneer as a payment method to its 35,000 contributing artists who earn royalties on the sale of their images and videos. Among Payoneer’s 70 clients are oDesk, MetaCafe, Amie Street and Plimus.

Founded in 2005, Payoneer employs 25 and is headquartered in New York with R&D in Tel-Aviv, Israel. A $2M seed round was raised from Payoneer’s CEO himself, Yuval Tal and private investors including Zohar Gilon, Charlie Federman, Michael Loeb and Ilan Kaufthal. Greylock (Israel) added a total of $4M in Series A this year, with Moshe Mor the partner attached to the deal.