When Cross-Border Payment Pain Leaves Both Sides Hurting

There’s a global phenomenon afoot that takes the notion of cross-border payments to a new level – the high value-low frequency transactions made by a whole new category of sender – the Global Citizen. These individuals aren’t wealthy by most developed country standards – with annual incomes that hover around $40,000 USD – but are part of the emerging middle class in countries like China, India and South Korea who now have the discretionary income to spend on the things that matter most to them.

Many of those expenditures are in support of family experiences outside of their home country. Things like sending their children to private schools and colleges abroad, or seeking medical treatment for acute illnesses or important but relatively “routine” procedures like hip replacements at institutions with more advanced technologies and medical staff than exist within their own country are regarded as a high priority.

That’s the pain point that Flywire CEO Mike Massaro says his matchmaker is in the business of solving for these Global Citizens. As Massaro explained in this week’s edition of The Matchmaker Is In with  Karen Webster and economist and author of “Matchmakers: The New Economics of Multisided Platforms,” David Evans, both senders and receivers need a helping hand when these high dollar, low frequency transactions cross international lines.

It was an area that Massaro gravitated toward after noticing the rigamarole of fees and exchange rates foreign-born students had to go through just to post tuition payments to U.S. universities.

And there seems to be a lot of pain to go around.

For the sender, it’s essential that the money get to the right institution, right on time, and in the right amount — otherwise service could be denied. For the receiver, it’s not always easy to match up payment with the person.

Massaro said that there was an obvious need for a solution to streamline things on the consumer-facing side of payments like this, but Massaro said that any such solution would be by definition a half measure at best since the receiving institutions aren’t well equipped to handle cross-border payments for those students.

“We realized that there’s pain on both sides,” Massaro told Evans and Webster. “To really solve what is seen as a specific problem in cross-border, you really had to solve it for the sender and the receiver. Ultimately, the receiver’s job isn’t to process international payments. They have a core business — in the school’s case, it’s educating students. So you have a team there being asked to be experts in something they probably will never be experts in – nor want to be.”

It is also one of the very unique aspects of Flywire’s ignition strategy. Trying to find and then reach these far-flung Global Citizens would be, if not impossible, a very expensive proposition. But Flywire has found that its value to the institution is so great, that they happily extend the benefits of Flywire’s platform to its students or patients. Flywire is prominently marketed on the websites where information for payments is featured. One institution, therefore, provides access to tens of thousands of students for four years or more – and their siblings. It also provides Flywire with an on-ramp as the solutions provider for these Global Citizens as other high value cross-border payments needs arise.

It was a philosophical shift that many cross-border commerce firms (especially those focused exclusively on remittance), Massaro said, are not well-equipped to deliver. Flywire leverages existing payments infrastructure so that his global citizens can pay the way they are most comfortable.

“The reality is we are able to use whatever rails are effective at allowing that consumer to pick the way they want to pay and getting the money to the client,” Massaro said. “It’s almost rails-agnostic in some ways. We work with the traditional bank transfer wiring rails, ACH equivalents around the world, we accept credit cards, eWallets, online banking portals – whatever the right ways to pay are in all of these countries. Our goal is to have the right way to pay for our senders.”

While Flywire operates under the goal of easing cross-border friction for both senders and receivers, it does contract with the institutions as a matter of business. Webster noted this as one of Flywire’s most unique attributes in a sea of like firms, and Massaro agreed.

“The entire foreign exchange market is based on monetizing the sending of currency,” he explained. “It’s only when you go to send money when the FX rates and fees get applied. So we’re really turning that market on its head. We’re saying you can collect from anywhere around the world and we’re giving consumers ways to pay locally without all those complex fees.”

Massaro said that, for now, Flywire’s market focus is on the two major areas of spend: health care and education. Those markets, Massaro told Evans and Webster, are massive – with plenty of room to grow. Instead of only focusing on colleges and universities, Flywire has expanded into facilitating payments at trade and culinary programs as well as long-term boarding schools and even for exchange programs – all over the world.

“A year ago, I think all of our clients were in the U.S., Canada and a little bit in Australia,” Massaro said. “Now we have 150 in the U.K., clients throughout Southeast Asia, 15 to 20 in Japan and 10 or 15 in Spain, where 80,000 Chinese students study every year.”

As far as the matchmakers that this matchmaker was enamored with, Massaro saved his praise for Peloton, a company selling stationary bikes that combines the experience of an uber-popular spin class with the comfort that comes with exercising in one’s home. Cyclers use a built-in screen to choose a workout designed by a favorite instructor from whom they once took a class. From the other direction, Peloton has also figured out a way to connect a wealth of fitness expertise with a population of consumers who might never have stepped foot into a Pure Barre or a SoulCycle.

Massaro also couldn’t help but touch on every retailer’s favorite app of the summer: Pokémon Go. While he and Webster acknowledged that Niantic, the developer behind the app, and Nintendo, the owner of the Pokémon property, still need to find a way to monetize the incredible buzz around the app, the sheer number of players they’ve amassed in such a short time proves the viability of the platform they’ve created — and the potential for any intervention to end up printing money.