In the midst of a pandemic payments platform Flywire had its best year ever thanks to some strong planning and a bit of luck.
The global payments-enablement and software company began a decade ago as a cross-border payments firm catering exclusively to education, CEO Mike Massaro said. Their growth began five years ago when Flywire began to expand to universities outside the United States, eventually establishing itself in more than 30 countries. They also digitized different payments including domestic tuition fees.
Then came new verticals. Healthcare payments now account for more than 20 per cent of Flywire’s revenue. They also serve travel and B2B customers. Those efforts have led to the establishment of 12 global offices and the employment of 500 people.
2020 began on a high note, with Flywire acquiring a competitor in healthcare payments. They the closed a $120 million Series E round led by Goldman Sachs which occurred weeks before the world changed.
“March, April, May and June were not much fun,” Mr. Massaro said.
Hospitals were feeling the strain as they were inundated by patients and schedules for elective surgeries and other services were cancelled. Many speculated on the damage to higher education from shuttered universities.
“As the year went on hospitals survived that first wave, and they started to get ways in which patients could come in for elective procedures again,” Mr. Massaro said. “Billings we saw very shortly pause or trickle down but then they came back and things opened up in different ways.”
Given the traditional schedule for education payments in late summer there was not much effect until then, with many people simply delaying their payment schedule from late summer to mid-fall. During this period Flywire worked with clients to change due dates and integrate notifications into payment plan systems.
“All of that is core functionality we offer to clients, so a lot of our time was spent with clients making these decisions and editing their existing deployments,” Mr. Massaro said.
The end result was all Flywire sectors grew though some not as much as expected. Together they combined to allow the company to make money for the first time.
Travel in 2020 was a unique situation, Mr. Massaro said. The first quarter was strong and allowed Flywire to generate almost as much revenue as they did from the vertical in the entirety of 2019. With much of their business coming from adventure and luxury-based travel, they saw clients shift their focus to attracting homebound visitors that could drive a short distance or visit locally.
Most industry participants believe the pandemic hasn’t necessarily changed fintech as much as it has accelerated trends already present. Mr. Massaro sees a bit of both. Healthcare has most definitely changed procedures, with pre-qualification steps at the beginning providing an opportunity to capture co-payments and address balances from prior visits.
“That’s a pretty new behavior, that had barely even started and now it’s almost become table stakes within the industry,” Mr. Massaro said.
Back office digitization has also been affected, he added. With people less able to visit a colleague down the hall to address a problem, many companies are digitizing many of the steps they used to do in person.
Because Flywire works with several unique verticals it leaves them well-positioned to quickly establish themselves in new ones, Mr. Massaro said. With each industry comes a unique playbook combining the efforts of sales, marketing and client services to create an optimal system. Invest in understand those technologies so you can drive value through strong integrations. Lessons learned and similarities can be carried over into the next vertical
Cryptocurrency is a way off from making a big impact in payments, Mr. Massaro believes. For starters crypto is large a value store than a transactional medium. With JP Morgan seeing Bitcoin at $140,000, how many are going to spend it on a double latte? There are too many other prime areas where the industry can more safely deliver value.
“I think there’s potential there but that’s not where the world’s obviously gone,” Mr. Massaro said. “People have realized you can innovate on the existing rails, you can make transactions better, you can make better interfacing. It takes a long time.
“People still need to trust where they keep their money and cryptocurrency has a long way to go in comparison.”
In 2021 we could see some consolidation in tech for one of two reasons, Mr. Massaro believes. With valuations high, it will take deep pockets to ante up, and such companies may decide to make a purchase or two and see the benefits of these higher values. Conversely, it is also possible prices could soften a bit but that scenario too could see richer companies look for value plays.
Either way some clarity on how long the pandemic will last and on the effective delivery of vaccines would allow more companies to feel safer about making an acquisition. Once things calm down, there will be plenty of money looking for a place in which to grow.
“I think the round sizes in general have gone up because the ability to go after these large global problems I think is easier,” Mr. Massaro said. “The opportunities are bigger so I think people are willing to write bigger cheques.”