Change — real change, the inexorable kind that transforms payments and commerce — can move with lightning speed. Or it can be positively glacial.
As Flywire CEO Mike Massaro told Karen Webster only a bit tongue in cheek: “I don’t know if it’s the old man in me that is starting to come out, but you start realizing how much time, effort, work and alignment needs to happen to effect real change at scale.”
Cases in point: It took decades for streaming music to come to its ubiquitous dominance in our headphones; and Amazon’s roots were in selling books before its rise to platform juggernaut.
To be sure, in broad verticals that are firmly entrenched in the economy at large — travel, education, healthcare and B2B among them — the payment frictions are apparent and long-lived, and the change is proceeding apace, but is as much a process as anything else.
But done well, Massaro said, payments modernization can help prevent the wasting of senior management’s time.
“The most experienced person is the one who’s dealing with the most complicated issues” related to operational inefficiencies, he remarked, when he or she could be dealing with strategy and looking toward the next technological change that might signal a competitive threat — or a revenue opportunity.
The conversation with Massaro came against a backdrop in which the company reported results that showed a 77 percent increase in second-quarter revenues (less ancillary services), as measured year over year, to reach $33 million. Total payments volume soared by 85 percent to $1.9 billion in the quarter, its first as a public company.
Those growth rates and numbers show that Flywire’s model of embedding software — integrated into clients’ business processes and key systems of record — is gaining traction, especially within those aforementioned verticals as they move toward digitizing the payment experience for Flywire clients and their customers.
Whether we indeed move toward blockchain or any number of other solutions in a bid to bring accounts receivable (AR) and accounts payable (AP) processes firmly into the digital age, Massaro said that the common issue can be boiled down to some key tenets: namely, that much of the critical information tied to a contractual relationship (including a payment agreement) sits in a stored document — most likely a file — and requires hours of time to create, store and manage.
Exhaustion Sets In
“It’s an exhausting task that takes the efforts of many people, oftentimes expensive, internal people, like general counsels and executives,” Massaro noted.
Take away the friction, and commerce flows more easily, he said. Drill down a bit, and it becomes apparent that the inherent frictions of money movement — and the costs involved — are not tied to the actual movement.
The cost is baked into the huge incumbents who have learned to live with the inefficiencies of the legacy systems that have long been in place, but where value for the end customer trumps those frictions (compliance, security and universal acceptance are what tie consumers and enterprises to the card networks, for example, according to Massaro).
But, he said, as other ways to pay and get paid gain traction, and as blockchain and even crypto start improving that acceptance in other areas of the ecosystem, the incumbents — the wire systems, even the card networks — will likely have to re-examine their value propositions.
To drive true innovation, he said, “you have to do that by actually delivering value within a geography within an industry and within a use case.”
Tackling Manual Processes
Flywire’s approach begins with identifying areas where there is too much manual work. The company, in its Securities and Exchange Commission (SEC) filing to go public, identified more than $11 trillion in payments modernization opportunities. Within healthcare, travel, education and B2B, Massaro said, there’s still payments complexity that wastes people’s time, and often it’s that aforementioned senior management’s time being wasted.
Education has been a key beneficiary of Flywire’s embedded software approach, where typically schools have had to enlist the efforts of collection agencies to chase down late payments (adding time and costs to get some of the money in hand). Within travel agencies, payments processing has been beset with manual processes and is ripe for digitization, especially as demand re-emerges with vaccines and reopenings (although the delta variant’s impact remans a great unknown).
Massaro noted that Flywire’s own customers tend to focus a bit more on systemic change — and on keeping the payments experience within the network — rather than just seeing incremental boosts to margins.
“We don’t hear a lot of ‘Can you beat somebody by a basis point to process our payments?’” he told Webster. “It really comes down to, ‘Can you change how we do business? Can you help us digitize and help make the pain go away?’”