Investors continue to cut big checks to global payments startups. The latest to cash in is Flywire, which announced Thursday it raised a $100 million Series D funding round led by Singapore-based Temasek.
Flywire has now hauled in a total of $144 million from investors, a spokeswoman said. Other investors in the Series D round were earlier Flywire backers Bain Capital Ventures and F-Prime Capital. Boston-based Flywire employs 300 people worldwide and plans to hire at least 80 more workers over the next year, she said.
Global payments are a hot area of financial technology lately. Remitly, a Seattle-based maker of an international money transfer app, said in late October it was raising a $115 million Series D funding round. A day later, TransferWise, a London-based international money transfer software company, said it grabbed $280 million in venture capital. This summer, Australian cross-border payments tech firm Airwallex reeled in $80 million in venture funding, and PayPal (NASDAQ: PYPL) struck a $400 million agreement to acquire global payout company Hyperwallet, based in San Francisco.
The deals signal intensifying competition to become the global shepherd for people’s money. The upstart payments companies aim to upend traditional banking with new digital tools and money-transfer techniques aimed at making cross-border payments faster, cheaper, and easier to execute. Some players, like TransferWise and Remitly, are primarily focused on consumers. Others, like Airwallex and Flywire, are targeting businesses and organizations.
Flywire spun out of MIT in 2009, founded by Spain native Iker Marcaide. Initially called peerTransfer, the company developed a new kind of global money transfer network that would match up the transactions going between two countries in order to figure out the net flow between customers, and to keep the money effectively moving only within each country. The idea was to save customers money on international transfer fees and bad exchange rates.
Flywire initially focused on international tuition payments, inspired in part by Marcaide’s frustrations with paying his MIT tuition from a European bank. But the company saw opportunity for its cross-border payments software in sectors outside education. Under CEO Mike Massaro, who took the helm in 2013, Flywire has expanded its customer list to include hospitals and businesses, such as Expedia, Hilton, and Volvo, according to its website.
The company projects that by the end of 2018, it will be on pace to generate at least $100 million in annual revenues, the spokeswoman said.
Flywire has a big war chest now, but winning a greater share of the fragmented global payments market won’t be easy. Expect more venture capital investments, consolidation, and startup corpses before the dust settles.
One thing to watch is whether new technologies, such as blockchain systems and the digital currencies they power, will have an impact on this sector. In their current form, most blockchain systems aren’t a threat to companies like Flywire—the technology isn’t user-friendly (yet) and popular cryptocurrencies such as Bitcoin and Ethereum can’t match the transaction processing speed of standard payments systems, although more efficient cryptocurrencies are being developed. Blockchain technology could advance further in the next few years, if investments in the sector continue to explode.
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