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Flywire Announces Medical Tourism Payments Solution - Money's Edge

Money’s Edge

Earlier last week, Money’s Edge had the privilege of catching up with Flywire CEO Mike Massaro. We were asked to hold this article until today, when the announcement of their entrance into the medical tourism payments segment would formally be made public.

Flywire (formally peerTransfer) was founded by Iker Mercaide, who was at the time an international student enrolled in MIT. It took too long for him to get money to MIT and once the funds were there, MIT had trouble attributing them to his account. Thus, Iker saw the need for a company to address the pain points of international tuition payments. He incorporated in 2009 and was funded in 2010. Iker is now a shareholder and advisor to Flywire, but is working full time on his own angel fund and incubator.

Flywire has a solid business in facilitating payments from international students to educational institutions. Their value proposition to students is that they offer better exchange rates than banks, 24/7 customer service in many languages, and process transparency through a payments dashboard. Their payments are fast, easy, and safe. Flywire’s value to educational institutions is similar, in that it provides customer service and otherwise assists in processing and reconciling student payments.

Flywire currently works with over 800 universities across 12 countries, processed over $1 bn in tuition payments for the 2014/15 academic year, and expects to clear $2 bn this year. Most of the educational institutions they work with are in the US (650) with many others in the UK (120), Australia, Canada, EU and Japan. Their recent acquisition of UniPay in the UK added 60 UK institutions to their portfolio.

Last year, Flywire secured a $22 mn funding round led by Bain which closed in just 6.5 weeks with participation from all existing investors. They have since opened a new office in Valencia, tripling their space in the third largest city in Spain. They also doubled their space in Boston overlooking the Boston commons.

Mike Massaro was the first VP ever hired in by Iker. He initially headed up sales and marketing, then moved to the board of directors, and then to CEO. When asked how he provides improved foreign exchange rates for students, Mike referenced that they pass on wholesale savings. From the Flywire website: “By grouping together multiple payments, we are able to take advantage of better rates based on our larger volume.“ “It’s volume-based,” says Mike. “We lock in a forex rate when the student starts a transaction and then the funds are moved. The average consumer can be charged a transaction fee on sending side, an international wire fee, and a huge forex spread (3-4%)- so banks have always made a lot of money on that. We leverage our scale to get wholesale rates for our clients.” Mike mentioned that they work with Citibank, Deutsche and sometimes Bank of America to clear their wholesale forex transactions.

Flywire processes payments from 200 countries and territories. Flywire is promoted mainly through alumni and word of mouth, though partner universities post Flywire information on their websites, admission flyers and even bills. There is remarkable growth in students coming from China recently, with nearly 30% of international students originating from China. Nigeria is also big, in the top 10 for US and top 3 for UK, as well as Korea, which third for inbound US admissions. “There are pockets and corridors of students,” says Mike. “There’s a big trend in K-12 boarding schools, with the number coming for highschool in the US increasing. We work with over 100 boarding and private highschools as well.” Apparently Flywire works with boarding and private school associations and many of Flywire’s more prominent university partners have private schools and boarding programs around them which they refer to Flywire for payment services.

Presently, Flywire supports as many types of popular payment methods as possible in any given country. For example, they accept AliPay and UnionPay in China. They do not currently work with the blockchain or any other distributed ledger system because they need traceability of funds, not anonymity, and because they want to own their transactions end-to-end. Flywire has opened an office in Shanghai and plans to geographically distribute itself to expand the 100+ bank accounts that they have in order to maintain control over their end-to-end process. Mike does see that “Ripple is targeted at beating credit card rates; our team is watching this tech and chomping at the bit to find relevancy.”

Mike doesn’t see TransferWise, an online payment transfer service provider, as competition because it is “a straight money transition company that lets people send money anywhere, mostly in small amounts. They compete with Western Union or MoneyGram, whereas Flywire is focused on cross-border payments in large dollar amounts. We don’t see any competition at all from any straight money transmission companies.”

Just this morning, Flywire issued a press release indicating that it would begin offering its payment services for medical tourism, which is the practice of people seeking healthcare in another country. From press release: “The worldwide market for medical tourism is worth up to $55 billion annually and is growing at 15 to 25 percent a year, according to Patients Beyond Borders, a company that publishes medical travel guides.” Approximately 11 million patients seek health care outside of their home country every year.

Flywire is now introducing payment services for people coming to the US for health care. When asked why Flywire decided to move in this direction, Mike answered: “People started coming to us- there’s a good correlation between educational institutions and medical. Many top universities have hospital systems, and the CEOs of academic organizations started introducing us to medical executives having the same pain points. Patients had no easy and convenient way to pay medical bills remotely; these were large dollar amounts with consumers coming from other parts of globe needing to make payments quickly and securely. The hospitals aren’t structured to handle 24/7 international payment-related questions, consumers are paying really high forex rates, and hospitals are hit with cross border fees and reconciliation problems. We saw the opportunity on the market side and folks asked for our solution to be brought. Flywire is not a vertical solution- it can be taken to any vertical. There’s really nothing education specific about it.”

A couple of hospitals have already signed on to partner with Flywire, and they expect to see more in the near term. Medical tourism has lots of different corridors- people travel from Southeast Asia to other countries in Southeast Asia to look for lower cost medical procedures. Others support US hospitals and developed hospitals, coming in search of the best medical care for surgeries, cancer treatments, or rehabilitation. The top reasons they come to US: access to medicine, equipment, technology, and rehabilitation, which are much more advanced here than elsewhere.

Mike’s team has spent 6 or 9 months researching the market and has discovered emerging associations as well as existing domestic payment processors that are interesting partnership opportunities. They see huge growth in the number of patients and number of companies that exist to help process the influx of patients from medical tourism. A lot of US hospitals are even building programs or facilities overseas- in the Middle East and China, for example- to better serve the market of international patients, which is a big revenue opportunity.

When asked what are his biggest obstacles going forward, Mike mentioned that Flywire is more than doubling this year versus last year- from 50 employees to nearly 100 now from recruiting and the acquisition of UniPay. One of his challenges is “making sure we get great people in and continue to accelerate, signing up 50-60 schools per quarter. We just completed our best quarter from a new client acquisition perspective and we want to keep focused and keep executing.”

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