Mike Massaro, Flywire CEO Interview - On Money Transfers and Receivable Payments

CEO Daniel Webber recently sat down with Mike Massaro of Flywire - an international payment processor that focuses on receivable payments.  Flywire started with education related payments, and has since moved on to medical payments, as well as business payments.  Mike expanded on the growth of Flywire in his interview with us, read on to learn more.  

Daniel: Can you talk us through the journey of Flywire from education to healthcare to the next phase of your business products?

Mike: The company started about six years ago, we spent the first four, four and half years focused exclusively on education. We built up a client base of around 1000 at the time, educational institutions. I happened to be visiting a client who we were helping process international education payments, for tuition, and they were part of an academic hospital under the same umbrella. We got introduced to the finance team over there and realized they had these large sum, cross border payments coming in from all over the world and similar pain points to what we saw and what we were solving for educational clients of ours. So that’s what got us into healthcare. Fast forward twelve months and we have 20 of the leading US hospitals using Flywire, we are now on a hundreds of payments a month run rate [per institution], so it’s going really well.

 

Daniel: What areas make sense for Flywire to tackle next?

Mike: So we actually sped up the launch of the business segment about four to six weeks ago - now it’s not just educational institutions or medical hospitals, but businesses that have cross border invoices going out can use Flywire to collect in local currency. We are seeing lots of interest from technology companies who are growing and who kind of have viral products that have gone global and yet don’t have the finance or the corporate structure to really invoice locally in local currency around the world. We see a lot of interest in things like travel and leisure, professional services, so there’s a bunch of sub-segments within business for international money transfers that I think are really interesting. Again, looking for that large sum cross border invoice where we can attach Flywire to.

Daniel: How is your business model different from some of the more typical payables companies such as - World First, OFX and Transferwise?

Mike: We call ourselves a large sum cross border payments company. Some may say it’s a cross border receivables solution. When you typically speak of cross border, people will think of remittance, they’ll think of money transmission, whether it’s for consumers, helping them send money abroad back home or whether it’s for businesses making business payments out as an alternative to their bank. What Flywire really does is focus on that receivables side.

So, it’s when you’re trying to receive money, like an educational institution, like the University of Leeds, or MIT, Brown - both clients of Flywire, they have hundreds of students, sometimes thousands, coming from all over the world trying to make payments in. And they’re different sizes, coming in with different currencies at different times of year. What we (Flywire) do is really streamline that whole collection process. So, we collect in local currency, we do the currency conversion, we deliver the funds right to our client institution in a lump sum disbursement and we post it right into their billing and their accounting system. So it’s very different because we are attached on that invoicing and accounting system side, so we have deep integration there. And we’re not really helping anybody send money out, we’re really helping them collect money.

Daniel: How does your sales and marketing effort focus compared to the payables players?

Mike: Well, you’ll see those companies in the consumer space, at least, advertising via google and Facebook and social media - you’ll see, tube advertisements in London for some of those money transfer players. That’s really not where Flywire goes - we go to the big billers, the institutions, the conferences, the medical hospitals through a direct and channel process, so we have a direct sales team focused on education and healthcare - and now businesses. And we also look for channel partners around the world who can go faster or attack a subsegment of a certain vertical that we just won’t have time or energy to get to.

Daniel: There’s been some recent announcements of these multi currency accounts - we are interested in your thoughts and where you think they add value, where you think that product might move to in the coming years?

Mike: I think there’s multi currency accounts on the consumer side that have been trying to find the right travel card, and products like that and they should be around. I think on the consumer side, there’s still lack of a killer product for multi currency. So whether it’s banking, banking rails, prepaid rails, neo bank, everybody’s looking at cross border as a way to monetize that kind of next generation bank. At the same time, I don’t think the products are fully there yet - they will still take some time to evolve. People are still trying to acquire consumers in mass and move large amounts/sums of money into those multi currency accounts, but I think it will be a product that will emerge. People want to have better economics when they travel. They don’t want to get charged really high fees when taking money out of a foreign ATM, I think the avid traveler wants a product, and I think small businesses do too - as we’ve seen with the recent launch within the business segment.

Businesses don’t want to have to go around the world, as their business grows, and set up corporate entities, have bank accounts, manage bank accounts with finance teams, right? They don’t want to have to do that. And having some more flexibility and stored value would help solve a lot of that. I think it’s definitely of interest, I think it will take some time to get mainstream, and the technology oftentimes is not fully there yet.

Daniel: Is the current [multi-currency] product keeping the banks up at night, or do you think there will need to be some adjustments to the product to turn it into something that the banks would really start to worry about?

Mike: I think what will cause the banks to really worry is if/when people really start to move their funds into those products. I think they’re still used, whether in the business world or the consumer world, for only a small percentage of someone’s total net worth. It’s typically people wanting to try a new bank, a new thing, or maybe they are going on a trip and want to try using a multicurrency wallet. I think they’re still being used in that edge case and I don’t know, unless it becomes easier for businesses and consumers to migrate their bank information, I don’t know that it can have that widespread adoption. I know in the UK and Europe there’s been some kind of bank account portability, but here in the United States, it’s still relatively cumbersome to move your direct deposits, your banking relationship from one bank to another. So they have a lot of really strong lock-in, these existing banks. I don’t think there’s necessarily anything keeping them up at night, yet, anyway.

Daniel: The First Data deal Flywire recently did was a really interesting deal. There are some big payments companies now coming into the cross border space. What do you think of this fit, and how is it different than other partner relationships that Flywire has?

Mike: As you said, we have lots of partner relationships. We work with many card processors and part of the value of our product, whether it’s at a bank account level or a card processing level, we can really route volume to any given bank partner or credit card partner, literally overnight. So if we add a new payment method, whether it’s currency, credit card processing, whether it’s a new e-wallet - that new payment method goes live to 1400 clients and all their payors literally overnight. So we can leverage that scale very quickly to launch a new partner, a new relationship. And I think the First Data deal, for us, gave us very broad card acceptance, obviously, they are one of the top players in credit card processing. It also gave us direct relationships with literally millions of merchants around the world. And we believe that a lot of those merchants have cross border invoicing needs, right? Where, yeah you may be running a storefront or an e-commerce site, but you also have bills and people paying you from all over the world. And our goal is, how can we better use Flywire with First Data to help solve those pain points?

Daniel: Are there any particular technologies you think are going to make a big difference, obviously blockchain is buzzed about all the time - voice recognition is another one that comes up. Any technology that you think will truly have an impact?

Mike: I think digital currency is really exciting. There’s a whole bunch of us at Flywire who would love to see it move to more mainstream and be more accepted. I think the banks, the regulators are still figuring it out, how it can be allowed to exist within our day-to-day lives. When that happens we’ll (Flywire) be right there to incorporate it into our platform. That to me is the most interesting, to me there’s no dispute that there will be some form of digital currency in the future, whether it’s bitcoin, whether it’s another variant today, whether it’s something else. I think time will tell on that. When it comes to other technologies and innovations, there’s a lot of talk around that omni-channel, that experience of having less relationships with different financial services providers. I think that is going to be a trend you see. Businesses don’t want to have five or six relationships, they used to collect payments online, an ecommerce store, someone different that they use for point-of-sales shops, someone different that they use to process bank payments, they don’t want to have multiple bank relationships around the world. So I think businesses and consumers want less relationships and naturally financial services will have some type of further aggregation. I think that’s going to be a pretty consistent theme.

Daniel: That’s interesting, because since 2008 we’ve had a dis-aggregation, right? So you think we are at the point where we are going to “reaggregate” some things, having gone through this?

Mike: I think we will have to see how it goes, but I think that consumers, such as myself, I have a different stock related product that I use for my kids’ accounts than I use for my accounts? If I want to operate in two countries, I often have to have two different bank accounts. I may have a travel card product, I have venmo, I have Facebook for payments, I have Paypal. And yet, I don’t think they’re all serving a unique need - so I think there’s a natural aggregation that has to happen at some point. I have almost a whole page of apps on my phone that are financial services related, right? And I just don’t know that they’re that differentiated enough to all be separate relationships. So whether its partnerships, or whether it’s big banks more actively acquiring technology after its taken off and proven its product/market fit. I don’t think people want more and more relationships - I think they want less, and I think we are going to start seeing that.

Daniel: How do you think the big guys, google, Facebook, are going to end up in the payments space?

Mike: I wish I could tell the future on that. I think they will continue to make big moves into the space. You need someone with that level of buying power - Amazon as well. I think there’s a lot of talk around cross border marketplace, and yet I think it’s funny. A lot of people run at that space and I don’t think they realize they’re running at, you know a core marketplace. If anybody doesn’t think that Amazon is going to bring to market their own payments/multicurrency settlements- my guess is that it’s not far away in their plans. The world is getting smaller and I think businesses that have global users and marketplaces have to operate globally. We are seeing the same thing out of Alibaba and what they are doing with broadening their footprint with the Moneygram deal. I think you’re going to see bigger players emerge and global players and I think you’ll see some other companies gobbled up along the way.

Daniel: Anything else you want to share about Flywire?

Mike: Now that we have gone from educational institutions to hospitals, to now businesses, we are also seeing big financial institutions look for better solutions to help their businesses better collect money. You may be a bank with a geographically limited footprint, but how can you use a company like Flywire to extend that footprint globally, even though you may not be a bank operating in many places. I think that’s another interesting trend you are going to see develop over the next few years.