The movement of money cross-border by Global Citizens is growing tremendously. What’s needed, Flywire CEO Mike Massaro tells Karen Webster isn’t a money transmission network but a collection network that solves a pretty big problem for the receiving institution. Massaro’s conversation kicks off the Top Characteristics of X-Border Payment Processors podcast series and highlights what processors must do to meet the needs of these new cross-border remitters.
Moving money of any value across borders has its unique challenges for both senders and receivers.
But the process increases in complexity when it comes to high-value, low-frequency transactions. For those Global Citizens who wish to send large sums of money to receiving organizations in other countries — but who do it infrequently — factors like speed, trust and accuracy play a major role in making sure funds make it from Point A to Point B.
For the launch of Flywire’s Top Characteristics of X-Border Payment Processors podcast series, we take a step back and start with the basics, i.e., what these Global Citizens really need and how cross-border payment processors can deliver.
Mike Massaro, Flywire CEO, explained that, in many cases, Global Citizens are moving money from one country into another in order to pay educational institutions or medical hospitals — two markets in which Flywire operates.
As access to other countries increases and the cost of travel becomes more affordable, the world itself is transforming into a much smaller place. People are traveling the world more often, and though borders still exist, Massaro pointed out that the global consumer’s empowerment is much greater than it’s been in the decades and centuries before.
“They want local, convenient ways to pay,” Massaro said. For Global Citizens, fair and reasonable foreign exchange rates are also important, as well as the accessibility of assistance when they have questions about their payments.
This shift has provided the opportunity for Global Citizens to have greater access to experiences abroad that they may not be able to do in their home country.
“There’s relative wealth pockets in many of these countries, where people want educational experiences they can’t get in their home country or maybe they need medical treatment in a different part of the world to get access to certain types of treatment or care,” Massaro said.
As a result, cross-border payments are becoming a part of everyday life for these Global Citizens.
But the biggest pain point, said Massaro, isn’t getting the money out of the originating country — as opaque and costly as that can be. It’s getting it properly reconciled by the receiving institution — something that is often done manually, Massaro noted.
“There can be a great deal of manual work that comes from reconciling payments and identifying who actually sent the money an institution receives,” he explained. “And that challenge only continues to grow with the more international payments received.”
That’s why Massaro says Flywire didn’t build a money transmittal network but a collection network. Rather, Flywire’s collection network is designed to handle the needs of Global Citizens who move larger sums of money for things like tuition or medical payments and for whom a big friction is being able to verify that the money sent was subsequently collected by the receiving institution and matched to their open invoice.
Unlike remittances, where payment processors rely on a sending network and a payout network for transactions, the payments sent by Global Citizens require what Massaro described as a collection network.
“We looked around, and there were no companies that had collection networks, so that’s what we built,” says Massaro. Collection networks, as Massaro describes them, are a network of banking partnerships at banks all over the world that can support the transactions it facilitates.
The collection network also enables Flywire to meet the growing demands from consumers who want to pay in the method of payment most common in their country of origin, such as UnionPay credit cards in China or Boleto in Brazil.
“We wanted to make sure our collection network wasn’t just banking rails — that it had alternative payment rails and credit card rails,” Massaro said, adding that it delivers Global Citizens an opportunity to use a trusted network to move money in the way that best suits their needs.