Life is full of complexity.
Life for a small- to mid-sized business (SMB) scaling operations into new countries? Complex on so many levels, especially when it comes to payments and, more specifically, invoicing, where demands for payment are tracked through paper and electronic means.
On a good day, managing the ebb and flow of supply chains, accounts receivable and accounts payable can be challenging; on a bad day, juggling all those spinning plates becomes a nightmare.
It’s no secret that growth in cross-border trade has been explosive, where digital commerce and devices have brought heretofore untapped consumers to companies — transacting across time zones, currencies and languages.
Hence, complexity is boosted in no small part by shifting regulatory environments, fluctuating currencies, invoicing and billing practices and payment methods and rails used.
As Karen Webster put it in an interview with Flywire CEO Mike Massaro, “a business receiving a payment from another business finds it difficult to reconcile and post that payment to their internal accounting records, given those many variables and inconsistencies.”
Flywire, for its part, has helped smooth the process in the education space by facilitating receipt of international payments from students and institutions. The company offers a college or university the tools to let students know exactly how much to send, while also allowing them the choice of a variety of payment methods, including credit card, PayPal or paying in their local currency. Via its cross-border reconciliation network, Flywire can collect and reconcile those payments immediately and accurately.
Now the firm is leveraging its expertise to solve business-to-business receivables.
Massaro said that this commercial payment segment, newly launched by the firm about half a year ago, already has a growing roster of clients in place across a myriad of verticals. He stated that breadth only emphasizes the magnitude of the challenge that businesses looking to conduct commerce outside their own domestic market encounter. Those verticals, Massaro told Webster, include travel, publishing, tech companies, professional services and import/export firms that span everything from luxury dress manufacturers to distributers to fisheries to fire department gear makers — “things that you would never equate as being global in nature.”
Flywire’s background in the healthcare and education space, along with its existing invoicing system, helped assist these businesses in new ways. Before, Massaro said, “international invoices were force-fed into domestic systems,” and universities were jerry-rigged to deal with an international invoice. Those institutions had to struggle with the complexity of reconciling tuition payments to student accounts after foreign exchange (FX) fees had been applied — making decisions over what payment methods to offer (and add as time went on) and grappling with market-by-market challenges, such as “how do people pay in Korea vs. how they pay in India?”
Businesses today face the tumult of fast-changing markets. Consider the scenario where growth and expansion might mean a firm’s biggest export market one year is Japan, but the next is in South America — yet the invoicing product in place is not as flexible as might be needed. That’s one of the reasons Massaro said Flywire acquired PACE Invoice in June of 2017 and launched a free, payment-enabled international invoicing solution.
To streamline the invoicing process, Massaro said Flywire connects with existing accounting platforms and other platforms used within companies. “We do not necessarily want to replace existing systems,” he told Webster, with businesses perhaps dependent on long-held — and possibly even cherished — management tools like QuickBooks. Managers can pull invoices in via a data feed, categorize them (say, by Japanese clients) and view reports in multiple currencies.
He noted, too, that many invoice payment products disaggregate payment from invoicing, making the reconciliation process friction-filled for the receiver. It’s why Massaro believes eliminating that friction had to come through “a couple of quick steps,” so the receiving business could configure the payments experience within the invoicing solution. Thus, reconciliation is automated, he said.
As Flywire looks to expand beyond its current 21 markets, Massaro said that engaging with regulators will become a key part of its focus in 2018, helping them understand the specific nature of the cross-border services they provide, while remaining compliant with each local, in-country regulatory framework.
“Regulators,” Massaro said, “immediately think of consumer-focused remittances from payers flowing across Western Union and MoneyGram and other conduits when they hear ‘cross-border payments.’” Consequently, he and his team must explain the difference between enabling consumer payments on the send side and what Flywire does: enabling the receipt of funds.
Future endeavors will include adding new currencies and payment methods with, what Massaro termed, “more configurability.” Clients want to offer certain payment methods on certain types of invoices; they want to have automated processes in place as they grow and scale, while remaining compliant.
As for what else might be on the (far) horizon, “We’re intrigued by what is going on in blockchain,” he told Webster, though it remains to be seen if actual results in this space measure up to all the hype. Blockchain, he said, is reminiscent of Big Data 10 years ago; “Everyone said you need to have it, but no one knew what it meant … or how it would impact their business.” He said Flywire is “working on a number of things” related to blockchain technology, but it’s still very early days.
Cryptocurrency? “Right now, as an acceptance vehicle,” he said, “it is something we watch very closely.” But bringing that into production is something that Flywire’s bank partners would question, “and rightfully so. Our clients go so far as to ask us to ensure we are not accepting it … it’s uncertain as a payments vehicle, [even though] people are enthralled by … investment or speculative returns.”