The market for Chinese consumers in search of education and medical care in the United States and around the world is large – and growing.
China is the world’s leading supplier of international students studying around the world. According to the United Nations Educational, Scientific and Cultural Organization (UNESCO), over 800,000 Chinese students pursued education abroad in 2016 – and that number is forecasted to rise.
China is also a major source of international medical patients around the world. Chinese nationals took an estimated 500,000 outbound medical trips in 2016, a fivefold increase from the previous year. Those figures, reported by The New York Times, come care of Ctrip, a Chinese travel booking company, which offers medical travel on its website.
“China is among the countries where we have seen the greatest growth in recent years,” Dr. Stephanie L. Hines, the chairwoman of executive health and international medicine at the Mayo Clinic, said in an email to The Times.
In both cases, the money that changes hands is not small.
When Guo Shushi was unable to find adequate treatment for his recurring stomach cancer in his home nation of China, he eventually sought care in the U.S., to the tune of $220,000 – which he paid personally, out of pocket. International students at American universities can expect to pay about $60,000 per year for tuition, room, board and expenses, and as much as $80,000 for elite universities.
Not only are these payments expensive to make, navigating the process of making them can be tedious and expensive, too.
It’s a problem that Flywire set out to solve.
Moving money around the world is never easy, but problems get infinitely more complex as the amounts of money in question start soaring well north of a few thousand dollars, into the big-ticket territory one tends to see when paying for medical treatments or tuition.
The road to big-ticket, cross-border payments follows the rails laid down and controlled by banks, CEO Mike Massaro told PYMNTS in an interview – and Flywire is far from trying to take banks out of the equation. If anything, he noted, it’s spent much of its year-long coming-out party further cementing those relationships.
“Our top partners are global banks. We’ve been assuring a compliance and regulatory framework in all these markets to be sure we have that bank relationship,” Massaro noted of Flywire’s many partnerships with huge global — and top local — banks worldwide.
Flywire also recognized that as opaque and costly as these payments are for students, patients and family members, they are also challenging for the receiving institutions that find it difficult to reconcile payments with payors, given the FX and other fees that are assessed.
Eliminating that friction for payors is the basis for the expansion of Flywire’s relationship with UnionPay, China’s domestic card scheme. Beginning today and extending through the rest of the year, for patients, students and family members who are sending money to schools and medical institutions outside of China using a UnionPay credit card, Flywire will offer the same foreign exchange pricing as a bank transfer – the lowest-cost card payment option available.
“We’ve accepted UnionPay for some time now, and built on that successful past relationship, we were able to put together a pretty outstanding partnership with them,” Ryan Frere, vice president of global payments for Flywire, told Karen Webster on the eve of the partnership announcement. “The brand is just phenomenal to be tied to.”
A New Incentive Structure
UnionPay is China’s largest – and only – domestic credit card scheme, and the initial question that prompted today’s announcement was one about consumer engagement: Could consumers get comfortable using a UnionPay card when making big-ticket purchases for education and medical expenses?
“The tests went really well,” Frere noted. “We saw increased usage and increased satisfaction from a payer perspective. From there, we mobilized teams on both the Flywire and UnionPay sides to design an incentive that would keep the momentum going.”
The move comes as UnionPay is facing increasing competitive pressures, both internally and around the world, with Alipay and WeChat Pay expanding outside their domestic market, changing the nature of how Chinese consumers use digital payment methods in other countries.
“Before the digital era, all payments went through the UnionPay system, with banks and UnionPay splitting the transaction fees paid by merchants,” Ba Shusong, chief economist at the China Banking Association, said in a report. Alipay and WeChat Pay, with their direct links to consumer bank accounts, are sidestepping UnionPay by connecting consumers and banks within their own ecosystems.
This expanded partnership with UnionPay is an effort to strengthen its position around two use cases that are both high-ticket and high-volume.
“There is a large amount of volume coming out of China in support of education and healthcare payments,” Frere said. “It only makes sense that UnionPay would want to do as much as they can to have as much of that volume coming across the UnionPay rails.”
By making the cost of a large-ticket education or healthcare payment on a UnionPay card the same as one via a bank transfer, the FX fee playing field is essentially leveled, and customers suddenly have options to make decisions that work best for their own financial circumstances.
As Frere noted, the customer who is already carrying the UnionPay card can now utilize that card, which they know to be secure and reliable, in another use case. The alternative is going into a bank and engaging in something they probably aren’t used to, such as setting up a large international bank transfer.
“That is what we look for when we think about new payment methods in general," said Frere. "Is this convenient; is this something a customer has asked for? Can we take a time-consuming process and replace it with a faster, more familiar one?"
The Larger World of Global Payments
The goal, as always, Frere noted, concerns the scale, and pushing into the regions where they aren’t yet the go-to solution for big-ticket international payments, but aim to be. That means going into markets that still feel a little bit “exotic," where they are still in the very early days of incorporating the latest and greatest in payments technology.
“The question we always have to ask ourselves is, what part of the value chain are we actually trying to improve in a market? Is it speed? Is it cost? And then we have to figure out how to match the right opportunities," Frere pointed out.
The good news about large-ticket items, he said, is that they have their own type of screening effect. There are only so many payments methods in a market designed to take on payments in the tens and hundreds of thousands all at once. From there, the question becomes about working with what is available in market, and continually interrogating the needs of the big-ticket payer in these situations.
“The question is always about how do we take these methods and then let customers choose what they think will be the most efficient manner in which to pay," he said.
The UnionPay partnership certainly fits that definition.