There is one topic of conversation that seems to dominate payments these days.
It’s a conversation that prompts many questions and as many opinions on all sides of the issue.
“Do we really need faster?”
“Isn’t having better payments, well, better than faster payments?”
“What ‘rails’ are needed to enable faster payments and do we have them today?”
“And is there – or will there be — one set of rails that will, ultimately, rule them all, making payments faster, and better?”
Flywire CEO Mike Massaro has an opinion – one honed from the rather unique perch he occupies in the global money movement sector. Flywire moves billions in money, collectively, one large transaction (think multiple of thousands of dollars) at a time — and from a consumer in one country to a business in another.
For Flywire’s customers, Massaro says faster isn’t the driver. What is, is the certainty of getting the money to the business – since that money is often to pay a kid’s college tuition or for the medical treatment of a loved one. The certainty of funds is also critical to the business on the receiving end – certainty that the amount they are expecting is the amount that was received, along with the data that goes with it to reconcile their own ledgers accurately.
Certainty that all comes down, Massaro says, to trust.
“I think there are things that we in payments can see and benefit from without having to overhaul [the rails] or throw it all out,” Massaro said. “For our customers – and we move billions every year – what’s more important than speed is trust. Consumers need to know that we will get their money where it needs to be when it needs to be there.”
Faster — For Who?
Trust, Massaro says, is critical given the opaqueness of the global banking networks. That’s left the consumer, he says, without clarity as to where their money is- and how much will be degragaded along the many hops from their bank in China, say, to the institution in Cambridge. MA. “When the money leaves their accounts and isn’t where it’s supposed to be yet, they get nervous.” They also get nervous, Massaro says, when they sent $42,500 and $40,750 ended up being deposited into the receiving institutions, bank account – a difference due to FX differences and bank fees.
Flywire, Massaro explained, was built to deliver that certainty to consumers, a guaranteed service level that gives consumers confidence that the money they are sending will end up where and when it needs to. “’Instant’ isn’t a requirement coming from consumers,” Massaro emphasized.
But since certainty is, certainty is what has influenced how Flywire has built its own rails – an end-to-end “collection network” with funds in their control so that they can manage the movement of money every step of the way.
“A lot of people think there has to be set of APIs or a ubiquitous set of funds concept that will magically cure all the perceived ills of the global payments system today,” Massaro said. “What we realized in the large sum, cross-border payment world is that these are large sum payments. So we have to own the end-to-end spectrum as much as we can so that’s what we’ve built.”
One that manages the risk associated with moving large sums of money, cross-border.
Compliance And Regulations
Flywire is a remittance-based company, but not in the same sense of the word that many people use it. Small dollar, high volume P2P remittances – what workers in one county might send home to their loved ones in others is not Flywire’s mode. When Flywire speaks of remittances, they speak of high dollar, low volume P2B remittances – consumers sending money maybe twice a year to an institution – typically schools and hospitals that are well known and trusted. Money is only flowing in one direction – from a consumer to a business, in support of a very significant life event.
“This helps mitigate risk as well,” Massaro said. “We don’t allow anyone to send money to just anyone. That means we can significantly de-risk our model.”
A model that has evolved over time to accommodate new forms of payment. Bank transfers and international wires have quickly evolved into an increasing credit card volume. In fact, those payments now make up about 10-12 percent of its overall payments volume.
And why, Massaro explains, there will never be a one-size-fits-all approach to payments, despite the many assumptions in the marketplace that cross-border and remittance transfers are the same. And that every single country is able to enable faster payments.
“One banking partner can’t get there on their own,” Massaro said.
“Even if we get faster rails today [in the U.S.] will China get faster rails? Will India?” he queried.
The Rails Driving The Conversation
What’s also important to keep in mind, Massaro says, is that all rails are deviations of another. And that shifting consumer behavior can’t happen overnight. Yet companies continue to innovate and investment mindshare around how to move payments faster.
“People think that things can always happen faster and that shifting consumer behavior can happen faster. … You can’t have that overnight revolution. As much as we all want it … the reality isn’t there. What we need instead, is more incremental innovation,” Massaro noted, adding that leveraging the rails and the institutions that exist today can make that “incremental innovation” easier and faster to realize.
Massaro pointed toward the role of the banks, and how Flywire’s model, he believes, offers banks that opportunity.
“I think a lot of people look at banks and think they can’t or won’t innovate. They don’t necessarily get credit. But there are lots of burdens on them already. They are evolving and I think that requires everyone to evolve,” Massaro said.
Rather than blow things up and start all over again, the kind of big-bang innovation that costs billions and on a global scale will take decades.
“We’re helping to facilitate the movement of money from one bank account to a businesses or an institution’s bank account – cross-border,” Massaro said. “And we can do that by leveraging the rails that exist today – the kind of innovation that adds value to all involved by making moving money borderless, transparent and trusted.”