Paying for college is tough no matter what country you’re in. And it’s not just because of the ever-increasing tuition bills. Sometimes just making sure the checks get in on time is a challenge in itself—especially for foreign students. The headache of making sure the bill is paid on time is compounded by banks and wire services charging large fees.
It is something that MIT Sloan School graduate Iker Marcaide, a native of Spain, knew well, and that’s why he founded peerTranfser, a financial services startup based in Boston. Today, the company announced it is in the process of opening a new office in China as it continues to grow by helping foreign students and their families make sure their tuition payments to schools including MIT and several Ivy League colleges make it on time.
Those transactions usually take the form of international wire transfers from institutions such as Western Union. Most come with big fees for exchanging large amounts of money from one currency to another. According to PeerTransfer CEO Mike Massaro, students could be hit with a 3 to 5 percent markup on each transaction.
Massaro says peerTransfer attracts foreign students because it eliminates bank fees on both ends of transactions and charges about one half what currency brokers take to convert the amounts. Massaro says students using peerTransfer typically pay half of what it costs using wire transfers.
He says the service also tries to add value by making everything easier. PeerTransfer automatically shows students the current exchange rates and lets them use the currency they’re most comfortable with or use credit cards or services like Alipay. And because peerTransfer takes fewer steps, payments can be processed in about two days, which is quicker than what banks and wire services can do.
After operating for about four-and-a-half years, PeerTransfer is on track to process about $2 billion in transfers and works with about 720 schools in 12 countries. That’s a small-but-growing cut of the $53 billion in tuition payments that cross borders every year.
More than 60 percent of foreign students studying in the U.S. come from Asia, with 28 percent coming from China. That’s why peerTransfer’s next step is opening up a new office in Shanghai. The new operations center will be responsible for customer support in one of peerTransfer’s largest markets and to help it grow by working with Chinese partners. Massaro says the company has been doing transfers from China for about three years.
The expansion is funded by the $22 million Series C round peerTransfer raised in January. Investors include Bain Capital Ventures, Spark Capital, and Accel Partners. All told, the company has raised $43.2 million.
Massaro and peerTransfer have ambitions well beyond facilitating tuition payments for foreign students. The company’s business model and technology platform could be used for many types of large international financial transactions. Massaro says he thinks of it as being akin to PayPal but better suited for large financial payments that cross borders.
That flexibility is why peerTransfer is using the new funds from the latest growth round to expand overseas. The office in Shanghai and planned offices in Singapore and Australia will help the company serve its growing client base and make connections with new banks and financial services firms. It also will help it find new partner schools—as Massaro points out, nothing limits peerTransfer to working with American universities, and it has about 70 schools in 11 other countries.
If that goes according to plan the next step will be to process transfers for additional industries, Massaro says. He did not say exactly what it will be, but he did say that real estate and healthcare could be possible areas for expansion, because of the growing numbers of foreigners who buy property in the U.S. or come here for treatment at prominent hospitals.
That seems like a logical extension of peerTransfer, but there are options that have surprised even Massaro. The rich are different—they have more money, as Hemingway allegedly said. That means they find ways to spend it that most people would never think of. One example is shipping their luxury yachts all over the world. Apparently there’s a small but lucrative industry that does just that, and some people have reached out to see if peerTransfer can handle their transactions, Massaro says.
People send more than $2 trillion a year across borders. PeerTransfer needs just a fraction of that to become a very successful company, and Massaro thinks that gives it a chance to be a billion-dollar company.
