Around 750,000 international students from over 200 countries attend schools in United States every year, and I was one of them. In this process, millions of dollars move across borders in terms of tuition fees and other fees. Moving to a new country is not that easy for an international student. The process of transferring money for tuitions and other fees can be expensive and sometimes may have inefficiencies and hidden costs. Exchange rate fluctuations most of the time hits the pocket. One of the payment companies which is helping international students transfer money at exchange rates lower than local or international financial institutions is peerTransfer.
The journey of peerTransfer started from a student from Spain who moved to USA to pursue MBA from MIT. He lost money while making a money transfer from Europe to USA. Iker Marcaide, founder and CEO of peerTransfer made payment to MIT that somehow got lost at the time of transfer. While researching about his payment, Iker discovered the hidden costs and inefficiencies in the international money transfer process. He also found that exchanges rate decided by banks were much higher than the actual.
When asked about the reason for starting peerTransfer, Iker Marcaide in one of the interviews said “As if all the other difficulties and challenges weren’t enough when going to school abroad! I decided there had to be a better way – one that would let me enjoy my time rather than worrying about my lost tuition. Soon after, I decided to create a solution that would help other international students with a more convenient and lower cost method to pay their tuition.”
peerTransfer found in 2009, provides global payments solution for the HigherEd vertical helping international students. Through peerTransfer students pay their tuition fee and other fees through their local currency and save money by being charged better exchange rates than other financial institutions. A student has to login into the peerTransfer website and has to key in the amount to transfer to the school. Provide a mode of payment and other basic information. Money transfers are made in the local currency and then converted into dollars. What could be interesting to know is if peerTransfer allows international students repay their education loans through their payment platform?
In June 2013, peerTransfer raised $6.4 million from QED investors, Fides Capital, and Kibo Ventures with participation from previous investors including Spark Capital and Maveron. The funds were raised to expand into different geographies and to upgrade their existing payments technology. Part of the funds will be used to sign up more colleges and universities and expand into countries like Canada, Australia, and the U.K. to scale up their business operations. peerTransfer has tied up with 350 educational institutes across North America, Europe and Australia and has processed payment from over 190 countries till now.
Since its inception, peerTransfer has witnessed a ten-fold increment in the number of payments with an average yearly payment of $25,000. The revenue recorded for the month of May 2013 was 13x times that of May 2012.
LTP View: Paying tuition fees for an international student may not be easy as it involves multiple steps and fluctuations in the exchange rates, additional processing fees make it worse. Like peerTransfer there are other companies who offer similar payment solutions. peerTransfer faces competitions from companies like Western Union, Travelex, Firma and Higher One. By tying up with educational institutions and raising funds to expand peerTransfer might have come up with a smarter way of beating completion and capturing market share. Their business model may not be hard to emulate which may give rise to startups competing with peerTransfer on lower profit margins. This was the case in 2010, when Travelex and Higher One teamed up to streamline international student payment systems. But they have a big jumpstart with hundreds of education institutes signed up and with the brand building.