Boston-based global payment processor peerTransfer has raised $6.4 million from investors as it seeks to expand its payments services beyond the education industry.
Altogether, peerTransfer has raised $15 million since 2009 when the company began providing international students and their families services to allow them to pay tuition and fees using their home currency, says Iker Marcaide, company founder and CEO.
PeerTransfer negotiates for better exchange rates after "bundling all of the payments together," Marcaide adds.
"We are looking to expand into other areas of international payments, possibly serving any businesses that make international or cross-border payments," Marcaide says.
The company may start by expanding upon the relationships it has with students and their families, Marcaide says. PeerTransfer could potentially provide payments for other services or products students may need during their school years, he says.
PeerTransfer works with more than 350 educational institutions across North America, Europe and Australia. The company has processed payments in more than 190 countries, Marcaide says.
International wire transfers are "pretty straightforward," but peerTransfer's services would appeal to students and their families who have never used or been exposed to wiring money, says industry analyst Russ Schoper of Atlanta, Ga.-based Business Development International Inc.
Whether peerTransfer could take its business model into other industries depends on the types of partners the company can develop, Schoper says.
"There is definitely a need for that kind of service in education, and many companies provide it, but peerTransfer has found its niche through [investor] connections in Europe in serving those students coming to the U.S.," Schoper says.
The seed for peerTransfer was planted in 2008 when Marcaide was a student in Spain coming to the U.S to attend college. "I realized the complications involved, and that it is very expensive to make a wire transfer for a tuition payment," Marcaide adds. "Plus, one of my tuition payments was lost."
After money passes through banks and currency exchanges, the markup on a $40,000 international tuition payment could be 3% to 6%, Marcaide adds.
As occurred with his own payment, funds can sometimes get lost when transferring, Marcaide says. "Universities spend a lot of time and money trying to figure out what happened in a case like that," he adds.
Marcaide figures everyone involved in an international transaction benefits when peerTransfer delivers a payment.
"The student saves money because our margin is about half of what a bank would charge, the university saves time and money because the payment arrives on time in full, and the banks get some revenue from customers it may not have had otherwise," Marcaide says.
Regulators in Europe and North America govern peerTransfer in the same manner as any other payment processor, Marcaide says. "The U.S. can be more challenging because of federal and state regulations because it creates more layers," Marcaide adds.
Even though it may appear peerTransfer is taking revenue away from banks with its services, Marcaide says the opposite is true.
"Banks are partnering with innovation companies as a way to make revenue," Marcaide says. "They know that these companies do better jobs than banks on certain things, such as international transfers, prepaid, mobile or online."
QED Investors, led by Nigel Morris, co-founder of Capital One Financial Services, and FIDES and KIBO Ventures, both in Madrid, provided the latest investments for peerTransfer. Existing investors also participated in the round, including Spark Capital and Maveron.