peerTransfer Does Its Homework and Grabs $7.5M

A Boston-based startup called peerTransfer that helps international students entering U.S. colleges and universities save on hefty international transaction fees when they pay their tuition has closed on $7.5 million in Series A funding.
Founded by CEO Iker Marcaide, a native of Spain and a former international student himself, the company says it curbs college costs for foreign students, who collectively spend $1 billion in nontuition fees, including currency exchange and banking fees, to attend U.S. schools each year.
Spark Capital led the financing round, announced Tuesday, with participation from Accel Partners, Maveron, and Boston Seed Capital. peerTransfer currently works with more than 30 colleges, including Auburn University, Georgia State University, Miami University, and the University of Cincinnati. Its goal with the fresh funding is to bring the system to more colleges, peerTransfer says in the announcement on the funding.
The timing on its expansion efforts is good: According to a survey by the Council of Graduate Schools released today, applications to U.S. graduate schools in particular surged in 2011, rising 11 percent between 2010 and 2011, reflecting the largest increase since 2006. Applications from China, which has a surging middle-class population, shot up 21 percent amid heightened interest in higher education and the increased ability for Chinese students and their families to pay for study at U.S. schools.
peerTransfer does not charge the colleges for the service, nor do the schools have to add IT infrastructure to process the payments. Here's the way it works: International students pay a fee to use peerTransfer. The company claims that students can save on fees compared with what they would pay via traditional payment processes—such as wire transfers from their home countries—which involve unfavorable retail exchange rates and credit-card payments, which typically involve fees charged by the credit-card provider. Students could save about $700 on a $25,000 tuition payment, on average, the company says. peerTransfer doesn't have a set transaction fee since they vary per nation and per exchange rate.

To allow the savings, peerTransfer has students make their tuition payments in their home currency, and transactions are bundled to secure higher-volume purchases at wholesale foreign-exchange rates, which cut the intermediary transaction fees.