Sydney startup NexPay uses an online business model to provide savings to foreign students attending Australian universities.
NexPay’s founders, former employees of Deutsche Bank, saw an opportunity to disrupt the currency exchange market: high rates at brick-and-mortar money exchanges are a major burden on foreign students studying in Australia, NexPay co-founder Dipra Ray told Techworld Australia
Students currently pay about $20,000 to $30,000 per year on school; add another 5 to 10 per cent in exchange fees and “that’s a significant amount of money that they’re spending,” said Ray.
NexPay has negotiated wholesale banking arrangements with Westpac, National Australia Bank and ANZ bank, providing the startup an exchange rate of slightly less than 1 per cent. NexPay makes a slim margin by charging a 1 per cent exchange rate to its customers.
“Technology has allowed us to make this model work,” Ray said. “One of the reasons traditional players have higher spreads is that they’ve got retail branches. We’ve actually been able to avoid all of that.”
In addition, NexPay eases the process of actually delivering overseas payments to universities and allows customers to track payments online from the bank to the school. A call centre provides 24/7 support to students, he added.
NexPay moved quickly from concept to reality. Ray and co-founder Jerry Stesel developed the idea for NexPay early last year. In September, the startup raised $250,000 in seed funding from a range of investors from the technology, finance and education sectors. In late November, the company launched.
The startup may seek to raise more funding in the next year, “but at the moment we’re relatively well capitalised,” Ray said. “For us it’s very much about getting our users aboard and getting our service out there in Australia.”
While not currently pursuing any government funding, NexPay may look into the Australian government’s export market development grant, he said.
Shortly after launch, at the beginning of the current semester, NexPay promoted its service on Australian campuses including the University of Sydney, Monash University, Macquarie University, and the University of New South Wales.
NexPay so far has signed up about 160 foreign students, said Ray, adding that he expects business to accelerate at the beginning of the next semester.
“We obviously want to make sure we push hard and go forward with the marketing and get more students on board,” he said.
NexPay is also talking to the universities themselves to better integrate its payment service, and hopes to seal a partnership with one of the institutions in the next six months, he said.
Eventually NexPay will look to expand overseas, said Ray.
“In the short term, our focus is Australia and potentially New Zealand,” Ray said. “But in the mid-term we would absolutely look to expand.”
Sydney’s startup community has been “open and welcoming,” said Ray. However, he said finding funding in Australia remains tough, “especially if you don’t have connections.”
While NexPay maintains its own office space, Ray said he recently attended an event at the Fishburners co-working space in Ultimo.
“It’s good to have events where you pull startups together because the worst thing about a startup is the lonely road,” he said.
“Anything you can do to bring people together and bounce ideas off of each other” is beneficial to the community and “the more you can encourage that, I think the better for Australia in the long term.”
The funding environment has improved in Australia, but early capital is still tough to find, he said. “We still prefer to invest in safe assets. People are not really willing to take that risk.”
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