Meditation Capital: Flywire Corporation ($FLYW) Investment Case
Introduction
In their Q2 2025 investor letter, Meditation Capital introduces Flywire Corporation as a new portfolio position, presenting it as a prime example of their investment philosophy of identifying amazing products with intentional “slack” trading at attractive valuations. Meditation Capital, known for seeking companies that over-invest in customer support and R&D while under-pricing relative to what they could charge, views Flywire as a business with exceptional product-market fit and customer loyalty. The letter emphasizes the firm’s approach of being guided by unusually good customer reviews paired with unusually low multiples. Meditation’s decision to invest in Flywire comes after extensive customer due diligence revealed effusive praise from university clients, reflecting the company’s superior product quality and customer service despite recent market concerns about international student visa restrictions.
Investment Highlight: Flywire Corporation ($FLYW)
Business Overview
- Contracts with universities to facilitate international student tuition payments
- Allows students to pay in whatever currency they prefer
- Dominates international student payment market share
- Free service to universities with fees embedded in FX pricing paid by students
Market Position
- Huge market share in international student payments across universities
- Superior product positioning versus unresponsive legacy vendors
- Trusted position in international payments creating platform for expansion
- What initially appears as simple, commodity business is actually highly differentiated
Performance Analysis
- Exceptional Customer Satisfaction:
- Universally positive customer conversations, described as “effusive” rather than just positive
- University customers praise high-quality customer support and willingness to solve problems
- Stark contrast to unresponsive legacy vendor alternatives
- Customer testimonials remarkably similar in enthusiasm across different institutions
- Value Proposition to Universities:
- Large time savings for university staff from multiple sources
- Fewer student inquiries about payment status
- Automated back-end reconciliation with finance/ERP systems
- Automated payment reminders reducing administrative burden
- Lower pricing and near-zero complaints from students
- Free service to the institution selecting the product
- Business Model Characteristics:
- Favorable split between decision-maker and payer: universities select, students pay
- Fees embedded in FX pricing (higher than Wise but reasonable for service provided)
- Similar attractive dynamic to historical successful investments in Google and Mastercard
- Model allows for strong alignment with university interests while maintaining profitability
- Growth Drivers and Cross-Selling:
- Revenue growth from student volume increases
- Tuition-driven price increases flowing through naturally
- Early traction cross-selling new products beyond core offering
- UK example: leveraging trusted position in international payments to capture domestic payments
- Platform expansion opportunities within existing customer base
Market Dynamics and Opportunities
- Enduring desire to study abroad despite obstacles
- Growing wealth in developing countries driving international student demand
- Students agnostic to specific study destinations, shifting between countries based on restrictions
- Universities increasingly value automated solutions and superior customer service
- High switching costs once integrated with university finance/ERP systems
Valuation and Entry Point
- Stock price hit hard by recent market concerns
- Entered at low multiple due to temporary headwinds
- Uncoordinated but simultaneous student visa restrictions in Canada, US, Australia, and UK creating opportunity
- Valuation disconnect from underlying business quality and long-term prospects
Risks
- International student visa restrictions impacting near-term volumes (Canada, US, Australia, UK)
- Regulatory changes in key markets could affect student flows
- Dependence on international student enrollment trends
- Competition from legacy vendors or new fintech entrants
- FX pricing model vulnerable to student price sensitivity
- Geographic concentration risk if certain countries tighten restrictions further
- Cross-border payment regulatory environment changes
Other Key Points
- Exhibits intentional “slack” – over-investing in customer support and R&D relative to peers
- Strong enough business model that customers would stay even with meaningful price increases
- Company chooses reinvestment over maximizing current profits
- Product quality difficult to replicate based on customer feedback
- Entry triggered by combination of exceptional customer reviews and low valuation multiple
- Long-term secular tailwinds from developing country wealth growth
Meditation Capital views Flywire as an exceptional product with dominant market share in international student payments, citing effusive customer praise, significant time savings for universities, favorable business model economics, and cross-selling opportunities as key factors. They believe the company’s intentional over-investment in customer service and product quality creates sustainable competitive advantages and provides downside protection, while temporary visa restriction concerns have created an attractive entry point for a business with strong long-term growth prospects driven by enduring demand for international education.
