A Master Class in Convenience: Faster Payments for Higher Education
Paying for college can be a real pain, and the act of paying tuition itself has not kept up to speed with the times.
According to Aite Group, 40% of tuition payments are made by ACH (electronic check), making it the most popular method of payment for higher education. Yet, these payments can sometimes take several days to process. In a world where college students send and receive over 120 text messages per day, immediacy is key. Especially when large dollar amounts are being spent. Students and parents demand that payment options conform to their expectations of speed, to prevent their accounts from being overdrawn.
Class, we’d like you to meet real-time payments (aka faster payments).
What are real-time payments?
Put simply, real-time payments are a payment method that instantly takes money out of one bank account and deposits the money in another bank account, 24x7x365. This same transaction carries the payment and remittance data.
While many institutions do post payments to students’ accounts in real-time, this new real-time payment method moves the money immediately as well. These payments run on new rails and move money faster than same-day ACH and credit cards, and are irrevocable, which means no ACH returns or chargebacks. When a student (or parent) submits a payment, they’ll see it immediately taken from their checking account, preventing them from over-spending and overdrafting in the subsequent days.
For higher education institutions, this means improved collections, a reduction in staff time spent collecting and reconciling payments, and greater customer satisfaction.
“Real-time payments have been very popular in countries like the UK, now they’re coming to the United States,” said Colin Adams, Managing Consultant at Lipis Advisors. “In addition to satisfying students and parents, real-time payments also feature lower transaction costs than credit card payments.”
Real-time real-life scenarios
Tuition Payments – The most obvious benefit of real-time payments can be found in tuition payments. Here, parents and students can submit their tuition payments as they normally would, but instead of waiting days for the payment to process, it goes through immediately. This gives families the peace of mind to know their checking accounts are up-to-date and accurate at all times.
Financial Aid Refunds – Students on financial aid are dependent on receiving their money in a timely fashion, and nothing could be better than receiving their money in real-time. Real-time payments allow schools to disburse these payments as they become available, helping to satisfy this large portion of the student body.
Campus Activities – Online payments for campus activities like sporting events or shows can present opportunities for fraud. Real-time payments help to reduce fraudulent activity with stronger authentication. Unlike credit card payments, real-time payments require the consumer to authenticate the purchase through their own bank account.
Real-time higher education payments forecast
According to Lipis Advisors, real-time higher education payments will grow at more than 80% CAGR from 2018-2022.
In addition, it’s estimated that 25% of online bill payments to colleges and universities will be real-time by 2022.
The types of payments that will contribute the most to the shift will be debit card, ACH and check.
The switch to real-time payments is now a matter of when, not if, thus making it imperative that institutions select partners now who can support real-time payments. Getting it wrong could result in having to redo your campus payment systems within two years.
See how institutions are preparing in our on-demand webinar - Faster Payments Coming to the U.S – Are You Ready?
Related Blog Posts
The Mexican Fintech Revolution – ¿Qué onda in Open Banking?
Mexico has joined an elite group of nations, being amongst the first to pass open banking regulations. Specifically designed to open up its financial services and technology sector, the so-called ‘Fintech Law’ appears to have taken notes from PSD2, UK Open Banking, Singapore’s ‘organic’ approach, and others – and balances these against Mexico’s unique context and aims.
ACI’s Lu Zurawski, one of the industry's foremost open payments experts, and Sonia Gomez, a Latin America payments authority, discuss this balancing act; including the drivers, the regulation and the potential benefits.
Working Up An Appetite for APIs in Australia
This week ACI hosted the latest installment of our #paymentsforbreakfast forums in Australia, with the early birds catching the open banking worm in both Sydney and Melbourne.
Given the similarities between the Australian and UK open banking movements, we enticed ACI’s UK-based Lu Zurawski (Solutions Practice Lead - Retail Banking) to Australia to share his learnings from being heavily involved in the UK Open Banking working group.
APIs and Cash Management (Harnessing the Hammer, Part 2)
In my last blog post, we talked about the hammer and the nail; the hammer in this case being open APIs, and the nail being the market need to adapt to changes in customer behavior and expectations from our commercial market. We laid out why the US is in a different position when it comes to open APIs—it has to do entirely with the regulatory environment, which is allowing us to start with the largest revenue opportunity first. Finally, we challenged you, the reader, on how you can begin on your journey. And that is where we are going to pick things up. What steps can you take today, and what use cases can you explore as we start getting our hands dirty?
Three Key Takeaways from the Latest Payments Insight Survey
Blinkist is a reading app that summarizes books into 15-20 minute reads; these reads are called “blinks.” It’s helpful for a few reasons – I can scan books before I purchase them, I can get new ideas without having to read the full book, and I can learn to summarize information. It’s safe to say that I (and probably many who are strapped for time) are a little obsessed with Blinkist! So here I present my own summary – in three key takeaways – of the new ‘2018 Global Payments Insight Survey: Retail Banking,’ which finds that 51% of banks are increasing spend on payment technology.
The Hidden Cost of Digital Payments for Retail Payment Players
It is not exactly breaking news that non-cash payments are on the rise globally, with column inches dedicated to the launch of digital financial-inclusion projects. But going cashless is not only a challenge for humanitarian endeavors, or developing countries. We all agree that removing cash from the system will save payments players big bucks in the future, but we must also consider the immediate impact of digital transformation on the legacy infrastructure of the powerhouses of the payments ecosystem.
Why User Engagement Matters, Even for Enterprise Applications
As a User Experience Designer at ACI, I spend a lot of time watching users interact with my designs. I need to make sure our solutions work properly, but lately I’m more interested in how they make my users feel. Engagement is a dominant concept in user interface design right now. It’s important because positive emotional experiences often lead to increased use and loyalty.
Five Payments Trends to Watch in 2018 [Part 1]
2018 is set to be a year of rapid change and new challenges for payments players. The floodgates are opening with PSD2 and UK Open Banking coming into force, bringing an onslaught of new competitors and potential partners. Whether evolution is mandated or market-driven, banks and processors are facing a critical year in their long-term success.
Five Payments Trends to Watch in 2018 [Part 2]
The New Payments Ecosystem Is Here. The floodgates are opening with PSD2 and UK Open Banking coming into force, bringing an onslaught of new competitors and potential partners. Whether evolution is mandated or market-driven, banks and processors are facing a critical year in their long-term success.
Open Banking Goes Live: The Walls Around Traditional ‘Old Style Banking’ Are Crumbling Down
January 13, 2018 may well be remembered as the ‘beginning of the end’ of the traditional retail banking industry.
Thanks to a profound set of new rules by European regulators and the UK government, we may see the start of an era where consumers no longer hesitate to change their bank accounts or make more personalized arrangements with regards to their finances.
The Bank of the Future: 2040 and the Reality of Ar and Vr
Mark, when I envision the bank of the future, I imagine Twiki and Buck Rogers at a casino. Or maybe I once dreamed that—I’m old and my mind is going. So what are we talking about and what can we envision when it comes to the bank of the future? And by future, I’m talking about 2040, before certain cities might be flooded (by water). But I digress, as this isn’t a post about climate change.