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
Taking a Holistic View of ISO 20022 Migration and Payments Modernization in the Pacific
Today’s payments modernization efforts, most notably real-time payments, not only work to satisfy changing consumer preferences and behaviors, they also serve to future-proof national economies throughout the world. But for real-time payments to deliver maximum value, consumers and financial institutions must be able to exchange meaningful and actionable information — hence the development of ISO 20022, a standard for electronic data interchange that facilitates the fast, standardized and secure exchange of financial messages across borders.
How ISO 20022 Represents Both a Challenge and an Opportunity for Southeast Asia’s Payments Landscape
Governments across Southeast Asia (SEA) are increasingly recognizing the vital role that payments play in the engines of their economies, which has resulted in a number of payments modernization initiatives such as those in Vietnam and Malaysia (PayNet). Yet there is one particular area in which SEA’s financial institutions might still be lagging behind their global counterparts: the adoption of ISO 20022, which has become the global standard for high-value payments and immediate payments (IP) when it comes to cross-border payments.
Ready or Not, The Time Is Now for Real-Time Payments
Research from ACI and GlobalData confirms that demand for real-time payments is only going in one direction: up. The root cause of this increasing demand is rising customer expectations and behaviors; clunky and opaque payment experiences are becoming less tolerable in a world where customers can buy, watch and listen to almost anything with a swipe, tap or click.
When It Comes to Payments, COVID-19 Crisis Could Lead to Long-Term Shifts in Consumer Behavior [Q&A]
ACI Worldwide and GlobalData recently launched Prime Time for Real-Time, a new global report tracking and analyzing real-time payments volumes, growth and dynamics across 30 global markets. According to the global research, an industry first, more than half a trillion real-time payments transactions will be processed over the next five years. I discussed what the findings mean, and how the COVID-19 pandemic might be a further catalyst for behavioral change, with ACI’s global head of real-time payments, Craig Ramsey.
TCH RTP and FedNow: What’s Next for U.S. Immediate Payments?
It has taken some time, but immediate payments (IP) are on the move in the United States. Although the speed of adoption has been slightly behind the curve of regions like India, the Nordics and the U.K., the U.S. has seen significant year-on-year IP growth of 69 percent.
Social, Mobile and Instant Payments: How Digital Payment Overlay Services Will Power Up P27
For some years now, the Nordics region has been a global-standard bearer for payments and financial services innovation. Sweden has for many years been a leader in the progressive move towards cashlessness, championing the range of efficiencies that it brings. Major payments innovators like Klarna, FundedByMe and iZettle are based in the region, rubber-stamping Stockholm as a genuine fintech hub. Analysts and insight leaders also regularly single the Nordics out as a genuine leader, in particular praising the collaboration between governments, regulators, financial institutions and businesses that has led to such fertile ground for financial modernization initiatives.
How to Meet ISO 20022 Migration Deadlines for Fedwire and SWIFT
Over the next decade, we will undoubtedly see huge shifts in how financial institutions throughout North America transact, whether domestically or across international borders. This will be driven not just by changing technologies, but also by regulatory events – such as the widespread adoption of financial messaging standards like ISO 20022.
How Can European Banks Meet the ISO 20022 Migration Deadlines for TARGET2 and SWIFT?
First published in 2004 – and already broadly used in some quarters – ISO 20022 is rapidly set to become the de facto standard for financial messaging around the world, replacing MT messages.
The Pathway to Global Real-Time Payments: What Will Be the Impact of SWIFT and ISO 20022?
The whole world is moving toward the ISO 20022 standard, and almost in unison. Globally, most major currencies are planning to shift to the new data-rich standard for either high-value payments or immediate payments (high value being global messaging via the SWIFT network or an RTGS scheme).
Digital Payments Overlay Services: Accelerating Real-Time Payments Growth
The global real-time payments landscape is transforming every day, as the world moves toward payments that offer a multitude of digital payment overlay services that drive consumer experience and adoption. But what are digital payment overlay services? They are ancillary services that often ride the real-time payments rails, and can be flexible, nimble drivers of innovation. These digital services – piggy-backing on the standard real-time payments rails – not only add value to core payments, but also bring about convenience and ease of use for all participants in the payments ecosystem.