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
How Italian Banks and Processors Can Capitalize on Digital Transformation
The European payments landscape is in an era of significant change thanks to PSD2 and other macro factors, but there is more than one way to deliver real-time and open payments to meet PSD2 requirements and its technical standards. Banks and processors must manage this alongside their own set of domestic challenges and opportunities.
SWIFT gpi: Leveraging Cross-Border Payments for the Real-Time World
SWIFT gpi represents the evolution of business done over the SWIFT network, bringing correspondent banking into the digital era.
I’ve covered this topic before, but with gpi now reaching the two-year milestone, it’s a good chance to reassess the progress that has been made – and what is needed to drive further adoption.
Instant Payments in Italy – And Beyond: Lessons from Il Salone dei Pagamenti
ACI was invited back to Il Salone dei Pagamenti – Italy’s premier payments event organized by the Italian Banking Association (ABI) – to participate in a panel, “SEPA Inst – the Future.” As expected, the session was packed with stats and advice for a more efficient roll out of instant payments – in Italy and beyond.
Dedicated Followers of Fintech: Why Transaction Banking Never Goes Out of Fashion
Taking part in a panel at a recent corporate treasury conference, I was introduced as a ‘consumer payments expert’ – not an obvious qualification for sharing stage-time with serious corporate liquidity and cash management folk, but as the talk track was on mobile wallets and Open Banking, I had some reasonably safe and relevant content on which to fall back.
Sibos Preview: The Five Trends Transforming Real-Time Payments
Real-time is now a reality, with more than 30 schemes live around the world. And real-time is in the spotlight as banks and financial service providers make their way to Sydney for Sibos 2018. What better time to look ahead at the key trends that are going to shape the ongoing development of real-time payments.
API Management: The Reason Digital Open Banking Can Fly
When it comes to thinking about the different roles that an API Manager can play for an organization, I personally think that an airport provides the perfect analogy. The customer is the passenger, the third-party organizations using a bank’s APIs are the airlines and the airport itself is the bank. I also think this analogy helps to visualize the variety of API management capabilities – including the role of an API gateway.
Can Corporate Banking be as Easy as Ordering Pizza?
ACI recently hosted Greenwich Associates on a webinar to discuss corporate banking. While not a topic that would usually make attendees salivate, the discussion turned toward ordering pizza (maybe, because it was close to lunchtime) and Greenwich highlighted how corporate banking should be as easy as ordering pizza.
Modernizing Cross-Border Transfers with SWIFT gpi
The customer experience for domestic payments – retail and corporate – has recently undergone a complete transformation. There’s still plenty more that could be achieved, but the advent of real-time payments in combination with open APIs has seen the launch of Request for Payment services and direct eCommerce instant payments in the UK and Europe. And it’s not just the PSD2 push in Europe that’s driving change – in the U.S., Zelle is moving beyond standalone P2P payments to become an integrated part of the retail banking app experience, as well as being included in new kinds of corporate disbursements.
Instant + Open Payments = A Winning Combination
I recently joined a panel discussion at EBAday 2018, alongside representatives from across the payments ecosystem, and the clear consensus was that real-time payments will be the new normal. This was evidenced by some of the interactive polls carried out.
Maintain Vs. Invest: What the Digital Era Ushers in for Banks
Taking place this week in Brussels, the European Credit Research Institute (ECRI) will host a high-level debate on how policymakers can build on the process of digitalisation of banks to raise competitiveness in light of increased competition from fintech start-ups and tech giants.