Digital Banking

The role of local payments in higher education

Attending college this year was not without its challenges, thanks to the coronavirus. Despite learning from home, students were still required to pay tuition and their method of payment was not always digital. Steve Villegas, VP of Payment Partnerships, North America at PPRO shares his thoughts on the real cost of payments in education.

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December 8, 2020 by Steve Villegas — VP, Payment Partnerships, PPRO

Each semester, millions of students seek higher education outside of their country's borders. Today, despite the coronavirus pandemic, students are still attending college, whether virtually or physically. And just because the student is learning virtually doesn't mean there's no cost.

Offering a wider, global range of tuition payment options is a good way for schools to stand out from the competitive landscape of higher education. But, even more importantly, it can lead to significant cost savings for universities.

Payments: the global landscape

International students comprise a large portion of many university student bodies around the world. For example, prior to the pandemic, China sent nearly 1 million students abroad each year while Germany followed behind sending more than 120,000

Neither of these markets rely on credit card payments: In China, 56% of all e-commerce transactions are made by mobile e-wallets like Alipay or WeChat Pay. While in Germany, 52% of all e-commerce transactions are made by bank transfers such as Giropay or SEPA.

Local payment methods (LPMs) are the bank transfers, e-wallets, cash-based digital payments, and local credit cards. Formerly considered "alternative" payment methods, they are actually the dominant payment methods globally, used in more than 70% of all online transactions.

The U.S. which receives the bulk of international students, is a very card-dependent market. This could explain why 67% of international students worry that they won't be able to pay their tuition fees using a payment method with which they are comfortable and familiar.

LPMs enable universities to offer an easier payment experience, which is important considering the amount of money at stake.

Accepting a more diverse range of payment methods isn't just an exercise in improving the student experience; it can also save universities millions in costs. Credit cards typically charge businesses up to 3.4%, while the fees for LPMs can be as low as 1.2%.

Local payments, lower processing fees

Case in point: The University of Southern California, Carnegie Mellon University, and University College London, on average admitted 11,197 international students per year with a yearly tuition of $52,220 per student. That adds up to over $500 million in international student tuition for each university.

If students pay their tuition using credit cards, those transactions could cost the university as much as $19 million. However, using a local payment method instead, those fees drop to as little as $6 million.

These incremental cost savings will prove vital. For example, in the U.S. 36% of the top universities derive 10% or more of their total annual revenue from international students. In France, around around 20% of the students at the country's top-ranked universities are from elsewhere in the world. Looking at Singapore and Hong Kong, this figure rises to over sharp decline

Making Payment Experiences a Priority

Universities have incredibly pressing matters in 2020 – how to keep students healthy in a pandemic or how to enable long-term remote learning, for example but, for finance departments, every penny counts.

International student enrollment in U.S. universities has been on a sharp decline since 2015. In the wake of COVID-19, while many international students are reportedly studying online or deferring enrollment to a future term, international student enrollment declined by 16% in Fall 2020.

Future successes in recruiting students from abroad can offset these declines. Lowering the barrier to entry by accepting a wider, global range of payment methods makes higher education more accessible to a global audience. And it boosts the bottom line. Which is essential, now more than ever.

About Steve Villegas

Steve Villegas is a sales, marketing and business development executive with over 20 years of experience building and managing sales, partner development and marketing teams. As head of the U.S. office for PPRO, Steve drives new partner relationships and has cultivated a strong network of Payment Service Providers who utilize the PPRO platform. Steve has expanded PPRO's presence in the U.S. and leads strategic growth efforts in the region.

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