That is an admittedly extreme example, but multiply it out across the hundreds of thousands of foreign students in each of the major study destinations and you begin to get a sense of complexity and potential pitfalls for students as they try to pay their fees across borders and currencies and financial systems.

That point where a payment is made is the last step in the enrolment funnel, but it’s one that often doesn’t get enough attention. If you don’t have an easy and effective way for students and families to transfer fees to your institution and school, you may be missing an important lever for boosting recruitment and retention.

“When we started, the international student was completely neglected in terms of institutions understanding their payment experience,” says Executive Vice President of Global Education Sharon Butler. “They didn’t know that students climbed mountains and swam rivers to get payments to them. You think about all of the investment that people make in marketing and recruitment, but that last step, the payment, is often overlooked.”

Flywire is a leader in the burgeoning field of international payment services for the international student market. Service providers in this space harness the power of technology, and considerable expertise in foreign exchange and financial systems, to create new payment systems that offer students and families a less expensive, faster, and easier way to transfer funds to institutions and schools abroad. For additional background on how this all works, please see our earlier post, “Cheaper, faster, easier: Building a better system for sending student fees overseas“.

As that backgrounder illustrates, there is a lot of complexity in moving money from country to country, and the trick is to make it simpler. Ms Butler explains, “The challenge is if it is really going to be a great experience for families, it has to be localised to that market. We need to allow them to pay with something that is familiar. If it is easy and familiar, that is a great experience for the family.”

That localisation effort can take many forms. It might mean, for example, that if you are a Chinese family and you routinely use Alipay Wallet then you might also want to use Alipay to pay international school fees. Or if you are an Indian family and you need to file tax declarations when making overseas payments, that the payment process provides you with those documents and prompts you to complete and file them. “The process is incredibly complex and we aim to make it incredibly simple,” adds Ms Butler.

Speed in payment processing is another top goal for every payment provider, and reconciliation — that critical step of verifying payment X was made by student Y – is the thing that threatens to slow the process. “Technology is the key to processing speed,” says CEO Mark Fletcher. “The opportunity for specialised payment systems like ours is to take that reconciliation and reporting process down from a couple of days potentially to minutes. That means we are automating important steps in the process, such as verifying the student’s identity or using machine learning to automatically check and parse related documents, like a tuition statement or invoice.” That speed of processing is more than a matter of customer service. It might also factor in how quickly students can receive important admissions documents to support their visa applications, or be eligible to register for courses or arrange housing.

Much of that reporting and reconciliation is automated within specialised payment systems, and this opens the door in turn to new payment models, such as installment payment programmes. You can easily imagine how such options might boost recruitment and student retention, especially in an environment of heightened financial concerns during and after COVID.

Going forward, Mr Fletcher points out that the sector has considerable room to scale up further. “The market is comfortable with the [international payment provider] model,” he explains. “Students understand there are alternatives out there and that is really driving competition in this space.” But he estimates as well that specialised payment providers are serving less than 15% of the addressable market at the moment, adding that, “There is plenty of room for growth as we continue to build awareness in the marketplace.”

For additional background, please see:

• “Cheaper, faster, easier: Building a better system for sending student fees overseas“

The post Is it easy for students to send you money? appeared first on şÚÁĎąŮÍř Monitor - Market intelligence for international student recruitment.

A new kind of private lender is offering hope to some of these students by banking on their future successes rather than on their current fortunes. The early leaders in this new category are MPOWER Financing and Prodigy Finance, both backed by venture capital or investment bank financing.

Their model is offering international student loans that do not require a co-signer or, even, collateral. Traditionally, co-signers and collateral are required as security in the event the international student is unable to pay back the loan.

“The world is increasingly global and connected, yet the banking industry has not kept pace,” says Prodigy Finance founder and CEO Cameron Stevens. “Traditional lenders are bound by local legal constraints, local data, as well as local repayments and collections, which ties an applicant’s credit profile to their location. For example, if you’re born and live in the US, you will have greater choice and access to financial services and credit. However, if you’re born in Ghana and want to study abroad, you’re more likely to be unbanked. We’ve worked hard over the years to change this. Our global credit model has allowed us to help international students with limited or no funding options to gain access to life-changing opportunities.”

No co-signer, no collateral

Traditional models of credit assessment rely on the borrower’s credit rating or on the type of security they can offer. But MPOWER Financing and Prodigy Finance evaluate applicants based on future creditworthiness. By limiting eligibility to certain destinations, institutions, and fields of study, the lenders can rely instead on proprietary algorithms that focus on factors such as graduation rates, post-study employment rates, and alumni earnings.

MPOWER Financing relies in part on the following eligibility criteria for loans of between US$2,001 and US$50,000:

• The student must be enrolled at one of 350+ specified institutions in Canada and the US;
• The student must be within two years of graduation – so financing is available for those in the last two years of an undergraduate or a graduate programme.

Prodigy Finance, meanwhile, provides financing for eligible post-graduate students admitted to more than 800 specified institutions around the world. In addition to attending an approved institution, applicants must have been admitted to graduate studies in one of the following fields: business, engineering, law, public policy, and health sciences.

The loans have higher interest rates than would typically be charged to domestic students via conventional student-lending channels, whether commercial banks or government-backed loan programmes. However, many students find the terms attractive, especially given their more limited eligibility for bank financing or ability to secure a conventional loan on the basis of a family home or other collateral.

Greater access to education

There are indications that lenders such as MPOWER Financing and Prodigy Finance are promoting wider access to study abroad opportunities and contributing to a more diverse international student body. MPOWER, for example, emphasises its social impact. In a 2019 report, the company noted that 85% of its clients could not have financed their degree programmes without their loans. Three in four students (76%) were from emerging economies, and 53% of clients came from families with annual incomes of less than US$15,000.

The larger context

The new lenders’ model is also relevant to educators who are now facing more challenges in attracting international students. As prominent international industry analyst Rahul Choudaha has written, “Many universities, especially in high-income countries, are at risk of pricing themselves out of reach to a large segment of international students.” He notes,

“We are heading toward a future scenario where global learning experiences will be out of the reach of many aspiring international students. This is a wake-up call to action for researchers, policymakers, practitioners, and leaders to focus on finding solutions to this affordability crisis, which threatens the future of international student mobility.”

Going forward, scholarship support or other financial aid will be an increasingly important factor in study abroad decisions for many students in emerging markets, and those students will be strongly attracted to more affordable destinations and institutions.

Private lenders such as MPOWER Financing and Prodigy Finance represent a compelling option for students facing affordability barriers. By banking on the promise of international students’ earning power as opposed to their current financial realities, the companies also remind us of the potential of international students to transform economies and societies.

For additional background, please see:

• “Tuition discounting on the rise as educators work to rebuild international enrolments“
• “International student recruitment and online communications in the age of COVID“
• “Brazil: Affordability will be key to unleashing demand for study abroad“

The post Private finance companies are expanding loans for international students appeared first on şÚÁĎąŮÍř Monitor - Market intelligence for international student recruitment.

Needless to say, the pandemic has had an extensive impact on the education sector. Many students have had to face delays or interruption in their study programmes, loss of part-time jobs, and restrictions on travel – all of which has created significant financial stress for the students and their families. At the same time, financial services providers have also been adapting their services to better support international students this year.

Our host this week is Martijn van de Veen, vice president of business development at şÚÁĎąŮÍř, and he is joined by three distinguished industry representatives: Amit Singh, the founder and CEO of , Tony Chen, the head of international education proposition at HSBC, and Adam Cross, director of marketing for Future Finance.

This episode is brought to you in partnership with HSBC. You can listen to it the player below, and we encourage you to subscribe via your favourite podcast app in order to receive future episodes automatically.

For additional background, please see:

“şÚÁĎąŮÍř Exchange podcast: How agents are supporting students and parents during online studies“

The post şÚÁĎąŮÍř Podcast: Financial solutions for international students appeared first on şÚÁĎąŮÍř Monitor - Market intelligence for international student recruitment.

Within this context, we might also consider the importance of fee protection programmes, especially in that students will soon be encouraged to once again send advance payments for tuition and housing. We can imagine that there will be more flexibility in payment terms and timing of payments as student mobility begins to resume later this year. But it is also reasonable to anticipate that both students and agents may have concerns around advance payments, especially amid news of school closures and with the prospect of a difficult recovery ahead.

Fee protection programmes will therefore have a particularly important role to play in bolstering consumer confidence during the recovery-to-come. There are many such mechanisms in place already. In some cases, they apply to regulated agencies in sending markets or in others to schools in study destinations. They range from more informal schemes – for example, where members of school associations may accommodate displaced students in the event of a school closure – to more tightly regulated deposit or bonding programmes.

When this topic comes up among industry colleagues, one example that is likely to be cited is . The programme derives from a requirement of the New Zealand government that all private training establishments (PTEs) registered with the New Zealand Qualifications Authority (NZQA) have some form of protection for fees paid to them in advance.

The programme operates in effect a student fee trust account. As such, it ensures that students can receive a refund of prepaid fees if the school is unable to deliver the booked course due to closure, insolvency, or loss of NZQA accreditation.

Fee Protect takes a broad view of prepaid fees, and its refund provisions include any fees paid for:

• tuition
• housing
• living expenses
• travel and health insurance premiums (if arranged through the education provider)

In short, the programme covers, “all payments made to a PTE, including accommodation and living expenses (includes homestay, living costs and other monies paid to or held by the PTE on a student’s behalf).”

As a related statement from the New Zealand government puts it, “Fee Protect means the last thing you will need to worry about is what happens to your fees.”

Aside from its broad reach in protecting or recovering all types of prepaid fees, there are two interesting aspects in the Fee Protect model.

First, it allows some flexibility to PTEs in providing security for pre-paid fees via trust accounts and/or bonding provisions. This allows for fees to be deposited into a Public Trust student trust account, and then to have them paid out by the trust to the education provider throughout the duration of the student’s programme. Alternately, the provider may arrange a bond as a security against pre-paid fees, from which refunds may subsequently be drawn as needed.

Second, the programme springs from a regulatory requirement and is tied to the registration of the provider within the country’s quality assurance and standards framework, the NZQA. This is, needless to say, a significant aspect of oversight and regulatory control for protecting prepaid fees.

While arrangements vary from destination to destination, protection schemes of all types will likely now figure more prominently as a security and incentive for prepayment as student mobility resumes in the second half of this year and into 2021.

For additional background, please see:

• “Plans for return to campus still in flux”
• “Looking ahead: Scenario planning and recovery forecasts for international education”
• “Cheaper, faster, easier: Building a better system for sending student fees overseas”
• “How will education agents expand their service offerings this year?”

The post The growing importance of fee protection programmes appeared first on şÚÁĎąŮÍř Monitor - Market intelligence for international student recruitment.

Just think about a traditional money transfer process for a moment. And imagine, for example, that a student in Germany needs to send US$10,000 to a university in the US for an upcoming semester’s tuition. If the student goes to his or her local bank to send that transfer, the bank will charge a markup on the foreign exchange rate, and generally an international transfer fee as well. There may well be additional fees levied by intermediary banks along the way, not all of which will be clearly known at the start of the process.

Conventional international funds transfer process via banks

The end result is that even if the student pays an amount equivalent to US$10,000 in Euros at the start of the process, plus whatever banking fees are billed up front, a different amount might actually end up in the university’s account (if exchange rates change during the transfer or if additional banking fees come into play). The student may not even know of any such shortfall until they arrive on campus to find they still have a balance owing, and they certainly will not be able to trace their payment or monitor any additional charges during the transfer.

Welcome to the mysterious – not to mention complex and highly regulated – world of moving money from one country to another. This is where retail banking and high finance collides, and where banks, along with a number of invisible money movers, have been quietly making big profits for years.

“The biggest players in international funds transfers are still the banks. In fact, historically they’ve been the only players that do it. People like ourselves are coming in and trying to disrupt that,” says Danny May of , a payment service for European clients offered by Flywire.

Here is what that disruption looks like for our German student who opts to send money to the US via a payment service provider. First, the student gets access to an online payment gateway that allows them to transfer funds locally and in their home currency. International transfer fees are eliminated as a result, or at least greatly reduced.

Second, the payment providers negotiate discounted exchange margins with the intermediary banks based on their volume of transactions, and pass that on in the form of lower costs for customers. As Mr May points out, “Banks are arguably charging 2%-3% more than the rest of the market, because they can. Although we use the banks for our [transactions], the volume that we do means that we can pass on some savings to the end users, be that students or parents.”

Third, the payment providers offer a more transparent process for students, families, and agents. They guarantee that the correct amount of foreign currency will be deposited with the student’s institution abroad – that is, they assume the risk of any shortfall arising from the foreign exchange or intermediary fees – and students are able to monitor the progress and status of their payments on the system at all times.

The bottom line is that the student or parent or agent is able to realise significant cost savings on international transfers – measured in the hundreds or even thousands of dollars per transaction. At the same time, the transfers are processed through quickly and transparently via routings established by the payment provider and the invoice amounts are guaranteed for the host institution or school.

Payments in a fragmented marketplace

Now expand the example of our single German student to the millions of internationally mobile students abroad today, coming in numbers from a rapidly expanding number of source countries. Those students are travelling to an increasing field of established and emerging host countries around the world and to tens of thousands of schools and institutions. Finally, many are being supported by agents – again, thousands worldwide – who in some cases are also making payments on the students’ behalf. Whatever way you slice it, that adds up to a complex web of millions of payments per year moving around the world.

International education has of course become a major industry over the past 30 years. It is a leading export sector in Australia valued at more thatn AUS$34 billion and a US$45 billion enterprise in the US. Education exports are valued at roughly ÂŁ22 billion in the UK, and CDN$20 billion in Canada. Among those four leading destinations alone, that works out to more than US$100 billion per year in fees and related spending.

These export numbers give a sense of the scale of the potential market for international payment providers specifically for international education. They underscore why we continue to see an expanding field of providers and services the international payment space over the last few years, and also why some of those firms are growing so quickly today.

The sheer number of participants and countries involved illustrate as well the complexity of the enterprise, and the fact that efficiency – along with the ability to offer lower costs to customers – is a key source of competitive advantage for payment providers in international education.

“We’re in the business to be a disruptor based on volume rather than optimising profit based on individual transactions,” says Brent Hobson. (Mr Hobson founded a specialised payment transfer provider – PayEd – in 2015 and later sold the company to .) “In this scenario, you’ve got three players generally. You’ve got the school, the person paying (whether that’s the agent or student), and the payment provider. And so what we’re trying to do is to take that money back from the banking system and give it to all three groups.”

“This market is so big,” he adds, “you don’t need to be greedy. You just need to be efficient.”

The proposition for educators

Part of that efficiency arises in the ways in which international payment providers aim to relieve some of the pain points for institutions in receiving, reconciling, and processing international payments. When you imagine the sheer number of students involved, a great number of whom are transferring funds two or three times per year and all at about the same time, you begin to get a sense of what that looks like from the institution’s point of view. For many, this adds up to large volumes of transfer deposits, which may or may not correspond exactly to the amounts owing on the student’s accounts, and often without a great deal of supporting detail from the bank.

This in turn translates into a lot of additional expense in trying to connect individual payments to the correct student accounts, in lost receivables due to discrepancies in foreign exchange calculations or unanticipated transfer fees, or in additional efforts to collect on any shortfall on a student’s transfer amount.

“When students are making payments for semester fees, there is a big spike in the telegraphic transfers that universities get a couple of times per year,” says Cohort Go CEO Mark Fletcher. “Typically, what happens is that the universities will put on reconciliation staff to look at all of these transfers and try and work out who they are from. If they are dealing with a payment provider like us, we just give them a single payment but with a detailed report on the payment amounts and students corresponding to each.”

The regulatory burden

Underlying this growing volume of international fee transfers for education are extensive systems of regulatory oversight and compliance, both at the level of participating banks but also in the form of related legislation governing international funds transfers, foreign exchange, and currency controls.

Navigating those different requirements often leads payment providers to build transfer routes on a market-to-market basis, and this means in turn that payment firms can sometimes play an important role in easing financial transfers for markets where moving money has traditionally been more difficult.

On the compliance side, meanwhile, approaches vary by provider. Some meet their compliance obligations at the institutional level – in effect, the education provider becomes a client of the payment service and is established as a legitimate institution and destination for the transferred funds.

In other cases, the compliance is conducted at the student level. The student, or a representative or family member paying on the student’s behalf, has to clearly identify themselves within the payment system and is then checked against a variety of security lists and other controls against money laundering or other infractions.

Just as international payment firms have to navigate the many different regulatory regimes of both sending and receiving markets, they also have to quickly adjust to changing political and regulatory requirements. Mr Fletcher adds, “One of the biggest issues in the marketplace — particularly when you look at the regions where most of the world’s students are coming from — relates to the sovereign and regulatory risk arising in these countries.”

Looking forward

Even rough calculations suggest that the combined number of transactions of the major payment service providers still adds up to only a percentage of the total number of international student fee transfers each year. Given the large number of institutions, agents, students, and other stakeholders involved, the market is naturally fragmented in this respect.

But the rapid adoption of specialised payment services over the past four or five years points to the potential for continued growth and efficiency in managing international student payments. Mr May agrees that there is considerable upside: “Everybody seems to know each other in this industry. If you get a good name for yourself, that goodwill and reputation spreads very quickly. We see a huge opportunity to come in and make international fee transfers cheaper, easier, and faster.”

The post Cheaper, faster, easier: Building a better system for sending student fees overseas appeared first on şÚÁĎąŮÍř Monitor - Market intelligence for international student recruitment.

Systems for receiving and managing payments naturally fall within this realm as well. The ease with which students can transfer or verify funds to an institution are important factors in a student’s selection of an institution, but also in reducing processing times and costs for both students and institutions alike.

Driven partly by technological change – but also by imperatives to reduce fraud and costs – we now see an expanding field of new payment options and services emerging for both local and international transactions. These range from mobile payment services, such as , to alternate payment methods like Bitcoin, to related processing services, such as the newly expanded FundsV international funds verification service.

Each of these services aims to provide greater flexibility and convenience in making payments, but also greater security and integrity in managing payments and financial information.

Even so, the prospect of tracking the many developments in this space – or of altering existing payment systems to adopt new payment methods or related services – can be daunting. In some cases, these are relatively new services that are only beginning to take hold in international education. In other cases, such as with some mobile payment technologies oriented to micropayments, they are primarily intended for small, local payments for populations that are underserved by more traditional banking and payment systems and therefore may have little application for international students or institutions.

In today’s post, we’ll take a closer look at some of the emerging services in this area.

Reading the tea leaves in global travel

The global tourism industry is often an interesting example for international educators to watch with respect to market trends, including new or emerging technologies.

The travel business shares some characteristics of the international education sector: a global clientele, a need to reconcile payments across banking systems and currencies, and, particularly in the case of international travel, the need to securely handle larger transactions.

At the same time, there are some important differences as well – the number and variety of transactions and the wider range of channels through which funds are received – that may lead the travel industry to adopt new payment technologies more quickly.

The need for greater efficiency in receiving and handling payments was front and centre at the in London last month. Jason Hancock is the head of channel development with payment solutions provider . In his conference presentation at Travolution, Hancock drew on recent work by the research firm PhoCusWright to identify a couple of .

Travel industry acceptance of conventional and alternative or emerging payment methods, where “EFT” refers to “Electronic Funds Transfer” and “NFC Mobile” refers to “Near Field Communication.” Source: PhoCusWright Payments Unsettled 2013

He notes two alternative payment methods in particular – online wallets and virtual credit cards – as important emerging payment models.

Online wallets – including services such as and Google Wallet – allow registered users to associate a credit card or other payment method with a validated online account, and to then use that account for purchases. One effect of this service is to provide greater security for the user’s credit card (or other underlying payment source) and so to reduce fraud across the system. An online survey conducted early this year found that just over half of all respondents had used a digital wallet service of some kind, with PayPal and Google Wallet being the most prominent choices.

Similarly, virtual credit cards are unique credit card numbers that are generated for a single transaction or payee, and typically with a specified limit on transactions and a limited window of time (ranging from a month to a year) for use. The effect again is to provide greater security for both the cardholder and the payee. Virtual credit card services are typically associated with – and the payments guaranteed by – or financial institutions.

Early adopters in virtual currency payments

Further along the spectrum of alternative payment methods is the virtual currency Bitcoin. Bitcoin is a peer-to-peer payment network that operates online and revolves around a virtual currency of the same name, the value of which can fluctuate widely. Partly due to this volatility, the e-currency has not found broad commercial application as yet. As of late-2013, it is widely observed that one of the primary uses of Bitcoin is to transfer funds internationally, partly because the fees associated with doing so are considerably less than those charged for more conventional transfers.

Perhaps in recognition of Bitcoin’s advantages for international transfers, we are now seeing the first institutions to accept payments via the e-currency. A2Z School of English in the UK bills itself as the first EFL school in the world to accept Bitcoin payments. And the University of Nicosia, the largest private university in Cyprus, has also announced that it will accept Bitcoin payments in a bid to assist foreign students in countries where traditional banking transactions are more onerous or costly.

Rishi Maudhub, operations director at A2Z English, comments:

“We are excited to be offering yet more options to our customers, many of whom are digital natives and will be attracted to the idea of paying in e-currency. In addition, paying by Bitcoin eliminates nearly all of the transaction costs associated with international bank transfer fees and credit cards.”

The issue of international funds verification

Aside from the question of new payment methods, many institutions are also looking for greater efficiencies in managing admissions procedures across the board, including those processes pertaining to funds verification for applying students.

Many institutions and host country governments require prospective students to prove that they have the financial resources needed to carry out their intended programme of study. And international funds verification services, such as the US-based FundsV, aim to make the process of financially qualifying international prospects easier and more secure.

After several years of development, including a two-year pilot phase in the US, FundsV is expanding globally this year, in collaboration with the UK-based consultancy Barton Carlyle, to offer an online verification service with links to more than 2,800 banks worldwide.

As such, FundsV effectively moves a traditionally paper-based process to a secure, online platform that minimises the opportunity to manipulate financial documents, and with secure access limited to applicants and receiving institutions.

“The FundsV service has an enormous benefit to institutions who are seeking to enrol more international students, and who need to improve the time taken in these essential recruitment and admission processes,” said Pamela Barrett, managing director of Barton Carlyle. “The FundsV tool is not just secure funds verification – it’s a real competitive advantage to institutions and organisations who use it.”

Along with providing greater security and integrity in financially qualifying prospective students, services like FundsV aim to achieve some of the same important goals as the alternate payment methods we explored above: to reduce processing and administrative costs and to reduce fraud or misrepresentation across the system.

Needless to say, those business goals are constants for institutions and recruiters as well and will no doubt continue to fuel our interest in innovative payment methods and services in the years ahead.

The post New payment systems aim to reduce risk and processing time for international transactions appeared first on şÚÁĎąŮÍř Monitor - Market intelligence for international student recruitment.