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Fintech payment innovations could reshape higher ed

Today’s fintech landscape is driving a greater need for payment innovations in education software at the collegiate level.

6 min read


payment innovations with a mobile phone

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Insights is a SmartBrief Education Originals column that features perspectives from noted experts and leaders in education on the hot-button issues affecting schools, districts or higher education. All contributors are selected by the SmartBrief Education editorial team.

Students pay for a shocking amount of products and services when enrolled in a college or university, from tuition to room and board, textbooks, meal cards and on-campus transportation fees. Basic digital payment portal is par for the course these days, but colleges and universities should be quicker and more open to making changes and adopting new digital payment innovations. 

Ralph Dangelmaier

Today, a student’s various payment options remain siloed from other administrative functions. Students can connect their bank accounts to make transactions, and the portals themselves have a simple view of the entirety of those payments, including what was paid over periods of time, partial pay capabilities and automatic payments. This is where the payment innovations tend to plateau — and create an inflection point for universities to modernize payments processes through new digital solutions.    

Payment platforms should be informative, more convenient and increasingly sophisticated. Retail and e-commerce sectors are primarily driving the rapid adoption of digitalization and fintech, but given the digital-native demographics, colleges and universities should be on the cutting edge too.

As with most industries in the past few years, the COVID-19 pandemic upended the education market, prompting schools to turn to technology in hopes of solving new yet fundamental challenges like remote learning. Subsequently, the education technology market was valued at over $89 billion in 2020 and has continued to grow since then as digital alternatives became normalized in day-to-day education operations. Payments should also be part of that experience.

The payment innovations spectrum

Education is one of several industries that still have the opportunity to evolve faster and embrace more effective digitalization. What’s getting in the way? Colleges and universities tend to focus on specific, big-ticket spending initiatives. Some may be hesitant to implement fundamental shifts in technology, assuming that it may be too complex. For instance, what works for the University of Texas may be vastly more detailed than what a nearby community college needs. 

Still, some higher-education institutions are just starting to become technologically savvy in areas like payments, and several have already made the leap to invest in game-changing upgrades. But emerging and untapped opportunities remain. 

Digital wallets

It’s no secret that the movement of money through digital wallets has become a hot topic in today’s payments landscape, and seamless, mobile-first experiences are critical to benefiting both students and schools. A digital wallet allows students to leave their physical wallets at home and only carry their phone to make purchases around campus, which offers them greater security.

Many higher education institutions already accept digital wallet payments for some things. Schools can also potentially convert more parents and alumni into donors through an optimized mobile experience, leveraging wallets like Apple Pay, PayPal and Google Pay.

Buy now, pay later 

The buzzy buy-now-pay-later, or BNPL, concept presents higher ed with a lucrative opportunity. The industry is worth $97 billion and is expected to increase in the coming years. 

With BNPL, students who have limited options for education payments could avoid using credit cards with steep interest, knowing that the short-term payment program they’re choosing has low to no interest rates. Giving students more financing options can change the way they view school funding and the outcome of their lives, depending on where they enroll.

BNPL can empower students to take on a stronger financial mindset, granting them the flexibility to make purchases that support their education, whether it be for their enrollment, school supplies or miscellaneous academic activities. Additionally, the short-term payment plan may alleviate the pressures that students might face when getting involved with multiple student loan lenders.

Payment innovations can be transformative, but they do come with cautions. Students need to be smart about BNPL. While splitting loan payments into a series of installments is convenient, falling behind on payments means getting hit with unexpected fees. Low account balances could cause an overdraft from a student’s bank, and lack of regulation means possible fraud is more common. 

Embedded payments

Embedded payment functionality in education software platforms should be an essential feature for today’s higher education institutions and students, as research shows that the embedded finance industry is set to top $7 trillion globally by 2030. This payment innovation can be a friction-free way to easily integrate a secure application programming interface or hosted solution into education software without costly development. Ideally, a built-in payment solution lets schools start taking digital payments immediately, cutting down on processing or vendor fees. 

When payments are embedded effectively, students can cut down on the frustration of manually entering payment information for essential operations like tuition, sports teams, extracurricular activities and meal services, as well as filling out forms for in-person payments or submitting checks. 

Additional research found that 60% of students would prefer to take out a student loan directly from their school rather than a bank. Embedded payments would allow both enrolled and potential students to gain instant access to short-term and long-term borrowing. 

Some schools should move cautiously, as international students may incur significant cross-border fees. Cross-border payments generally incur a fee of up to 2% of each transaction. The school may choose to absorb this, or some may upcharge the end customer to cover it. 

Moreover, if students attend boarding schools or higher education programs abroad, transactions from foreign countries are more likely to be flagged as fraudulent without a practice known as local card acquiring, which runs transactions through a bank based in the same region as the buyer’s card to increase the likelihood of authorization.

Ultimately, catering to current digital behaviors means balancing new technology while managing risk and compliance. Software platforms that target schools across the globe can build payment functionality right into websites and student portals, all to alleviate some of the most common pain points found in the education sector today. Streamlining processes for digital payments with new payment innovations like embedded payments, BNPL and digital wallets will only make the experience easier for schools, students and the edtech platforms alike. 

Ralph Dangelmaier is CEO of BlueSnap, an all-in-one payment solutions company. 

Opinions expressed by SmartBrief contributors are their own. 


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