The Role of Local Payments in Higher Education’s Bottom Line

Each semester, millions of students seek higher education outside of their country’s borders. 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.

The Global Landscape of Payments

International students comprise a large portion of many university student bodies around the world. For example, China sends nearly 1 million students abroad each year while Germany follows 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 US, 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.

Local Payments, Lower Processing Fees

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%.

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 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 30%.

Making Payment Experiences a Priority

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

International student enrollment in US 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.

By Steve Villegas, VP of Payment Partnerships, North America at PPRO