Cross-border tuition payments hit a wall: Immigration politics

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The Trump administration's isolationist policies are slowing the flow of foreign students to American universities, and thus may hurt companies that rely on cross-border tuition processing to American corridors.

New foreign student enrollment in the U.S. fell 3% during the 2016/2017 school year, according to the Institute of International Education, which also reports overall foreign enrollment grew 3% to 1.078 million due to students already in the U.S. The National Foundation for American Policy reported an overall decline in all non-U.S. students at American colleges. While it's too early to know this year's figures, Politico projects the decline in new enrollment will double for the 2017/2018 school year.

Nearly 70% of educational institutions report the decline is due to immigration issues such as visa application process or denials, which was double the rate of foreign students who applied but could not attend school in the U.S. in 2015/2016. The declines follow a decade of steady growth in foreign enrollment, which was enough to offset revenue declines from lower government investment in U.S. universities, and developed a competitive payment processing niche.

While tuition rates vary, any decline in foreign enrollment could impair tuition revenue in the U.S., and thus pose a challenge to companies that specialize in that market. "We have not seen a slowdown in the U.S. so far, but we're keeping an eye on it," said Mike Massaro, CEO of Flywire.

Boston-based Flywire, which just raised $100 million in new investment, will use that funding to expand in new markets and diversify into new products. The company got its start as a tuition payment gateway for international students, carving out a niche between larger B2B international payments and small-volume remittances and online marketplace transactions.

Flywire has over the past couple of years diversified into health care payments and other verticals, collaborating with Billtrust to improve processing; and acquiring Pace Invoice to enhance multi-currency invoicing.

Flywire predicts it can weather any decline in incoming U.S. tuition payments by focusing on other corridors. Australia, for example, has seen a surge in university students from outside the country. International students will also go to Canada, Australia or the U.K., Massaro said.

Flywire's geographic diversification also prepares it for the impacts of tariffs on health care, its other major line of payment processing. The tariffs could increase the price of equipment and hardware for certain medical procedures, making those procedures more expensive and lowering the number of patients who visit the U.S. for surgery.

"If someone has the means and has a need for a procedure and it isn't available at home, they're still going to travel to get that procedure," Massaro said. "They may go to Japan or Singapore."

As the trade war has accelerated, there will more likely be a downstream impact that will affect payment processing, either through a decline in a transactions or a shift to less price-conscious payment types.

In such an environment, fluidity is becoming nearly as important as friction when it comes to enabling transactions, particularly cross-border, according to Thad Peterson, a senior analyst at Aite Group. "The path of payments between countries reflects the political, economic and social changes that are underway across the globe."

Other payment companies have turned to technology to offset the impact of the pending trade war. Airwallex, for example, says faster processing technology can offset the cost of more expensive materials for international transactions.

"As markets and relationships change, processors need to be able to adapt quickly," Peterson said. "Fortunately the cross-border payment infrastructure is improving quickly, and while some of these socio-economic transitions could result in disruption of payment flows, most will be easily integrated into the existing payments ecosystem."

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