The University of Illinois is getting an education in how complex tuition payment processing can be, especially when the students enrolled from outside of the U.S.
It also serves as an example of the clients that are in big demand for cross-border payment companies seeking larger volumes, a race that will dominate the market in the next year.
"There are multiple banks involved in the payment. It can be a bank in the home country or one or two banks in this country," said John Hockersmith, associate director of receivables, student loans and collections for the University of Illinois.
Nearly a quarter of the University of Illinois' 44,000 students are international enrollees, so that complex web of banks involved in the cross-border transfer—the originating bank, the University's bank, the forex institution—each can take a fee and processing time out of the transaction, Hockersmith said. "We can get short paid by these fees."
To address that problem, the University is expanding its use of a technology platform that relies on a cloud server to lower conversion rates and improve processing speed.
The University has suggested the technology to students for some time but is inching closer to making it mandatory. There are still some students that make payments differently, but the cloud transfer option, from Flywire, is the only option presented at enrollment. There's a flat $30 fee, which is cheaper than most commercial bank rates, Hockersmith said.
Winning and retaining clients such as the University of Illinois, where payments are generally above five figures each, is driving the competition in a growing cross-border payment market. The University of Illinois is similar to clients all over the world that require large cross-border payments and are looking for technology to slice fees and time out of the process.
Flywire, which specializes in tuition payments (and, to a lesser degree, health care payments) is increasing its geographic reach to accommodate the international student population. It has expanded its presence in the U.K. through acquisition and more recently added Australia; it also has a substantial presence in Asia. Flywire is chasing what it calls global citizens, or people who have business or payment needs that span multiple countries.
It's a trend that started to take shape in 2016 and will continue to accelerate in the next year, according to analysts who study the market.
"The increasingly global nature of markets like higher education, along with the annual increase in college tuitions, will cause the size of the cross-border tuition market to increase in the years to come," said Andy Schmidt, an executive advisor at CEB. "This is especially true in markets like the U.S. where foreign students are ineligible for student loans or financial aid. Making these types of payments transparent and cost effective gives students, as well as their parents, peace of mind as they leave the country to start their next term at school."
Flywire's approach is a bit different than that of other cross-border payment companies. While pursuing a market that's distinct from the traditional Western Union or immigrant workers' remittance, Flywire is a niche inside of a niche.
"Companies like TransferWise and CurrencyDirect aim to attract consumers looking to make higher-dollar-size cross-border payments for things like tuition, luxury items, real estate, etc.," said Talie Baker, an analyst at Aite Group, adding Flywire acts as a processor, which is where the transparency and efficiency in payments come from.
"The consumer pays lower fees overall and the school is able to track which student belongs to which payment," Baker said. "The process is much less confusing for all parties involved with Flywire providing this service."
Beyond speed, the technology also aids in records management, since the students enter a distinct identification number to make a payment, Hockersmith said.
"The biggest problem we have is the limited data space to identify the payment, so often we have to conduct substantial research to find out where the payment is and what department it's going to," Hockersmith said. "For example, we have a lot of students named Patel, which is a common name in India. If we get a payment with an initial and Patel, it can be hard to look that up. With the ID there can't be multiples."