Perfecting the Payment Process
Working in a bursar's office in early September can be like working for the IRS in mid-April. During this chaotic time, bursars are not only collecting and disbursing hundreds of thousands of dollars, but they're also responding to myriad customer service complaints, reconciling incorrect student mailing addresses and lost checks, and paying top dollar for paper and postage, check processing, and credit card fees.
To cut costs and expedite the payment process, many IHEs have turned to e-billing and e-payment systems. While some have developed homegrown systems, others prefer to outsource.
"But e-billing is not just about eliminating the paper check at the end of the process," says Sean Glass, chief marketing officer for Higher One, which specializes in refund management for IHEs. "It's about reducing the process that goes into producing the paper check."
However, not all IHEs are sold on the e-billing solution. "There's a lot of buzz about it. And everyone feels they need to go there. But it all comes down to what are the true problems they are trying to solve?" says Kevin Barney, vice president of sales and marketing for Tuition Management Systems, a company that focuses on tuition management solutions. After all, he says, it is a six-figure investment with recurring maintenance fees. Keeping these costs in mind, some IHEs have taken a more conservative approach to billing and payment by adopting only parts of an electronic solution. Ultimately, "any school could be a good candidate for an e-billing solution, as long as they do it in a thoughtful manner," Barney says.
The University of Minnesota was thoughtful when it decided to revamp its paper-based check processing system, a main source of its payment woes. The university used to encode cash and checks into its general ledger before having a courier service pick up the bundles of money once or twice a day to transport them to the bank. The courier service would cost $25 a trip. "It was always a struggle because we didn't scan the checks or take pictures of them, so reconciling any errors that we made in the system was a fairly lengthy process," says Stuart Mason, associate vice president and chief investment officer for the university's Office of Asset Management.
as they do it in a thoughtful manner."
To Mason's delight, the old system was eliminated eight months ago when the university implemented Wells Fargo's Desktop Deposit services, an electronic check processing system that is designed to improve cash flow by eliminating transportation costs and delays in the check-clearing system, says Danny Peltz, executive vice president of wholesale internet solutions at Wells Fargo. Now, the university simply scans checks from students (about 40 percent of checks come electronically via a homegrown e-billing system) and sends the electronic files to the bank using a CEO (Commercial Electronic Office) portal. The paper checks are then stored as backup for a couple of months before being destroyed.
This method of scanning is now legal as a result of the Check Clearing for the 21st Century Act, which took effect last October. The law allows printed versions of scanned paper checks to act as legal substitutes.
Mason says the new system also speeds up the university's depository process because the staff can scan checks throughout the day, enabling the clearing process at the bank to start sooner.
While the university hasn't produced any savings in terms of staff, Mason says eliminating the courier pickups has resulted in a savings of about $50 a day. "The overall system makes it much easier to retrieve specific data to reduce what used to be a fairly lengthy reconciliation process," Mason says.
Kennesaw State University's (Ga.) payment program also benefited from a little outside help. In February of 2004, the university decided to give its refund process an electronic makeover. "We were printing checks and mailing them but had no pick-up system," says Earle Holley, vice president of business and finance at KSU. "It would take up to five days from the time the check was printed until the time the student received it by mail, and that's assuming there was no glitch in the mailing address," he says. And unfortunately, Holley explains, many students move without notifying the university of their new address. He estimates that about 10 percent of addresses were incorrect.
We see it as an enrollment strategy."
-Mark Franke, Indiana University-Purdue University Fort Wayne
To remedy this, the university adopted Higher One's OneDisburse refund management service, which offers students three refund options: direct deposit to a demand deposit account associated with a MasterCard debit card that Higher One distributes to students, ACH (Automated Clearing House) payments, or paper check. About 65 percent of the student body opted to get their refunds via their debit card; about 10 percent chose the ACH method; the rest wanted paper checks, according to Sean Glass of Higher One.
In addition, Higher One handles the customer service for the university. "Because Higher One directly interfaces with our students, our staff doesn't get bogged down with student calls," says Martha Roth, director of universal card services at KSU. Furthermore, she says, "I didn't want the university to be responsible for maintaining students' direct deposit signatures and account numbers."
Still, many IHEs develop their own refund system in-house. "It's relatively easy to build one yourself," admits Glass. "But we're not just offering software. We are handling their customer service and doing error-handling." Besides, Roth, who is a big supporter of outsourcing, says: "Our industry is education, not banking."
The University of Denver's payment dilemmas surfaced last year, when it stopped taking credit card payments. Once it shut down this popular source of payment, the university knew it had to explore other options. "People liked the ease and convenience of paying with a credit card. Some students were even using their credit cards to finance their education," says Joe Benson, director of student financial services at the university. "We knew we had to replenish our payment options."
But as the university's annual merchant fees began approaching $1 million, Benson says there was no other option but to eliminate payment via credit cards.
As a result, the university decided to outsource its e-billing and e-payment to Tuition Management Systems in an effort to provide students with more payment options. TMS now charges students convenience fees for using their credit cards, but students can also opt to pay with ACH. In effect, credit card usage has dropped by 81 percent since last year, and about 200 percent more students are paying by check, Benson says. "We decided it would be better to outsource the payment service as opposed to trying to keep up with the technology and card issuer policies regarding convenience fees," Benson says. TMS collects the money and sends it to the university via an electronic file encoded with the student ID, date of payment, and amount of payment. Then, once a week, TMS wires the funds to the university.
Unlike the University of Denver, Indiana University-Purdue University Fort Wayne absorbs the credit card fees. "We have been taking credit cards since 1969. We see it as a cost of doing business," says Mark Franke, assistant comptroller and SIS director for the university. "It's a credit card economy. We pay everything else that way, so we see it as an enrollment strategy." While he admits there is a cost to the university--about $175,000 per year--Franke says he would lose 20 percent of enrollment if the university did not offer credit card payment options. And, he says, the money the university saves by outsourcing its e-billing solution offsets the cost of the credit card fees.
TouchNet Information Systems, a software provider of automated payment solutions, handles e-billing for the school. TouchNet's system links with the university's SCT Banner ERP system in real time. Franke expects to save $30,000 this year in printing and mailing costs. The university has already saved by reducing staff for temporary help at peak times. "But the money savings was secondary to the improved service cost savings. Our goal was to advance student service so enrollment would grow," he says.
Since the university implemented its first web payment options in 1999, enrollments have grown by 22 percent, Franke says. While he says this is not the primary reason for growth, "e-commerce has contributed to a real and perceived user-friendliness that helps our competitive image and gives us a real comparative advantage over competing institutions," he says. "Students can literally walk in the door the first day of the semester and get enrolled and paid that same day. E-commerce is just one aspect of our self-service culture, but certainly a very important one."