28. Payments in — Education Sector

Education is diverse sector with various types of entities, types of payment use cases and with multiple payment channels.

Entities that collect fees

• Institutes: Schools, colleges, Universities
• Private Tutorials such as Allen, Aakash etc.
• Competitive/entrance exam boards: NEET exam, UPSC Exam
• EdTech Companies that deliver online courses such as Byju’s, UpGrad etc.

Entities that facilitate fee collection

A. Education ERP Providers:

Provide software solutions that help education institutes to manage student information, courses, fees etc. Such solutions are integrated with online PG (payment aggregators) to provide holistic solution. Example: Fedina, FeeCounter etc.

B. Payment Service Providers:

• Payment Aggregators: (a) direct integrated with education institute’s back-end (b) provide light ERP with readily integrated online PG (E.g. Fees Junction by TechProcess)
• Wallet Companies enable fee collection for institute on their App (e.g. PayTM)
• Banks: (a) On-premise bank branch for fee collection (b) Light ERP with integrated PG (E.g. SmartHub Education by HDFC Bank)

Combination of these entities enable the institute to collect various types of fees (admission fee, course fee, examination fee etc.) at different timeframe as few fees are one time and few are periodic

Basic payment requirements for Education sector.

Requirement 1: Payment Modes:

• Credit card, debit card, net-banking, UPI, Wallets, Payment Containers, EMI on Cards, credit products etc. — basically all are welcome
• Practicality dictates which payment mode will be enabled: If ticket size is large then wallets are useless but EMI on cards can be useful

Requirement 2: Payment Channels

• Online: Parent/student pay online on website or App
• Offline: Bank branches located in Institute’s premise accept cash and DD across the counter

Requirement 3: Charges:

• Education sector has lower PG rate (MDR) compared to e-Commerce sector
• Credit Cards: ~1%, Debit Cards: RBI Standard rate, Net-banking/UPI: Flat Fee per transaction (except CITI bank)
• Charges are typically configured in surcharge model (norm). EdTech companies that are willing to absorb charges will be configured in upfront deduction model

Requirement 4: Settlement:

• Standard settlement time of T+2 days
• Settlement amount will be Gross if charges configured in surcharge model and Net-Settlement is done if charges are in upfront deduction model

Next, important payment solution used in education sector

Education Institute

Integration Ways:

An Education Institute might be running multiple institutions (branches) and have various types of fees.

• Institute can integrate directly with payment aggregator or use light ERP of aggregators
• Institute can use ERP vendor who provides integrated payment gateway
• Banks also provide PG integrated ERP solution and cash/DD collection at branches

Note: ERP vendor and Bank usually work with aggregator (s) to provide holistic online payment solution

Integration Options:

• Institute can have one MID to collect all types of fees
• To simplify reconciliation efforts, Institute can use separate MIDs to collect different types of fees (E.g. MID12345 for admission fee and MID67854 for exam fees)
• Alternatively, use multiple scheme codes under one MIDs to collect different types of fees (E.g. Under MID 12345 use scheme AdmF123 for admission fee and ExmF123 for examination fee)

Note: Similarly, multiple MIDs or scheme code integration is done to collect fees of different branches of the institute

ERP Vendors

ERP vendor plays important role in Education sector as these entities provide solutions to manage student data, fee types, fee cycles etc. Such ERP vendors integrate with payment aggregator(s) and bank(s) to enable online payments.

PG Charges: ERP vendors are not education institutes but software companies so they do not qualify for PG rate (MDR) that is given to education sector. To avail such lower rates,

• ERP vendor need to prove that PG is used on-behalf of institution (undertaking letter from the institution) or
• Let institution procure MID from payment aggregator and configure that in ERP system

Integration Type: ERP vendor needs to support different types of payment flows depending on institutions requirements. Example: Single MID, multiple MIDs, Scheme codes, Surcharge etc. (covered in above section).

Settlement:

• Direct: Settlement is done directly to Institute’s account (most popular method)
• Nodal A/C: ERP vendor gets the settlement its nodal a/c and then disburse to institute. Gives them control on debiting its own charges before settlement

Revenue Model: ERP vendor makes revenue from online payment services (over and above core ERP revenue). There are different revenue models

• Surcharge model: Add small mark-up fee above PG charges (+ GST) and mark-up amount is credited to ERP provider (Call it convenience fee)
• Invoice to Institute: Instead of adding mark-up, ERP vendor will raise invoice to institute
• Partnership model: ERP Vendor can strike revenue sharing arrangement with payment aggregator and payment aggregators readily work in such models

EdTech Companies

New-Gen companies that are democratising education by delivering content to user over internet. They offer tutorials for Class-X student (E.g. Byju’s) till course in Artificial Intelligence (E.g UpGrad). Either they create the content or run course on behalf of institution.

Integration: Standard online Payment gateway integration through aggregator(s) and direct bank(s) across various channels (website and App). And all types of payment instruments are allowed.

If there are periodic transactions they prefer using recurring payment solutions (E.g. Standing Instruction on Cards).

Rate: Although these are no education institutes but they get PG Rate (MDR) that of education sector. It is not straight forward case always but considering their volume, payment aggregators and banks relax their rules. Typically they do not work in surcharge model but absorb the PG rates.

Examination Boards:

Competitive exams are conducted by Education Boards. Example: NEET, Nursing Exam or even CBSE.

Integration:

• Directly integrate with payment aggregator. Some aggregator’s give simple form that can be used to capture applicant’s details along with various payment options (e.g. BillDesk)
• Examination platforms: These companies provide solutions to conduct examinations along with integrated PG (E.g. Meritrac, Manipal Technologies). Considering such companies conduct various examination on its platform so either they use single MID with different scheme codes per examination or procure individual MID for each examination, depending on time and effort.

Important Points:

A. Challans:

Transaction across bank counter using cash and DD are prominent payment methods. For easier reconciliation, Institute gives a challan (has unique number, student details, amount etc.) and Cash & DD are paid at bank counter against that challan. Few of the aggregators and ERPs provide feature to generate challans and same can be used during payment across counter

B. Recurring Payment Solution:

Although some of the fees (e.g. semester fee) are periodic but very rarely a parent will set-up mandates for these recurring payments. Even institutes are not that keen on pulling money for parent’s account on time for the reason that education is not a business (to some extent it is not true but let’s not say it loudly)

C. Success Rate:

It depends…Let’s say you are paying semester fee and transaction failed then you will retry and even if there is delay college won’t send you home. But let’s say you are paying competitive examination fee on last day and first transaction fails. Definitely you will do second transaction but think of your mental status when that first transaction failed. Right?? So importance of success rate will vary from moderate to super critical.

D. Duplicate Check:

In above example of examination fee payment, student did transaction and status is pending so what student will do? She will attempt again (and again) till transaction successful. But what if earlier pending transaction becomes successful? So duplicate transaction check and auto-refunds are important.

Duplicate check is set on parameters (e.g.: Student ID and Amount) and if multiple transactions are triggered with this combination in specified time period then duplicate check functionality and auto-refund is triggered.

E. Refund and Chargeback problem:

Surcharge model is quite common is education sector i.e. parent/student bears PG charges + GST amount. Reiterating issues of surcharge model during refunds and chargeback.

Refund can be marked for transaction amount not entire amount. So when parent teacher asks for refund they won’t get entire amount.

On the other hand, if a chargeback is valid then entire amount is debited/adjusted from institute so the institute will end up losing.

F. More problems of Refunds:

Most of payment cases in education sector are seasonal. Example: Admission fee is paid in May-July but then no transactions till next year. If a refund is marked post the fee cycle then merchant doesn’t have on-going settlements to adjust the refunds. So these merchants have to define clear refund process (whether refunds are allowed or not) and also, set process to defend chargebacks. Anyway for such edge cases, aggregators give provision of transferring funds to aggregator’s nodal a/c and then mark refund or recover chargeback amount.

G. BBPS

Earlier we have covered BBPS platform and the platform will be extended to education institutes/examination boards where student/parent can make fee payment on the platform through third party or agent’s website/Apps.

With 250million school going students and 36million students enrolled for higher education institutes, education sector is big with $100B value. The sector will keep growing and country is moving towards digital, online payments will continue to thrive in this sector.