Last week, nearly 100 higher education finance and international office professionals flocked to a festive-looking Birmingham (UK), for Flywire’s 2023 International Payments Summit. In one jam-packed day, guests heard insights based on knowledge and experiences of international payments. Here are the key takeaways:
1. Global demand for international education is still strong, competition between destinations increasing
With the exception of the pandemic years, there has been constant growth in demand for international education. Globally, the top senders are China, India, Vietnam, Germany, Uzbekistan and France and the top receiver countries remain the UK, the US, Australia, Germany, Canada and France - the flows are relatively stable. However, competition between destination countries is increasing.
While English-speaking destinations account for 40% of global student mobility, there is a growth in intra-regional mobility as students look to study abroad but closer to home. Factors influencing choice of study destination include immigration policies and post-study work opportunities, cost of living and cost/value of higher education.
China, India and Nigeria remain the top sources of international students coming to the UK to study and the diversity of the international student population is declining. As John McNamara from the British Council showed in his presentation in 2021/22 74% of students coming to the UK to study came from one of the UK’s top ten source countries. Brexit also caused a sharp contraction of EU students coming to the UK to study, and these students now only account for around 20% of international students.
That the UK remains a top destination for international students is critical for the UK economy and the higher education sector. International students make up nearly a quarter of the UK’s HE student population and are an increasingly vital source of revenue to universities that are being squeezed by insufficient government funding. But with competition increasing, relying on a few core markets for international student recruitment could leave universities in a precarious situation should the situation change-diversification is the key to long term growth.
2. Internal collaboration critical to the international student experience, tools to help available from Flywire
A significant shift has occurred in the financial landscape of universities, with international fees constituting 20% of their income compared to 10% a decade ago. This increase in importance for UK higher education brings added complexity, particularly concerning international students.
Research conducted by Flywire consistently highlights the challenges international students face with payments, significantly affecting their higher education journey. Surprisingly, students begin contemplating payments as early as 6-12 months before applying, and issues often arise from this early stage.
The root of the problem lies in universities being unaware of the necessity for payment information at such an early stage. Throughout the payer journey, communication gaps emerge due to a lack of collaboration across departments.
In a panel discussion on "Finance & IO: Opportunities for innovation," representatives from Finance and International Office functions acknowledged the value of collaboration but admitted difficulty finding time for it. Kris McDermott from the University of Manchester shared how, after overcoming this hurdle, constructive discussions were actively taking place between him and his International Office colleague.
The true benefit of cross-departmental collaboration lies in closing information gaps, enhancing internal finance processes' efficiency, and simultaneously improving the payer experience. Steve Boland from the University of Birmingham emphasized the importance of guiding students toward official payment guidance webpages on university peer-to-peer networks instead of relying on student advice within those networks.
International students undergo a stressful process of applying and paying for education, involving substantial sums of money. The panel stressed the importance of providing support to ensure these students and their families feel comfortable with the payment process.
One critical aspect discussed was agent management, where Finance teams could assist the International Office in facilitating smoother payments from agents. This involves supporting staff in discussing uncomfortable topics with agents, providing training on official payment processes, attending university agent conferences, and furnishing necessary documents for students to complete the payment process.
Even small process changes, such as updating dates on shared documents, can significantly impact internal relationships, process efficiencies, and ultimately, the student experience. Sheona Griffiths emphasized the necessity of collaboration across functions, stating that only through a shared understanding of the student journey can processes be reimagined, systems streamlined, and staff well-being supported.
Both sides expressed a clear appetite for collaboration. To facilitate this, Flywire unveiled a set of tools at the conference, designed to empower university finance teams and other key stakeholders to create a more positive and streamlined student payment experience. These tools, developed from research findings, are now available to Flywire's UK HEI clients, and include insights into the payment needs of key international student personas.
3. Insights into key sending countries helpful to understanding and meeting needs of students
Understanding the socio-economic and payment landscapes of various countries is crucial for Finance teams, especially when dealing with a significant portion of the international student population at universities. Three members of Flywire’s Global Payments team shared insights into China, India, and Nigeria, shedding light on the challenges and trends in these regions.
Joseph Chen, Flywire’s General Manager for China, reported that credit card spending in China has rebounded to 60% of 2019 figures, signaling a return to normalcy. However, the country's economy is facing a downturn, and the currency is being devalued to boost exports.
There's also a notable consideration for migration among Chinese citizens.
China’s thriving middle class values education highly, and not only are they looking at the UK and US as study destinations-where China has been a top source of students-but increasingly they are also considering universities a bit closer to home, in the APAC region.
Joseph also highlighted the increased use of preloaded cards in the region and emphasized the risks associated with them as a payment method, citing potential money laundering risks and increased payment collection costs for universities.
Prakash Venkataramani, Flywire’s Senior Director of Payments, India, highlighted the influential role of education agents in shaping how Indian students make payments. Providing a payments platform, such as Flywire's Agent Platform can strengthen agent relationships but facilitating and streamlining payments. Local language support for agents and payers is also crucial, another service provided by Flywire.
Prakash noted the common use of loans by Indian students due to affordability and favorable tax treatment. He emphasized the importance of facilitating the use of Flywire for sending loan funds to universities and addressed the need for an official letter from the university to streamline the process. The Indian government's push for faster and more streamlined cross-border education payments has contributed to the evolution of real-time payments in India. Currently, real time payments has not evolved for cross border use and there is cap of INR 100000 (cross border payments are much higher in size) but Flywire’s Global Payments team has replicated the security and experience as closely as possible by providing direct net banking connection with 3 of the largest banks in India.
Giles Rowlinson, Senior Payments Manager for EMEA, explained the volatile landscape in Nigeria, impacting student payments. Despite intentions, the devaluation of the Naira has not eased pressures in the foreign exchange market. Supply issues and a backlog of demand for foreign currency have extended the wait time for Form A applications to nearly four months. However, economists are optimistic about improvements in the Nigerian FX market by the end of 2024. According to a small survey Giles conducted, this volatility has led to a decrease in applications to UK university, with 40% of institutions reporting a decline for January 2024. Affordability concerns and changes to visas for dependents are likely to have contributed to this decline. In terms of payment trends, 65% of universities surveyed in the UK have seen a decrease in Form A applications and many have reviewed credit control processes for Nigerian students, including implementing controls on payment timescales (50%) or allowing more leniency (30%) based on student behavior.
4. HEIs are exposed to significant financial crime risks, self-regulation recommended
Although higher education falls outside the purview of a "regulated sector," institutions are not exempt from the implications of the Money Laundering Regulations 2017 or POCA 2002, especially in relation to certain payments, particularly those from international students. This concern has garnered significant media attention over the years, and the potential risks to universities were underscored by both Dr. Nic Ryder from Cardiff University and Dan Harris from Kaplan in the concluding sessions of the day.
Dr. Nic Ryder's critical review of the AML processes within higher education institutions (HEIs) revealed alarming findings. While there is awareness of AML legislation in the HEI sector, there exists a disparity among universities in terms of its effective implementation. Notable weaknesses include:
- Approximately 19% of HEIs do not offer internal AML training.
- Despite many HEIs discontinuing the acceptance of cash payments, 20% are still open to this method.
- Most universities do not submit Suspicious Activity Reports (SARs) to the National Crime Agency (NCA).
- 22% of HEIs do not provide guidance to students on the risks associated with financial crime and organized crime.
Dr. Ryder concluded that the current exclusion of universities from the AML framework puts HEIs, their employees, and their students at risk of money laundering, terrorism financing, and criminal liability.
Dan Harris (Kaplan International) further emphasized these risks by guiding attendees through the financial crime risks at each stage of the payment journey. He offered practical tips to mitigate these risks, such as blocking web traffic from sanctioned countries, rejecting cash payments to minimize sanctions and money laundering risks, educating students about money muling, and monitoring geopolitical situations in volatile countries to identify students at risk.
Evidently the entire international student journey is fraught with risks, requiring universities to proactively identify, assess, and monitor these risks with a robust control framework. The final panel felt that showing commitment to improving AML risk management may forestall formal regulations, to which many universities may struggle to comply.
The atmosphere in the room, as the Summit drew to a close, was optimistic. Guests had plenty of ideas and practical tips back to their teams and everyone was keen to explore what cross-campus collaboration could achieve for their university.