The Evolution of Electronic Payments

Sue Spies |

Tambellini Analyst

Top of Mind: The Evolution of Electronic Payments
Estimated Reading Time: 3 minutes

Electronic payment solutions are not new, as vendors have offered them in various iterations for more than 25 years.

The bursar’s office was one of the first functional areas to provide electronic payments to make it easier for students and families to pay tuition and fees. Vendors expanded their solutions to include payment plans and payment portals, both of which reflected real-time transactions, electronic billing, 1098T generation and delivery, and refunds.

After the bursar’s office’s initial usage, electronic payments expanded to other campus departments, including those that follow:

  • Admissions
  • Advancement
  • Ancillary Services
  • Athletics
  • Continuing Education
  • Departmental Stores
  • Dining
  • Events
  • Facilities
  • Housing
  • International Centers
  • Parking
  • Sponsored Research
  • Summer Programs

Electronic payment solutions features have eased the burden of in-person payment processing, assumed the risk for and provided compliance with strict Payment Card Industry (PCI) and other regulations, and shortened the time that funds are available to institutions.

Over time, as vendors expanded their offerings, many institutional departments purchased and implemented individual payment solutions without institutional approval, oversight, and in some cases, even knowledge. At best, these purchases created expensive and inefficient duplication of systems. At worst, they created significant security risks and issues with the proper application of payments and reconciliation.

The best practice for institutions is to consolidate as much electronic payment functionality as possible into one solution. A unified, enterprise-wide electronic payment platform can provide cost savings; compliance with PCI, federal, state, and industry regulations; automated integrations with finance and student information systems; transparency into transactions for reconciliation; and improved cash management.

Features

The category of electronic payments encompasses broad functionality. There are many vendors, all with varying functionality and partnerships with payment processors, hardware suppliers, card systems, and administrative systems.

The following list contains some of the electronic payment features and functionality provided by vendors and their partners.

  • Features and functionality
    • Admissions fees and deposits
    • Student financial dashboard for both students and administrative staff
    • Creation of invoices and electronic bills
    • Multiple payment methods: electronic check, credit cards, debit cards, smart cards, contactless cards
    • Immediate confirmation of payment
    • International payment and multiple currencies
    • Authorized users
    • Real-time transactions
    • Refunding for student credit balances
    • Application of payments to specific transactions for student accounts receivable
    • Payment plans for students and families
    • Third-party and sponsor billing and payment
    • 1098T generation
    • Cashiering for in-person transactions
    • Shopping cart functionality for store and departmental purchases
    • One card for ancillary and off-campus purchases
  • End-user experience
    • User interface compliant with accessibility standards
    • Look and feel consistent with the institution’s website
    • Access through all devices, including mobile
  • For the institution
    • Intuitive setup
    • Compliance setup and audit
    • Oversight and activity monitoring, including access to data for reporting
    • Data sufficient to ensure reconciliation of the general ledger with the bank statement
    • Integrations with student information systems, finance systems, card systems, and event management systems
    • Hardware
    • Security and compliance attestation, including PCI, FERPA, GLB, and SOC2
    • Audit trail of transactions
    • Training

Approach

The first step in transitioning to a new electronic payment platform is identifying the institution’s existing systems. Some departments’ usage and systems are apparent. Others may be evident only through a review of the general ledger and bank statements.

Once you have identified the departments, work with them to determine their needs. There may be similar user experience needs across departments. For example, shopping cart functionality to accumulate purchases with a subsequent check-out are common requests. If possible, determine the departments’ costs for their existing platform to determine any new solution’s cost savings.

Security and compliance should always be top of mind. Generally, vendors and platforms in the electronic payments ecosystem are vigilant in ensuring PCI compliance, proper authentication and login protocol, and encryption and integrity of the data, as well as remaining current with operating systems. However, any vendor evaluation should include a complete assessment of its compliance with security standards.

Reach out to vendors with a Request for Proposal (RFP) or a Request for Information (RFI). Include an overview of the institution, current and projected payment functionality, systems for integration, and timelines for response and decision. If applicable, ask for recommendations or services for consolidating existing solutions. The vendor can provide detailed information in response to the institution’s requirements and budget estimates for implementation and ongoing costs. Vendor demonstrations can provide additional information and answer any questions that arise after the institution receives and reviews the vendor responses.

Because there are multiple companies involved in electronic payments, there are numerous fees involved. Each company—the bank, the credit card company, the processing company—earns a fee when the payment is made. Complex cost structures include items such as interchange rates, convenience fees, settlement fees, authorization fees, debit network fees, and transaction fees, the last of which can vary depending on whether the transaction is keyed or swiped. Consult with the vendor to determine the overall cost, and consider these fees and other costs that may be hidden or bundled.

Incentives

The business office knows that a unified, enterprise-wide electronic payment solution improves efficiency, student and customer satisfaction, security, and cash flow. However, it may be difficult to persuade a small, stand-alone department that it is in its interest to put effort into transitioning to a new solution. Initial outreach to all stakeholders and including them in selecting a new platform provides the opportunity to showcase its features and benefits, some of which the department may be unaware. Consider giving back to the departments any cost savings realized by the transition to a unified platform.

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Sue Spies |

Tambellini Analyst

Sue Spies
As The Tambellini Group’s Research Director of Enterprise Information Systems, Sue Spies authors and publishes research, assists in client engagements, and supports client services. Most recently from Worcester Polytechnic Institute, Ms. Spies was the Director of Enterprise Information Systems, where she was responsible for the development, implementation, and support of academic and administrative systems. Ms. Spies is an experienced panel facilitator and presenter covering topics such as custom solutions, code, and collaborative work with institutional research colleagues.

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