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At a time when higher education administrators continue to adapt to many new challenges, opportunities for meaningful transformation are emerging. Schools currently face shifting enrollment patterns, rising student expectations, and mounting financial pressures. However, administrators may find that embracing emerging trends in the payments industry can be one way to help their schools meet the needs of their student base, increase retention, and improve operations.
Here, we’ll examine four critical trends in the payments industry that are transforming how colleges handle financial transactions: embedded finance solutions that integrate seamlessly into student experiences; open banking principles that simplify account management; targeted financial literacy education at key decision points; and practical applications of artificial intelligence in payment processing and fraud prevention.
The rise of embedded finance
Embedded finance, defined as the seamless integration of digital banking or financial services into other platforms or applications, has the potential to transform the student payment journey. Rather than seeing payments as isolated transactions, embedded finance views them as natural parts of the broader student experience. Administrators should consider how embedding financial services into existing platforms may reduce friction points at critical student decision-making moments, turning potential dropout scenarios into opportunities for retention.
For instance, schools are integrating currency conversion directly into tuition payment systems for international students, thereby eliminating unnecessary complexity and fees associated with external currency exchanges. Also, payment plans, which can cover additional expenses that financial aid and grants don’t, can be embedded at the point of class registration. By addressing these uncovered costs without high-interest private loans, payment plans can ease financial stress and allow students to manage costs predictably over time. Schools are additionally embedding tuition insurance within payment portals at the time of registration. This gives a student the peace of mind that their investment in tuition will be returned if they aren’t able to continue their education.
With financial stress cited as the leading cause for college dropouts, schools can help reduce some of the strain associated with complex financial decisions by embedding financial options directly into an uncomplicated and accessible portal.
Leveraging open banking concepts
While formal open banking regulations haven’t yet fully materialized in the U.S., open banking concepts are being adopted and delivering significant payments benefits. Open banking, generally defined as the practice that gives third-party financial service providers access to consumer banking through applications, has utility in higher ed.
A prime example of this is the integration of 529 Savings Plan accounts directly into university payment systems. Rather than juggling multiple platforms, families can link their 529 Savings Plan account to the university’s tuition payment system. Then, instead of juggling money between different accounts and platforms, students or parents can seamlessly draw from their savings accounts for tuition and related expenses. College administrators may find further similar integrations in financial aid disbursements, refunds, and student account management, streamlining payments processes for both families and administrators.
Prioritizing financial literacy education
Financial literacy remains a pressing matter for Generation Z, many of whom enter college with limited financial management experience. With 77 percent of Gen Z consumers reporting they actively seek financial advice from social media, universities bear responsibility–not only for educating students academically, but for providing practical financial knowledge critical to their success. Integrating financial literacy directly into the payments process can effectively bridge this gap.
Universities are beginning to integrate “just-in-time” educational resources at key financial decision points, such as tuition payments, loan agreements, or course registrations. The embedded financial literacy modules include clear, straightforward guidance about payment plans, the implications of debt, and emergency financial aid options. Educating students precisely at the time of these decisions, or even before enrollment, helps ease some of the fear and tension surrounding finances.
Given that late or missing student loan payments can now negatively affect students’ credit scores, schools that assist students with their financial education will reduce exterior pressures on students and boost their ability to focus on institutional success.
Demystifying artificial intelligence
AI continues to dominate higher-ed headlines, often accompanied by uncertainty or skepticism about its practical value in the classroom. But for higher education administrators, there are beneficial applications of AI in payments, particularly in fraud prevention.
In the payments industry, fraud protection services are using AI algorithms to detect bank account changes, classify how suspicious these changes are, and detect threats of fraud. With the rise of ‘straw student’ scams in higher ed, (fake student identities used by fraudsters to pocket financial aid money), AI-driven analytics can reduce these risks by identifying patterns and anomalies that indicate fraudulent behavior.
While universities are still working to determine all the best uses of AI, there are campuses that report that strategic use of AI has led to operational savings and higher levels of student engagement.
Practical guidance for implementation
As universities continue to understand the transformative capabilities of integrating payments industry innovations into campus operations, more administrators will consider adoption. To approach these integrations, administrators should simply begin by defining clear objectives for their payment systems, and then identify specific points where students struggle with existing processes. Armed with this knowledge, schools can identify technology solutions that best address these outcomes.
As new systems are tested, administrators can approach outcome measurement by tracking metrics such as payment completion rates, dropout reduction, student satisfaction scores, and process improvements. These indicators provide clear evidence of the value and impact of adopting new payment technologies.
Ultimately, embracing these payment trends is about empowering student success and ensuring institutional sustainability. By proactively responding to these trends, higher education administrators can reduce payment friction, enhance student satisfaction, improve retention rates, and optimize operational efficiency.
Don Smith is the Senior Vice President of General Manager of Integrated Payments at Transact Campus + CBORD.
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