In 2015, NACHA argued that organizations should view emerging payment technologies as an “imperative” in the short term. Flash forward a few years, and several of the major solutions are now considered viable options within a broader payments strategy. Paper checks still rule, playing a dominant role in some industries, but the move toward emerging technology continues.
Higher education provides a good example of this gradual change. New payment technologies will grow as more institutions adopt them, but administrators should avoid leaping without a safety net. A strategic analysis of current and potential solutions will help back any decisions.
We recently hosted a discussion with some of our higher education clients, in various stages of emerging technology implementation. For those beginning to investigate options, we outlined the benefits and drawbacks of five major market solutions.
• Same Day ACH
• Disbursements via Zelle®
• Mastercard™ Send and Visa Direct
• Real-Time Payments
• Virtual cards
For more information on these payments solutions, check out a recent article by U.S. Bank Working Capital consultant Adam Kruis.
The wide variety of emerging payment technologies presents a conundrum for higher education institutions. These organizations must continuously manage payments to vendors, paid researchers, visiting scholars and athletes and other students. The table below shows the difference between vendor and individual payment preferences:
|Example vendor payments strategy
||Example individual payments strategy
|1. Virtual card
||1. Traditional ACH
|2. Traditional ACH
||2. Prepaid cards
|3. Same Day ACH
||3. Disbursements via Zelle®
|4. Real-Time Payments
||4. Mastercard™ Send/Visa Direct
|5. Paper check
||5. Paper check
|6. Wire transfer
Traditional ACH remains near the top of the list in both cases, if the institution retains the recipient’s account information. However, the emerging payments options fit certain situations, like when there’s a request for a faster turnaround.
The wide variety of options work best when aligned with a broader payments strategy. Many of our higher education clients are only now exploring emerging technologies.
One client, focused on medical education on the West Coast, sought to move beyond their current paper check-dominated system. They wanted to implement ACH, but needed a balanced approach using all payment types within their strategy. They are currently enrolling clients for Virtual Card payments, and rolling out ACH to those that do not accept a card payment.
Another client, a research university on the East Coast, had been using virtual cards for several years. They started looking at broader ACH implementation, including same-day and next-day fulfillment. They found that while many vendors preferred ACH, students preferred refunds through the same payment method, while researcher payments varied based on stipulations in their contracts. The client noted that existing vendors were easier to loop into the updated ACH system, while new vendors still required check payments.
Both of these stories illustrate the gradual process of emerging technology adoption, especially in higher education.
As administrators, you may need to address new payment innovations on all sides of your organization, from vendor payments to researcher reimbursements.
Have you started testing an emerging solution at your institution?