Card surcharging changes: what should education providers consider?

From 1 October, eftpos, Mastercard and Visa will introduce no-surcharge rules covering their debit, prepaid and credit cards. Other major payment networks have also announced changes to surcharging.

For students, the impact is relatively straightforward: paying by card should no longer result in an additional card surcharge.

For education providers, however, there is another side to the equation.

The cost of accepting and managing payments hasn't disappeared. And where providers have previously recovered some or all of their card acceptance costs through a surcharge, that option is changing.

Payment processing is only part of the equation

Taking a payment is relatively simple.

Managing hundreds or thousands of course-fee payments over time is not.

Education providers have some particular requirements that distinguish them from many other businesses. Course fees can run into thousands of dollars, students may need to pay over extended periods, circumstances change, payments fail and accounts can fall into arrears.

A payment provider should therefore be doing more than moving money from one account to another.

The value of the infrastructure should also be considered in terms of how it helps you manage the complete payment lifecycle — from enrolment and establishing a payment plan through to recurring collections, failed payments, arrears management, reporting and ultimately completing the plan.

Look at the economics of card versus direct debit

The payment method itself also matters.

Card processing is commonly priced as a percentage of the transaction value, sometimes with an additional fixed transaction fee. Direct debit from a bank account can have a materially different cost structure.

That difference can become significant when course fees are being collected across multiple instalments and multiplied across hundreds or thousands of students.

This doesn't mean removing card as a payment option. Students value flexibility, and the right payment mix will differ between providers.

The RBA expects the wider reforms — which also include lower interchange caps and greater transparency of payment fees — to encourage businesses to compare providers and put downward pressure on payment costs.

Education providers should take advantage of that opportunity.

Look beyond the transaction fee

Cost matters, but the cheapest transaction isn't necessarily the lowest-cost payment solution.

• There is a cost to manually following up failed payments.
• There is a cost to maintaining payment arrangements across disconnected systems.
• There is a cost when arrears aren't identified and managed early.
• There is a cost when rigid payment options make it harder for a prospective student to enrol.

A more useful assessment of payment infrastructure therefore looks at the whole picture:

Transaction costs. Administration. Payment-plan management. Failed-payment handling. Arrears and collections. Reporting. And the experience you're providing students.

If your payment provider is simply processing transactions, it may be worth asking whether that's enough.

Use 1 October as an opportunity to review your payment strategy

The end of card surcharging doesn't mean the end of payment costs.

But it does create a good reason for education providers to take a fresh look at where those costs sit, which payment methods they're using and what value their payment infrastructure is providing in return.

That might mean reviewing the balance between card and direct debit. It might mean looking at how recurring payment plans are structured. Or it might mean asking whether your current provider is doing enough to reduce the administrative and collections burden that comes with offering students flexible ways to pay.

StudentPay

Review your payment infrastructure.

If you'd like to better understand how your current payment setup is structured — including transaction costs, payment methods, payment plans and collections — talk to StudentPay.

We can help identify where your current infrastructure is working well, where unnecessary cost or administration may be sitting, and whether there are opportunities to structure things differently.

Review your payment setup →