Perfecting the payment process: many IHEs are adopting e-billing and e-payment solutions to cut costs and offer students more payment options

University Business, June, 2005 by Alana Klein

Working in a bursar's office in early September can be like working for the IRS in mid-April. During this chaotic time, bursars are not only collecting and disbursing hundreds of thousands of dollars, but they're also responding to myriad customer service complaints, reconciling incorrect student mailing addresses and lost checks, and paying top dollar for paper and postage, check processing, and credit card fees.

To cut costs and expedite the payment process, many IHEs have turned to e-billing and e-payment systems. While some have developed homegrown systems, others prefer to outsource.

"But e-billing is not just about eliminating the paper check at the end of the process," says Sean Glass, chief marketing officer for Higher One, which specializes in refund management for IHEs. "It's about reducing the process that goes into producing the paper check."

However, not all IHEs are sold on the e-billing solution. "There's a lot of buzz about it. And everyone feels they need to go there. But it all comes down to what are the true problems they are trying to solve?" says Kevin Barney, vice president of sales and marketing for Tuition Management Systems, a company that focuses on tuition management solutions. After all, he says, it is a six-figure investment with recurring maintenance fees.

Keeping these costs in mind, some IHEs have taken a more conservative approach to billing and payment by adopting only parts of an electronic solution. Ultimately, "any school could be a good candidate for an e-billing solution, as long as they do it in a thoughtful manner," Barney says.

The Perks of E-Check Processing

The University of Minnesota was thoughtful when it decided to revamp its paper-based check processing system, a main source of its payment woes. The university used to encode cash and checks into its general ledger before having a courier service pick up the bundles of money once or twice a day to transport them to the bank. The courier service would cost $25 a trip. "It was always a struggle because we didn't scan the checks or take pictures of them, so reconciling any errors that we made in the system was a fairly lengthy process," says Stuart Mason, associate vice president and chief investment officer for the university's Office of Asset Management.

To Mason's delight, the old system was eliminated eight months ago when the university implemented Wells Fargo's Desktop Deposit services, an electronic check processing system that is designed to improve cash flow by eliminating transportation costs and delays in the check-clearing system, says Danny Peltz, executive vice president of wholesale internet solutions at Wells Fargo. Now, the university simply scans checks from students (about 40 percent of checks come electronically via a homegrown e-billing system) and sends the electronic files to the bank using a CEO (Commercial Electronic Office) portal. The paper checks are then stored as backup for a couple of months before being destroyed.

This method of scanning is now legal as a result of the Check Clearing for the 21st Century Act, which took effect fast October. The taw allows printed versions of scanned paper checks to act as legal substitutes.

Mason says the new system also speeds up the university's depository process because the staff can scan checks throughout the day, enabling the clearing process at the bank to start sooner.

White the university hasn't produced any savings in terms of staff, Mason says eliminating the courier pickups has resulted in a savings of about $50 a day.

"The overall system makes it much easier to retrieve specific data to reduce what used to be a fairly lengthy reconciliation process," Mason says.

A Paperless Disbursement Plan

Kennesaw State University's (Ga.) payment program also benefited from a little outside help. In February of 2004, the university decided to give its refund process an electronic makeover. "We were printing checks and mailing them but had no pick-up system," says Earle Holley, vice president of business and finance at KSU. "It would take up to five days from the time the check was printed until the time the student received it by mail, and that's assuming there was no glitch in the malting address," he says. And unfortunately, Holley explains, many students move without notifying the university of their new address. He estimates that about 10 percent of addresses were incorrect.

To remedy this, the university adopted Higher One's OneDisburse refund management service, which offers students three refund options: direct deposit to a demand deposit account associated with a MasterCard debit card that Higher One distributes to students, ACH (Automated Clearing House) payments, or paper check. About 65 percent of the student body opted to get their refunds via their debit card; about 10 percent chose the ACH method; the rest wanted paper checks, according to Sean Grass of Higher One.

In addition, Higher One handles the customer service for the university. "Because Higher One directly interfaces with our students, our staff doesn't get bogged down with student carts," says Martha Roth, director of universal card services at KSU. Furthermore, she says, "I didn't want the university to be responsible for maintaining students' direct deposit signatures and account numbers."