The most common complaint of educators and study travel agents alike is the crippling cost of international bank transactions. “Banking fees are incredibly high,” comments Alissa Olgun of California ESL in the USA. Plus, with profits being eaten by foreign exchange rates and transfer fees, “it is very difficult for a small, family-run school such as ours”, she reflects.
“The Bank of America wire [international] transfer has been a problem, because it charges us US$12 for every transfer into our account plus an exchange rate difference. So even though the student or agent sends us the correct amount, the amount we receive is less,” she adds.
For credit card payments from students, California ESL previously used PayPal. However, owing to poor international exchange rates and problems students faced with the service, Olgun says the school switched to Bank of America Merchant Services. “The rate for swiping cards is relatively low, compared with PayPal, and the staff were great at giving us very competitive rates with other banks,” she reports.
Many organisations offset these bank fees by charging them back to their clients. “We currently process our invoice payments directly with our agents via wire transfers to and from our bank,” explains Keith Mayer of fellow US language school, AHLI. “We include a fee to cover the bank wires in our invoice, so that it is handled within the total invoice amount. The parents must pay an additional amount when sending a wire transfer from their bank we have found this way of wiring to work efficiently,” he attests.
Agents, by contrast, often need to absorb the cost of bank transfers. Gabriella D’Urso at ATW in Rome, confirms that “very often, the schools ask for a contribution usually [between] US$11 and US$23 which we are happy to pay on big amounts sent”. For larger amounts, she notes that the agency asks business partners to let it group payments together, so that both parties can save money on the transfer. Meanwhile, for receiving payments from students, she notes that bank charges “are not that heavy from Italy-to-Italy and we all can still afford them”.
For small or last-minute payments, UK agency Independent English uses PayPal. “[This] has the advantage that we can see instantly when the client has made a payment [there is] no need to wait, as with a bank transfer,” relates Torquil Dick-Erikson. However, for large payments, he observes that PayPal is not cost-effective, since it charges a small percentage of the amount involved. He adds that a further disadvantage is that, although PayPal allows you to run several different currency accounts, it is inflexible. “If we wish to withdraw, say, a euro balance that we are holding with PayPal to our euro account with our UK bank, it forces us to withdraw the sum into our UK sterling account entailing conversion losses for us and then if we want to make a euro payment with that money, we have to move it from our UK bank’s sterling account to our UK bank’s euro account, entailing more reconversion losses.”
Specialist payment services
Given the high costs and administrative difficulties involved, many educators and agents have switched to using one of the specialist payment companies whose services are specifically tailored to the needs of the sector. These promote themselves on the basis of a number of advantages. The primary selling point is that they offer lower charges than banks. As StudyPay’s Brent Hobson explains, they can do this because they have lower overheads, and are not tied to using one bank, enabling them to choose different partners around the world in order to obtain the best exchange rates. One point to bear in mind when comparing these companies is the number of local bank accounts they hold in different countries, and where these are located, as this is the key to avoiding transfer fees. While some make their profits purely through the exchange rate, others also charge modest service fees.
Speed of execution is another advantage, as is the fact that the system cuts down on the amount of admin involved in tracking payments. With PaytoStudy, for example, payment history details are available for all transactions, including student name, identification number, transfer amount and date, and receipts are issued to all clients making payments. Furthermore, transfers can be made online, and some providers, such as StudyPay and StudentPay offer multilingual platforms. Live online help is also a feature of some systems.
Internex International Exchange in Canada is a user of PaytoStudy for incoming payments, and Martina Scholz explains how it works: the payee registers, submits proof of identity, receives local bank details and then transfers the money.
The need for proof of identity introduced by recent EU anti-money-laundering regulations has added a level of complexity to the process for students using these services. Dick-Erikson reports that the agency has now suspended use of The Clearing House’s service (CHS) for receiving student payments, “because it would subject [them] to an intolerable amount of paperwork, which would act as a disincentive to them using our services”. Instead, the agency started using UK bank accounts in different currencies. However, Seona Breslin from payment company PaytoStudy points out that proof of identity documents are normally sent to the school or university during the application process, and can be shared with the payment company in accordance with strict data privacy policies to facilitate the payment process.
This issue aside, Dick-Erikson confirms that the CHS service worked efficiently. “We could run accounts with them in different currencies, their staff were always very friendly and helpful, and the charges for receiving and sending out payments in different currencies were a little more for incoming, but lower for outgoing payments than what our bank charges.”
Other aspects of payments with the potential to be costly and complicated are commissions and refunds. However, this need not be the case, as Olgun explains. ”We ask that agents send us net payments, instead of gross payments, so that we do not have to return any commission. We generally keep a running account of commissions from extensions, and net payments to be received from agencies. We pay [them] by giving a credit on future net payments. This benefits all of us, because it results in the smallest amount of transaction and exchange rate fees on both sides.” Processing these payments through a payment company, such as PaytoStudy, may also offer a useful way of cutting down on cost and administration.
Currency fluctuations are a major issue for all international businesses, with rates sometimes changing significantly between publication of a course price and payment being made. By charging only in their own currency, educators effectively protect themselves. “This works in the student’s favour when the rand is weakened against the dollar,” says Trish Cooper of Wits Language School in South Africa. “However, if they wish to pay in another currency, they pay the going exchange rate on the day.” Changing exchange rates still affect those involved, nevertheless, because of the impact on potential clients, Olgun adds.
Some agents also take measures to protect themselves against losses. “If there is volume, one can definitely hedge the funds,” notes Vinod Gambtoo of GEC in India, “although an agent cannot do that on behalf of his client or student”. Meanwhile, D’Urso explains that they charge a E50 (US$61.50) “administrative or enrolment fee” to cover this kind of risk. “If we let the prices rise, the students may decide not to participate in our programmes,” she comments.
Payment companies overview
Various payment companies offer their services to educators and students/agents to help cut the cost of international money transfers, as well as helping to simplify the reconciliation process for educators. We list a selection of these providers and some of their claimed key benefits:
Service provided by EduStep, T/A PaytoStudy, a member of the Taxback Group
Payment solution of choice of Felca associations. Competitive exchange rates, guaranteed for 48 hours, with no additional charges. Payments accepted from 132 countries worldwide, with local bank accounts held in 60 countries. Secure, customised web portal for schools, agents and students. Full payment history available to view online.
From peerTransfer Corporation, USA
Founded to address specific money transfer needs of international students in the USA. Secure and efficient system. No fees for institutions, competitive exchange rates; wholesale rate foreign exchange and transfer fees lower than those of traditional banks for students. 24/7 international support via voice, Skype, chat or email.
Service provided by Western Union
Can initiate payments to 130 countries, available online 24/7, customised, flexible and streamlined reporting for institutions. For students, offers multilingual service and email alerts on status of transactions, to help avoid missed, late or short payments.
Service provided by UK-based BaydonHillfx
Safe and secure system, regulated by the UK Financial Services Authority. No transfer fees; profit is built into foreign exchange rate; ability to execute forward contracts. Clients allocated their own contact person for advice on matters such as timing of transfers. Online platform currently available in all major European languages.
Service provided by Collective Enterprises Ltd, UK
No transfer fees for agents or educators when dealing through its network of local bank accounts in 36 countries. Students can pay either via multi-currency credit cards or bank transfer through its local bank network, charged at UK£7 (US$11) per transaction. Company offers full communication with student and institution, giving visibility and full reconciliation to both parties.