How Fee Funding Creates a Win-Win Situation for Parents and Schools

The rapid evolution of digital technologies over the past decades has taken almost every industry by storm. The financial sector is no exception. The industry, which relied heavily on paperwork and was known to move at snail speed, is now nearly paperless and is moving at the speed of light.

The advent of digital technologies has brought about the emergence of a new term in the last century: fintech. The combination of finance and technology has done wonders for millions of people around the world.

Today, one can finance his needs or his luxury with the help of loans from banks and other financial institutions without even going physically there. High-speed internet, smartphones and mobile apps have given the fintech industry a boost.

The partnership of finance and technology has made a world of good for personal and business finance. Millions of people have made their dreams of business, education, vacation, etc. with the help of fintech.

But there is a new entrant in the sector: fee-based financing.

Fee-based financing is a relatively new concept. In fee financing, the finance company pays the entire year fees to a school in advance and parents reimburse them to the finance company in installments.

This model creates a win-win situation for parents and schools. Even in the event of an income disruption, parents do not have to take their children out of school. Educational institutions collect the full session fees in advance.

With capital in hand, schools are able to better plan upcoming sessions and invest in infrastructure. Therefore, on the one hand, the financing of school fees reduced the dropout rate and eased the burden on parents, and also helped to improve the quality of education on the other hand.

The ever increasing cost of education in the country and the desire of parents to provide a better education for their children have been the main forces behind the exponential increase in the funding of tuition fees in the country.

The sudden disruption caused by COVID-19 has also pushed many people towards funding fees to ensure the continued education of the services.

Fee financing and technology

Like any other industry in today’s global order, expense financing is also deeply impacted by digital technologies. This is a recent entry into the FinTech sector, but has already made significant inroads into the industry.

The emergence of fee-based financing as a distinct vertical in the FinTech sector has caught the attention of many big names in the industry.

Some studies have indicated that conventional banks are increasingly reluctant to provide student loans due to a large number of student defaults, thus increasing the number of NPAs. This has opened up a big playing field for expense finance companies.

Commission finance companies are making the best use of the fast internet and smart devices to reach more and more people. India boasts of the youngest population in the world. This young population has new aspirations, especially in education.

This population is knowledgeable about technology and is open to new ideas. Unlike the previous generation, where credit was considered taboo, this new generation sees credit as another way to finance their needs.

Fee funders can easily reach this population using social media, mobile apps, and internet marketing. Like other microfinance companies, commission finance companies also use AI and ML to analyze the digital fingerprints of their potential clients and determine their creditworthiness.

Various tech startups are linking up with fee-based finance companies and are quickly making it a big phenomenon in the industry.

The path to follow

Financing education is not a new concept; it has been around for several decades now. However, fee-based financing, in its current form, is a relatively new concept. Technology has enabled it to quickly gain prominence in the financial technology market.

Currently, the expense finance industry is primarily fueled by startups. However, in order to realize the full potential of this model, big players and government need to get involved. In its short period of existence, fee-based financing has revolutionized the FinTech industry and is about to completely change it for good.

Edited by Teja Lele Desai

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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