In a country where school fees range from Dh2,500 to over Dh100,000 per year, according to experts, it is not always how much you have to pay that is the issue but how you pay.
As the global community moves towards a cashless environment, the UAE’s education sector is one that is slower to adapt.
While schools, colleges and universities have worked hard to digitise the curriculums they deliver to students, their front-line administrative processes still lag behind, according to Sirish Kumar, the chief executive and cofounder of Telr, a regional online payment provider.
This can leave parents frustrated by long queues at school accounts departments where fees and extra curricular activities are paid by cheque or cash.
With the academic year starting now and many parents dreading the hefty fee bill, Mr Kumar outlines the challenges education providers and parents face over fee payment and how the outlook is set to become easier and much more flexible.
The start of term is an expensive time for parents, particularly in this challenging economic climate. What trends are you noticing at the moment?
There is an evolution phase in the education system where an element of flexibility will come in. There are schools with fixed fees facing two kinds of problems. One, the children have moved to less expensive schools because parents cannot afford to pay the fees. That figures ranges between 25 to 30 per cent of children in the UAE moving to schools that are less expensive in the last nine to 12 months. Over and above that, 15 per cent of the children enrolled have now moved out of the country.
Why are they leaving? Is it because of job losses?
The reasons could be any. It is difficult to attribute to job loss but this is a new trend that has been seen in the UAE. There needs to be an ability to tweak the system for how the fees can be catered to the changing times. Someone might ask for an insolvency system or whether they can have a deferred payment system rather than paying one fee upfront for the 12 months. They might ask if they can pay in three, six or nine monthly installments. This flexibility is possible in an automated environment.
How do parents traditionally pay their school fees in the UAE?
You have people from different countries here and you generally have both the husband and wife working. At the moment there are schools that say they prefer cheques as the method of payment for the simple school fees that run in three or four installments over the year to fees related to specific activities chosen by children.
Isn’t a cheque-based system a little antiquated?
Yes, the finance department has to collect thousands of cheques from the parents and there can be an administrative problem tracking the cheques. Some might lie in different cupboards or in different sections of the office so once you have collected the cheques and sent them to the bank, the period ranges from 30 to 35 days.
What are the other challenges?
The second challenge for the accounts and finance department is tracking who has paid and who has not; sometimes it is on Excel spreadsheet, sometimes on a software system. So the school says "we still haven’t got the cheque" and the parent says "actually, let me follow up with my wife or husband". They then come back and say "we gave the cheque in five days ago". There is a disconnect in terms of whether the cheque has already been presented by the parent. The third challenge for that finance person is that they are not sure who they need to chase and how much is outstanding from the parents.
This must lead to a lot of frustration on both sides?
Yes. You have people in the administrative and accounts and finance department focused on [chasing payment] and there are multiple discussions. That leads to a lot of frustration because people are busy. It becomes more complicated when people are travelling because they need to pay in cash or by cheque where they physically have to go into the school.
So, what’s the solution?
Certain institutions in the UAE have recognised that part of the good customer experience is to go from cash to cashless? Some of them have positively addressed the fact that, yes, the current system was relevant 15 years back. While there is a digitisation happening in several sectors – it’s good and important for schools and colleges to be part of that wave.
How are education systems making that digital shift?
Some like to do it phases and some like to shake up the system. Some of the institutions are saying 'let’s go step by step'. So they might agree to a software management system that basically tracks the number of students enrolled at the school, those that are absent and present, or a system that makes everything automated from an administrative, finance and accounts perspective
What about the payments side?
Then in parallel they go to an online payment player and say 'could we start with a very basic service of accepting credit cards as a payment method'. There are two choices: one, you integrate a separate solution with your website or your mobile app or two you actually integrate a payment gateway with your software management provider. That allows you to get automated statements of the amounts paid so you are then becoming an enabler where you not only provide online payments but you are also removing the hassle of tracking information on a real-time basis. As a result you don’t end up chasing people unnecessarily.
How does this help parents pay the fees?
With the payment gateway and the software management system binding together and making the ecosystem less fragmented, the accounts and finance department will get an updated statement of payments and there is an individual one-on-one communication with the parent acknowledging the receipt of the funds. Instead of waiting for 30 to 35 days, the school gets the payment in two days time and there is a publication of receipt on both sides and therefore less phone calls and frustration. From the parents' perspective, they are not logging into multiple systems.
What if someone does not pay the fees?
There can be capabilities in the system that puts on a delayed-fee charge or you can give a discount when fees are paid before a specific date. From an accounting perspective, I’m sure schools know the cost of their working capital and the cost of not getting paid on time, so they would be very interested in giving an incentive or disincentive to avoid delayed fees on the parents side. What we have seen in other countries is that the proportion of delayed fees comes down drastically
Is that because parents fear the penalty?
No, it’s because they have much clearer visibility of what is payable and the process is simpler. And most of the parents are not willful defaulters - they are not paying on time because they do not have visibility and regular communication mapping out the various fees. You are left with a lower proportion that can be categorised as regular or wilful defaulters and then the accounts and finance department and the admin department can focus on them.
Are UAE education institutions more open to flexible payments now?
This is a discussion we are having with various colleges and also with schools – what they plan to do in the future if their business is changing. They tell us they will continue to re-evaluate the various bill models. That does not mean it will come down to 12 monthly installments but it will definitely come down to more installments, more flexibility in terms of the frequency of payments.
How much does it cost a school to automate its systems?
It comes back to what you want from the system. I always suggest phasing what you need because then you can bring in software modules that you actually require. The cost ranges can start with a very simple system of US$5,000 and it can go to hundreds of thousands.
How can the students benefit from such a system?
In the more advanced model that we have seen, a student can be given a card and this card is basically topped up by the parent and the student is able to use that card for different purposes – paying for food in the cafeteria or for a particular extra curricular activity. Then the parent gets a report on a regular basis saying how that money was utilised; you are empowering the student as they see this as pocket money and the parent has full visibility on how the money is spent.
Will UAE schools be more open to direct debt payments in the future?
For the online payment industry overall, in the next five to 10 years we are obligated to give more choices to the consumers and the customers. In the UAE it is essential that we offer choices that extend beyond just credit cards – we need to see more adoption of online banking or direct debits. Neighbouring countries like Saudi Arabia have moved into a system of online payments and that is a great alternative to credit and debit cards.