As an emerging financing method, the education fintech solutions consider not only the borrower’s repayment capability but also the outcome of the entire project. (Representational image)By Victor Senapaty
Learning never stops. This is true, especially in today’s job market, where one needs to upskill regularly. Education has become an ongoing process. It does not end with schooling or a graduation degree. With the dynamic technological advancements and the ever-evolving needs for almost every profession, the education sector comes up with a skill-based trend every two to four years. This is gradually becoming the norm. Nowadays, most companies seek an adept workforce with an updated skill-set.
The evolving education trends have increased the outlay for fees and catalyzed the need for better financing. This has led to constant innovations in the education fintech sector. By using digital and tech-equipped resources, the segment strives to bridge the gap between education and financing. In the wake of ongoing tech-based advancements, let’s look at some of the upcoming trends in the education fintech sector in the coming year.
Outcome-oriented financing
With the expanding job profiles across different sectors, education is gradually becoming more outcome-oriented. More students give attention to the skills they will gain throughout the course and how that will help them climb the ladder in their careers. As a result, there is a rise in income-share agreements (ISA) by financing institutes. An ISA provider finances the student’s education and aligns the repayment in smaller portions from the salary. This form of financing gives more focus to the outcomes of the skills upgraded after an educational course.
Fintech is one avenue, a strong one, that connects the educational institutes and students with financial institutions. For education financing, the financial institutions fulfill the need for cash flow management and working capital. The ongoing alteration in the education system has given rise to more outcome-oriented financing that empowers the students to receive education to attain their far-fetched career goals.
Altered repayment capabilities
In the world of digitization, ‘Buy Now, Pay Later’ (BNPL) has become a common phenomenon. Similarly, in the education financing segment, the BNPL, zero cost, and seamless pay-later options are gaining preference among the students and parents. In contrast to the traditional options, there is an increasing number of novel customer-centric financing plans for education.
As more and more industries are moving towards the pay-later model, the education fintech sector is expected to move towards the same goals. For instance, as per a revised financing model, a student can pay the complete tuition fee in one go and pay it back later in multiple installments. With the zero-cost method, the students and the parents can pay for the education in small installments to the fintech platform rather than giving a lump sum amount at one time.
Customized financing plans
Traditionally, the financing market involves only two stakeholders for a loan transaction. However, the scenario is gradually changing. The modern financing setup considers all the stakeholders involved for a better understanding of repayment capabilities and customization. In the case of an education loan, the fintech involves the student (the borrower), the financial institution (the lender), and the educational institution (service provider). The complete project, i.e., the educational course and its outcome, is of key consideration here.
As an emerging financing method, the education fintech solutions consider not only the borrower’s repayment capability but also the outcome of the entire project. After a thorough analysis, the education loan is sanctioned as per the student’s academic performance and the educational institution’s past performance.
The shared risk between the finance provider and the educational institution creates a win-win scenario for all the stakeholders. On the one hand, the students can benefit from the customized and flexible financing plans, and on the other, the institutes can potentially increase their top-of-the-funnel sales.
Final Note
Education financing has deepened its roots beyond the traditional education system. The education ecosystem has evolved with the budding job opportunities in different segments like graphic designing, hospitality, interior design, etc. Earlier, the education was limited to school or university, but now it has spread its roots in skill-based courses. The growing demand for professional education in aviation, nursing, soft skills, vocational training, and Edtech courses has created significant demand in the education fintech sector.
(The author is the co-founder of Propelld. Views expressed are personal and not necessarily that of Financial Express Online.)
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