BEIJING, March 7, 2019 /PRNewswire/ -- PINTEC Academy published an article today to share thoughts and experiences on how to design installment payment services for online education platforms. PINTEC Academy is a research institute under PINTEC mainly focusing on research in the field of fintech, data science, digital lending and robo-advisory. PINTEC Academy conducted a comprehensive survey through interviews with PINTEC's consumer finance business team and in-depth observation on PINTEC's collaboration with multiple online platforms such as China's leading online education platform Hujiang Online Class.
As the spring semester begins, it is a peak time for online education courses. The cost of online courses is on the rise. Course fees - which sometimes amount to as much as 10,000 RMB (approximately USD1,500) can pose liquidity challenges to some families.
How can online education platforms attract and retain more users? How to promote the sales of pricey courses? Providing online installment services is one solution.
PINTEC Academy's research and experience on designing installment payment options for online education platforms is key.
1. The ultimate goal: boost turnover
In the Chinese online education market, the turnover realized through installment services accounts for 10% to 60% of the total revenue. It is clear that installment payment options are in high demand among customers.
The reason online education platforms introduce installment services is two-fold:
- Business development - there are circumstances where customers are willing to pay for courses yet do not have the necessary funds immediately available. Installment payment options can help facilitate payment so that the platform doesn't lose a student.
- Peer competition - as competition among online education platforms becomes increasingly fierce, it is a way to increase competitiveness by providing customers with another payment option.
2. Two implementation methods
Online education platforms, by nature, specialize in providing courses and tutorial services, while the installment service is essentially a financial service. Therefore, when in need of launching installment services, most online education platforms will opt to design installment products with an external installment service provider, or a vendor. The job of the vendor is to assess credit risks and recommend credit decisions.
There are two cooperation models available in the market:
In the first method (Mode I), the online education platform launches its installment products. After applying for installment payment on the platform, customers would make subsequent repayments directly to the platform.
In this case, the vendor plays the role of a pure technical provider to offer suggestions to credit decision makers. The repayment relationship is between the platform and the customer, with the online education platform as the ultimate risk bearer.
It's widely believed that the risk is relatively controllable in this mode because the "customers' repayment behavior" and the "platform's course-offering behavior" are usually carried out concurrently, meaning that if the customer stops the repayment, the platform will stop providing the course, such that the customer's learning purpose would not be satisfied.
Another advantage of Mode I lies in that it is more likely for the online education platform to get lower-cost funds and owe more in fees.
In the second method (Mode II), the installment service is primarily completed by a vendor. The platform guides the customers with installment payment needs to the vendor and the subsequent repayments take place between them and the vendor.
In this mode, the vendor (or a third-party financial institution) pays the tuition fee to the platform first, and then it provides installment services to the customers. In this case, online education platforms can run on a "light" mode, by focusing on providing educational services, without the need to worry about managing installment payments.
3. How is the money paid?
Taking "Mode II" as an example to explain how the interest fees are paid in the installment business:
As seen in a snapshot from a well-known online education platform in China, it shows the installment service items provided to customers. Under this installment service order, customers do not need to pay any fees to the vendors. Therefore, for the customer, it is more like "holding and using" the funds without paying any interests for a certain period. Many customers are happy to pay for their courses with this option. The interest charges generated are subsidized by the education platform to the vendors.
On an industry-level, the interest fees are usually covered by one of the three ways: 1) by the platform; 2) by the students; 3) by both parties. At present, the common practice in the market is the first one, as shown in the above hyperlink.
In the "customers - platform - vendor" relationship, customers usually do not pay interest. As for settling the fees between the platform and the vendor, the commercial terms vary.
It is worth mentioning that, even if the interest needs to be paid by the customers, it may not be challenging to promote the installment payment option.
4. Choosing Vendors
For online education platforms, choosing a reliable installment service provider is of vital importance for the business to run.
From PINTEC's experience of communicating with online education platforms, the provider's past service experience in this industry is of great importance. Vendors with rich experience are more familiar with the characteristics of the customer base, thus making better suggestions regarding credit decisions.
Most online education platforms consider using multiple installment service vendors, for two reasons:
- Risk diversification - Using various vendors can avoid the disaster when one vendor is out of service, and the whole installment service would not work.
- Business volume - The amount of funds available to each vendor is limited. Therefore, by partnering with several vendors, a platform will be able to provide installment services to more customers.
In traditional Chinese family concepts, children's education is a top priority. Parents often have low price sensitivity when choosing lessons for their children. For work professionals, most of their online learning is to invest in themselves and make themselves more competitive in the job market. The most significant cost of their online study is not so much the cost of the course as the time they spend studying. So they also have a relatively high budget for the online courses.
iiMedia Research predicts that China's online education market will reach CNY 433 billion in 2020, with 296 million users.
PINTEC is a leading independent technology platform enabling financial services in China. With its mission to "Power the Future of Finance", PINTEC aims to advance financial services by providing customizable and modular fintech solutions to its financial and business partners. In fields such as online travel, e-commerce, telecommunications, online education, SaaS Platforms, financial technology, internet search, and online classifieds and listings, PINTEC enables financial services for institutional partners with point-of-sale financing solutions, personal installment loan solutions, business installment loan solutions, wealth management solutions and insurance solutions. PINTEC's services include: consulting services, SaaS technology services and other value-added services. PINTEC has cooperated with a number of business partners and financial partners, including without limitation Xiaomi, Qunar, Ctrip, China Telecom BestPay, Vip.com, shouqianba.com, Minsheng Securities, Orient Securities, Yunnan Trust, Guoyuan Securities, China National Investment & Guaranty Corporation, Fullerton Financial Holdings. PINTEC has launched two joint ventures to serve the Southeast Asian market: Avatec.ai (S) Pte. Ltd, formed in 2018 to offer credit assessment services and solutions, while PIVOT Fintech Pte. Ltd ("PIVOT"), formed in 2017 to provide robo-advisory services. On October 25, 2018, PINTEC was officially listed on the Nasdaq Global Market with American depositary shares trading under the symbol "PT".
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