American Schools Help Spur a Cashless Society

COMMENTARY Education

American Schools Help Spur a Cashless Society

Feb 26, 2018 2 min read
COMMENTARY BY
Jonathan Butcher

Will Skillman Senior Research Fellow in Education Policy

Jonathan is the Will Skillman Senior Research Fellow in Education Policy at The Heritage Foundation.
Families can use the accounts to buy classes online, hire personal tutors, pay private school tuition or even save for college. stevegeer/Getty Images

Key Takeaways

In the U.S., we’re still reaching for our wallets to make most purchases, but digital payments are entering our lives through an unexpected channel: education.

More recently, traditional schools in states such as Pennsylvania and Florida have used this service to make cashless transactions online to buy classroom supplies.

Public school special-interest groups blocked the innovation with a lawsuit, but this account design is a model for other states as they launch new account laws.

Using cash at the store or to pay for your morning coffee is on the way out in Britain. A new report from British industry analysts estimates that just one in five purchases in the U.K. will be made with cash by 2026, down from approximately two out of three purchases in 2006. Similar trends are unfolding around the world.

In Kenya and some East- and Sub-Saharan African countries, mobile money and digital wallets — elements of financial technology, or “fintech” — are making cash obsolete. India is in the midst of a fintech “boom,” according to researchers at the Wharton Business School. More than 200 million Indian consumers are using digital person-to-person payment systems, a larger figure than in any other country.

In the U.S., we’re still reaching for our wallets to make most purchases, but digital payments are entering our lives through an unexpected channel: education.

U.S. consumers have been slow to adopt financial technology. Strict federal regulations are at least partly to blame, which is why states have been taking the lead and working together apart from Washington to help fintech companies take root.

Earlier this month, seven states agreed to recognize each other’s findings as to whether a fintech startup should have a business license. The move, Reuters reports, is in response to “longstanding complaints by fintech startups about the costly and time-consuming process of having to secure licenses separately in each state.”

Meanwhile, in education, mobile payments are finding a niche. In a high-profile example from 2015, teachers in Newark, N.J., used a fintech service called ClassWallet to buy back-to-school supplies in conjunction with a donation from Facebook’s founder Mark Zuckerberg and his wife, Priscilla Chan.

More recently, traditional schools in states such as Pennsylvania and Florida have used this service to make cashless transactions online to buy classroom supplies. A teacher accesses the service online and can buy items using funds the state deposits in her account.

Digital wallets and mobile money are also a natural fit for parent choice in education. In Arizona, Florida, Mississippi, Tennessee, Nevada and North Carolina, lawmakers have enacted education savings accounts, which allow parents to choose a new school or multiple learning options for their child. With an account, the state deposits a portion of a child’s funds from the state education formula into a private account that parents use to buy educational products and services.

Families can use the accounts to buy classes online, hire personal tutors, pay private school tuition or even save for college. Research finds that many parents and students are, in fact, using the accounts to pay for more than one learning option. Researchers released a report this month and found that 40 percent of Florida account holders used an account for more than one item or service — such as a personal tutor and private school tuition or textbooks and online classes. Studies of Arizona’s accounts find that one-third of account holders are doing so.

Fintech is on the horizon for these accounts. Nevada policymakers designed a mobile money platform with a health savings account company to operate the state’s accounts. The online payment system would allow families to choose a school or personal tutor, for example, from their computer or smartphone and pay for the service with the press of a button. State officials could confirm who was making a payment (to make sure it was an account holder) and who was being paid (to make sure the recipient provides an education service).

Public school special-interest groups blocked the innovation with a lawsuit, but this account design is a model for other states as they launch new account laws. North Carolina policymakers enacted the accounts last summer and began accepting applications on Feb. 1. Tennessee’s accounts are just a year old. Arizona officials operate the nation’s oldest education savings accounts, but the state auditor said that while the state department of education has “established various processes to help ensure program monies are spent appropriately” the agency should make better use of online accounting resources.

State policymakers are not waiting for the federal government to provide quality education options for children — nor are they waiting for Washington to keep up with advances in financial technology. Examples from around the country demonstrate they shouldn’t have to.

This piece originally appeared in Athens Banner-Herald