This time of year I’m always on the lookout for financial companies doing something interesting for the holidays. Gift cards are the obvious opportunity, but there are other financial products that make good holiday gifts as well (stocks, mutual funds, savings bonds, and so on).
But it took a startup, Finovate alum Tuition.io (see FinovateFall 12 demo), to come up with one of the most valuable gifts yet: student loan repayment.
It’s not as exciting as $100 to blow at Nordstrom (note 1), but the long-term value is pretty enticing, especially if the former student gets a number of them over the years. And it’s the perfect gift from grandparents or aunt/uncle who probably don’t have a clue what gift card to choose anyway.
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How it works
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It’s as easy as sending an electronic Applebee’s gift card.
1. The giver completes a simple form naming the recipient, amount (from $5 to $500), date of delivery (email) and custom message (see screenshot #3).
2. Payment is made via credit card (screenshot #4).
3. Recipient redeems by providing student loan info to Tuition.io.
Fine print:
A. Neither the giver nor recipient need have a previous relationship with Tuition.io.
B. The gift can be used only for principal reduction, not monthly payments.
C. There is a 6.5% transaction fee (3% for the card processer and 3.5% for Tuition.io). Like those pesky shipping charges on ecommerce sites, the amount is not revealed until the final confirmation screen (screenshot #5)
D. If the recipient does not redeem before the expiration date, the money goes back to the giver, less the transaction fee.
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Bottom line
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This has great potential for banks. A simple form to deposit cash or pay down bank loans/cards is a welcome service for holiday, birthday and graduations. The Tuition.io is nearly a perfect example of how to build one. The only serious weakness is lack of disclosure of the 6.5% transaction fee until the last screen. While $19.50 to send a $300 repayment is not outlandish, it leaves a slightly bad taste when disclosed so late in the process. Why not be upfront with it? It would just add to the credibility of what the startup is doing.
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1. Tuition.io homepage (18 Dec 2013)
Note: “Give a gift” promo in upper right corner
2. Tuition.io gifts landing page (link)
It’s pretty clear what the startup is pushing this holiday season
3. Dynamic gift certificate form
Note: The virtual “card” is updated as the form is completed
4. Payment via credit card
5. Final confirmation screen shows service fee
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1. We usually package a small retail gift card with the student loan payment, so it’s not completely boring.