The first virtual reality (VR) headset was developed in 1968 at the University of Utah. It was so heavy that it had to be suspended from the ceiling, like the sword of Damocles, its namesake. Fast forward to today, and VR is widely used in several applications, including in education. Due to its immersive and interactive nature, ease of engagement, and visual component, it has become popular for field trips, lab simulations, STEM education, and more. So much so that the VR education market has grown dramatically and is projected to top $65.5B in 2032, with a compound annual growth rate (CAGR) of 18.2% globally.Although not quite at the same rate, the US education market itself is also growing. Defined as childcare, K-12, post-secondary, and corporate training, the education industry is expected to reach a value of $2.25T by 2028, at a CAGR of 4.87%. Many factors are driving growth in the sector, such as shifting demographics, technological advances, the rise of online and hybrid learning models, an increased need for higher education and an upskilled workforce, and changing educational models.Opportunities in the Education SectorEducational institutions have unique financial needs due to their distinct operational structures, funding models — including tuition, public, and private funding — seasonal cash flow, and capital-intensive operations. Community financial institutions (CFIs) have an opportunity to help educational institutions address their financial challenges with products and services catering to these needs. These include:
- Capital financing. Many educational institutions — be they public, private, or charter — require funding for the expansion of land or buildings, for renovations, for technology upgrades, and for other necessary equipment. By understanding these institutions’ specific needs, CFIs can develop tailored real estate loans, construction loans, and equipment financing solutions.
- Treasury management services. Optimizing cash flow and working capital is crucial for educational institutions. CFIs can help by providing cash management services, including automated payment processes, cash flow analysis, payroll services, and working capital lines of credit. Moreover, they can ensure their customers maximize their earnings with checking and savings accounts that suit their unique needs.
- Investment management services for endowments. Many educational institutions have endowments that ensure the long-term stability of the organization. Others rely heavily on fundraising. While larger financial institutions dominate this space, CFIs with wealth management capabilities can cater to small and mid-sized institutions. They can offer investment solutions to help them achieve the right balance of growth and income, in line with their goals. They can also provide advice on fundraising strategies and manage funds for scholarship programs and other similar initiatives.
- Student services. Offering credit to students can be a great way to attract this demographic into the banking ecosystem. CFIs can create competitive loan products with flexible repayment options, lower interest rates, and no prepayment penalties. They can also partner with educational institutions to manage financial aid services, offering scholarships, grants, and student loan counseling.
Examples of CFIs Catering to the Educational Sector
- Live Oak Bank, an online-only subsidiary of Live Oak Bankshares, a $10B-asset FI in NC, has a dedicated team of educational services loan specialists. Live Oak Bank provides startup and construction financing to many educational franchises and independent daycare centers.
- Another CFI targeting the educational sector is $7.8B-asset Michigan State University Federal Credit Union. The institution was started by the university’s faculty and continues to serve primarily alumni, donors, students, and staff. Its AlumniFi digital brand provides members with checking and savings accounts, debt repayment solutions, and tools to promote financial wellness.
- John Marshall Bank, a $2.2B-asset CFI in VA, offers private and charter schools a banking package that includes deposit services, money management services, insurance products, merchant services, and loans.
Following their mission to serve their communities, CFIs are well placed to help educational institutions fulfill their goals. By truly understanding their financial needs and offering tailored solutions, such as loans, lines of credit, cash flow management services, and endowment investment services, CFIs can capitalize on this growing sector. What’s more, CFIs can contribute to their communities by running financial education programs in schools and colleges. This could prove a good customer acquisition strategy as well as a philanthropic one.
