This article is part of our Rising Star Portfolios series.
I recently had the chance to interview Miles Lasater, co-founder and COO of Higher One (NYSE: ONE ) , and ask him some questions about the company, the market they address, and concerns and goals for the future. Below is a lightly edited Part 1 of our two-part series:
Jason Moser: What do you consider to be Higher One's top three priorities at this point in the business?
- Reduce higher education expenses by helping colleges and universities eliminate unnecessary costs and realize process efficiencies.
- Eliminate waste, delays, and errors in the refund distribution process while giving students choice in how they receive their refunds.
- Provide valuable banking services and financial education for students, many of whom are unbanked or considered unattractive by traditional banks.
Moser: What do you perceive to be the biggest threats to the company?
Lasater: Over the past couple of years, there's been heightened regulatory scrutiny in both the financial services industry and higher education. While our services are actually designed to help schools be compliant and help both schools and students save money, we remain wary of the current regulatory environment. I hope that the worst is behind us in this regard, but there are still certain regulatory overhangs and uncertainty that could pose a threat to our results. Thankfully, our business is flexible and nimble, and we will do our best to quickly and effectively adapt to any changes in the regulatory environment.
Moser: Are there any aspirations to go beyond the U.S. and possibly tap into international opportunity?
Lasater: We're more focused on the large opportunity in front of us in the U.S. There are currently around 20 million students attending higher education institutions in the United States, and we still have a lot of runway to increase penetration of all of our different products. Our specific expertise in the rules and regulations that govern U.S. financial aid and financial services sectors will help us continue to sign up more schools, increase adoption at existing clients, and find other products and services that can increase efficiency at higher education institutions. That said, we remain open to good opportunities when we identify them.
Moser: I understand that part of the advantage in working with a bank (The Bancorp (Nasdaq: TBBK ) ) with assets under $2 billion means that the bank is not subject to new card rules limiting transaction fees [affecting banks with assets over $10 billion]. Given that Higher One generates a significant portion of revenue from card transactions, how susceptible are you to changes in card legislation? Is this a major concern?
Lasater: A material portion of our revenue does come from interchange, so we are certainly paying close attention to what's happening with debit interchange regulations. As you mentioned, given the fact that our bank partner has far below $10 billion in assets, we should not be directly affected by the Durbin amendment interchange caps as currently written. In fact, assuming the exemption holds, the Durbin amendment could actually be a positive. The low-balance student demographic would become less valuable to the big banks given their high cost structures, and we've recently seen large banks enact new fees to make up for lost revenue on the interchange side. Assuming the exemption holds, this could help us gain market share against the big banks, and if for some reason small banks do see their debit interchange rates come down, we have the flexibility in our fee schedule to see what the big banks are doing with their fees and react accordingly.
Stay tuned for the second part of our interview on Monday.