This article is part of our Rising Star Portfolios series.
Recently, I had the chance to correspond with 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 2 of our two-part series. Click here to read Part 1:
Jason Moser: What are the long-term goals for Higher One? In other words, can you see one day becoming a bank or a lender? Do you see one day going outside of the student market?
Miles Lasater: Our current strategic goals are to continue to sign up new institutions and to increase adoption of OneAccounts at existing clients, and all of our projections and guidance are built off of just that. Looking forward, however, there are a couple of interesting opportunities. First, we have built strong relationships with a large number of colleges and universities. Given these relationships, we are well-positioned to roll out other products and services designed to streamline operations and increase service. There are a lot of processes in higher education that are currently paper-based or could be done at lower cost, and over the longer term we believe that we can either build new products internally or roll up existing products on the market to continue to bolster our service offering to schools.
Beyond that, as we sign up more schools, the number of students using our OneAccount suite continues to grow. While customers can continue to use their OneAccount after leaving school, we have not put a lot of resources into retaining customers after they graduate. In the future, either through a strategic partnership, acquisition, or something we build internally, we believe that we can provide beneficial services solving a number of challenges faced by those leaving school.
Moser: Who are your biggest competitors?
Lasater: Traditionally, our biggest competitor has been schools handling disbursements in-house, and the biggest barrier to entry has been the slower pace of change in higher education. Over the past 10 years, we have done our best to learn from and about our prospects and clients and working to address any questions or objections they may have to working with us. More of our sales and implementation process than you may imagine is change management.
Since inception, we have seen "me-too"-type competitors for OneDisburse in the space, though we don't believe that anybody on the market has as robust a product as we offer. Plus, because we charge the schools so little to handle disbursements, it's very difficult for anyone to compete on price. This makes service and reputation the main differentiators, and considering our 98% client retention rate, our A+ rating at the Better Business Bureau, and our hundreds of referenceable clients, it would be very difficult to compete with us on those points.
Moser: By my estimates (obviously please correct me if I'm off) there are approximately 20 million or so students in the country pursuing a degree of some type. Are you concerned that you may reach a saturation point when one day you have basically tapped the reasonable market of students out there? What then?
Lasater: As of the end of 2010 there were 1.6 million students using a OneAccount, so with 20 million students in the country pursuing a degree, that leaves us with a lot of runway to grow. And as we discussed earlier, that 20 million number becomes much, much larger when you start to talk about alumni retention. If we reach the point of saturation, just think about the number of students that we will have established a financial relationship with that will be graduating from school and going into the workforce. Also, the opportunity exists to continue to increase the depth and breadth of products and services we offer to schools.