Fan-plastic path to the easy life spreads to city

June 25, 1999

Cola drink manufacturers, banks and universities are sharing the profits of campus smartcard schemes, Liz Amos and Tony Bell found on a US trip

We went expecting to see major developments using chip cards that far exceeded any work in the United Kingdom. The cards and the schemes were certainly smart, but the smartness was not in the chip but in the multi-functionality of the plastic, the fusion of different technologies and the smart partnerships with banks and other businesses.

We visited four universities: Michigan, Penn State College, Arizona and Florida State. The approach of the Americans is one of visionary thinking, flexibility to provide a "win-win" solution to all partners. They see the plastic card with an embedded computer chip as a lifestyle card for the modern-day student who wants an easy life on and off campus.

The primary objective was to have a card providing a multiplicity of services and functions, using appropriate technology. The cards serve as ID and give access to campus facilities such as libraries. But one of the main purposes in implementing the schemes was to earn income for the university from services provided via the card.

Partnerships were therefore key to the smart card programmes. It was the intention of every university to run a self-financing card scheme, funded by income streams generated by use of the cards. Each university has contractual arrangements with one or more banks which generate income for the university as students use their cards to access their bank accounts.

The "float" of money loaded onto electronic purse cards but not yet spent represents a pool of cash that the card issuer can use. The universities hold the float themselves, and draw interest on short-term investments.

Card schemes in the UK are costly to the universities and fall short of an impressive cost benefit analysis. So, is there a lot to learn from the American experience, a market waiting to be milked?

To our surprise the smart chip was only used for "closed" electronic token schemes where a token equals a dollar. A third party, generally a bank or credit union, takes responsibility for managing the token reconciliation, including the risk of fraud. All universities had vigorous plans for expanding their in-house token schemes to retailers off campus. Everyone wanted part of the action. And the more players, the better the income.

The campuses all cover vast amounts of land, encroaching on towns and cities. It is difficult to identify what is town and what is university. The population of the University of Michigan far exceeds the population of Ann Arbor, where it is located. The campus card is gradually becoming a community card - provided by the university.

Community smart card schemes, or city cards, are also generating much interest in the UK. Sheffield Hallam University, working with Cumberland Card Care and Sheffield City Council, has plans to launch a city smart card for Sheffield.

Interestingly, in America there was no particular interest in moving to a global purse, unlike in the UK where Mondex is in use at six universities including our own. Mondex had not been given serious consideration in the US, perhaps because of the perceived failure of Mondex trials by North American banks.

The campus cards all double as bank cards that can be used on the major financial networks. This means that the banks do not have to issue their own cards to students and the universities are in receipt of that steady income stream. The income may be based on any of a number of factors, including the current account balance and the number of ATM transactions.

The cards can also be used to make telephone calls and offer students favourable rates for long distance calls. The terms of these differ but in each case the university takes a slice of the call charges.

The scale of operation was a big bonus to the universities. Michigan has 95,000 cards in circulation, which gives it big buying power and clout. Companies such as Pepsi and Coca Cola are keen to develop their market share and offer competitive deals to secure exclusive distribution on a campus. One of the conditions they have had to meet is to convert their vending machines to take payment by smartcard. At the University of Arizona, Pepsi gave each new student $1, showed them how to load it to their CatCard and then showed them how to buy a drink from a Pepsi machine. All sites had very sophisticated operations with dedicated teams, including a marketing function to promote the total card package. This was given high priority and importance as the schemes need the income from a big take up of the services offered. Perhaps this along with committed partners is the key to success with campus smartcards.

Liz Amos and Tony Bell run a smartcard project at Aston University. Their US visit was part of the JTAP funded Smart Campus project, also based at Aston.

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