After a 13-year development process, an “electronic purse” project can now boast a few flagship clients. Its founder sees the project as the germ of a “community bank”, running independently of the big banks.
The breakthrough in the business model, says founder Ted Woodley, was to assign a unique serial number to each contactless chip card in the system so that payments can be tracked accurately. This means user organisations have a running picture of how much is still on customers’ cards in unused funds and can invest a proportion of the float, “which never goes negative”.
Petone Workingmen’s Club and Stokes Valley Cosmopolitan Institute are running the contactless chip card system, as well as recognising each other’s members in a scheme that gives loyalty discounts. It also allows the clubs to have a sizeable float of funds, in the form of unused e-cash on cards in circulation. Card payment also removes cash from the premises.
The first user of the card was Kelly’s Irish Bar, in Petone, which has had it in place for 16 months.
A BNZ representative says chip cards are one of many available means of delivering the customer loyalty experience, but need supporting processes to safeguard customers’ privacy, security and financial position.
“How well schemes like this deliver a safe, secure loyalty offering will determine how much of a foothold they gain in the New Zealand payments marketplace.”
Each implementation of the card is individually branded; the original brand-name of the card was Unipoints, but this is not being used at present. “We’ve removed ourselves from the branding as much as possible,” Woodley says, reinforcing the philosophy that the user organisation owns the card. The Unipoints name may resurface as Unipoints Plus, when an upgraded version of the card is produced.
The scheme is independent of the banks, simply circulating customers’ own funds. Woodley calls it a “closed loop” system. A customer will typically pay the club $100 and get a card with $105 of purchasing power. “Effectively they’re running their own bank,” he says.
With mutual recognition of cards by the two clubs, the operation has begun to grow. He sees the concept evolving into a “community bank”, with electronic cash flowing through multiple merchants without touching the mainstream banks.
In the nine months the Stokes Valley club has used the card it has run at least three large functions — “a 21st birthday party, a wake and a wedding anniversary” — where four-figure sums were transacted through the system on each occasion without a hitch, Woodley says.
This is all operated offline, without the need for a network among terminals, he says. Yet, the system has a constant accurate picture of the unused funds on each card.
The card also incorporates a physical access control function; members can use it to get into the club. Both functions are incorporated on the same chip.
The chips and the card stock is imported. but the printing and initialising of the chips is done by Geldard Card Services in Christchurch, making it a substantially local operation.
Woodley has been attempting to get a card scheme off the ground for 13 years (Computerworld, March 14, 2003). He has repeatedly run into problems with finance, technology and what he sees as negative input from the banks.
Asked if there had been any reaction from the banks to the latest version of the scheme, Woodley says, “I don’t think they know yet. Maybe we’ll get a reaction when you publish.”