2. Open Loop/Closed Loop
Advantages Disadvantages
Open-loop systems
The institution isn’t responsible for card-issuing Card replacement is slow, with no interim solution
Therefore most risks pass to the card issuer Transaction fees are higher
Students can use the payment method off-campus Design flexibility is limited
Diverse usage makes it popular with students Spend goes off-campus
Cards have higher levels of security. Cards readers are more costly
3. Open Loop/Closed Loop
Advantages Disadvantages
Closed-loop systems
The institution remains in full control The institution bears all risk & responsibility
One card (or app) does everything Not all systems can be used off-campus (eg bus)
The institution issues cards & re-issue is very fast Visitors may need additional payment options.
A higher proportion of spend is kept on-campus
Lower administration costs
No issues with the ownership of data
Funds held can deliver working capital
Substantial interest can be earned on stored funds
Detailed, accurate analytics become available
Easy to reward/incentivise users
Lower risk of fraud (although not eliminated)
Secondary authentication can be used when cards are
lost/stolen
Effectively ring-fences funds – so they can’t be spent in
bars, nightclubs, etc.
Introduction
Alan Christie BDD of MonitorIT and I am joined by my college Howard Tucker - Technical Director. Feel free to ask questions as we go through and I may call on Howard to assist with some of the more technical or integration related questions.
Monitor IT is a wholly owned subsidiary of the AIT group and is solely focused on providing Universities & Colleges a cashless campus solution that is both flexible and fit for purpose.
I have been attending HESCA meetings for at least the last 3 years and over that time I heard numerous organisations express the desire to go cashless but very few have actually achieved it.
So before embarking on this road we commissioned a white paper on what the HE/FE felt about cashless and tried to identify some of the main drivers behind organisations desire for a cashless or Less Cash environment and why it was so difficult to achieve.
We selected a very knowledgeable author with a great deal of experience in this particular sector along with a long list of industry contact who provide a very interesting document with some very unusual statistic and I'd like to share some of these findings with you today.
One of the first things we found most organisations asking is what type of cashless environment should they have. The question mainly stems around open loop or closed loop. We have heard discussions in this very room highlighting the merits of both types from a range of vendors but the individual organisations need to understand what is best for them. Further investigation of the pro's and con's of this dilemma produced very interest results. While the pro's and con's of the open loops options were fairly evenly balanced as shown here.
We can see that there are some familiar items listed below
On the Pro’s side
Level of card security, students can use payment method off-campus, University or college is not responsible for issuing cards.
Against
Card replacement can be slow, transaction fees are higher, card readers or Efpos terminals are more expensive.
But that is not my point
Closed loop - with a closed loop system the decision becomes much easier as there appeared to be a lot more in the Pro's column than there is in the Con's column.
Obviously we do have issues like:
The university or college bears a lot of the risk
Or visitors may need additional payment options
But there are far more pro’s under this model like:
Easier, more comprehensive reporting of on-campus spend
Lower risk of fraud
The university or college remain in full control of the cash float,
A higher proportion of the spend remains on-campus and
Lower administration costs
Which leads me nicely onto quite an eye opener that came out of the research.
As mentioned in our Pro's and Cons list earlier we do need to consider the cost of cash as there are a number of hidden factors.
Storage is the first big headache and with that the cost of insurance. Our research found out that there are many safes types and you can only insurance a safe for the value rating of the safe itself. Each safe has a rating for jewellery, documents but also cash. Cash rating of safe are public knowledge as they are published on-line
You also need to have a certain level of security in place including alarm systems, motion detectors and adequate locking mechanisms. If this is done then you can insurance your cash. To get a ball-park I checked with MonitorIT current insurance broker - this would typically be approx. £80 per £5,000 so how much do you typically store per week?????
During one of discussions with a small college they audited their insurance provisions and found that while their insurance premium covered each of their 4 safes to store up to £7,500 one of their safes regularly had over £15K in it.
In addition to this there is the cost of collection, storage, counting, banking to name a few.
One of the customers we currently work with reviewed this. This included collection from 18 different vending or value loaders, 10 hours of coin counting and 3 bank trips per week. They estimate they spend around 21 man-hours per week just managing cash. That is 2/3rd of an individual’s salary just collecting, counting and banking cash.
Any then there is the cost of fraud
And whiles we're talking about fraud and security aspects of cash there is the Dirty Money aspect.
This covers both the counterfeit aspects of cash and hygiene side. This is also my audience participation slide to make sure everyone is still awake.
Any guesses how many counterfeit bank notes are removed from the UK economy every year? It is in fact 430,000 notes every year and in 2014 these had a face value of £8.1M
In addition to this, depending on which report you read somewhere between 3-5% of all £1 coins are also fake. According to the Royal Mint in 2014 there where approx. 1.5B £1 coins in circulation which mean over 45M are fake.
Still on the subject of dirty money any guesses on the average number of bacteria found on bank notes in Norway found during a recent study?
It was in fact 40,000 on average.
Another survey in the US found out that 94% of banknotes contained the bacteria Staphylococci
So with these types of facts why would anyone want to either pay or accept cash in a catering environment - food for thoughts!!!!!
So while we're on the subject of catering environments what was one of the biggest complaints by students during recent student satisfaction surveys in 2013 - queue's!!!
With time-tabling and student schedules the café or restaurant peak-times normally produce a lot of students looking to get their latte's, cappuccino's or even eat at the same time.
Handling these rushes either means staffing up during these periods (a costly option) or provide quicker methods to pay.
The typical transactions times for the various methods of payment are significantly different and can have a major improvement on the status of queues. Scanning or entering the products purchased is the same for all methods so we started our stop-watch from the time the balance was displayed.
Cash - by the time the cash has been found, handed over, checked, changes selected and handed back and money put away we averaged 42 secs (some transactions were much longer)
Credit card using chip and pin - this was a significant improvement. Students typically had the card ready but this still took time as terminals were passed and pin numbers entered, this came in at an average of 23 secs.
Both Contactless and on-line accounts were by far the quickest averaging only 3 secs as again the cards were typically ready.
To quote a close colleague of mine – “when it comes to fast and easy payment methods, students should spend more time doing and less time queuing”
Other interesting phenomena of card /account based payment over cash is the increase in spend.
There is a psychological barrier to handing over coins and notes. The transaction has a higher level of meaning for the purchaser and therefore more care is taken. This is less so when payments are made using cards or accounts.
I have heard in this very room that typical on-campus spend can increase up to 20% by introducing account based payment methods.
However a recent survey by MasterCard has indicated that increase spend for contactless payment can be as much as 30%.
One study this year's by Business Wire shows average cashless usage at locations equipped with USA Technologies’ vending Cashless Payment System went up to 37 percent during a one-month period
My final slide today just highlights again, some of the things you need to ensure any cashless (or less cash) environment provides to make sure that your student satisfaction surveys come back with glowing scores.
Ensure your solutions provide you the control you need to make informed decisions about your strategy
Provide your students with a single, simple user interface across a broad range of applications (café, bookstore, print, library etc.)
Ensure your solution provides you the clear visibility about what each one of your revenue points is making (or losing) but having a single point for generating reports.
And finally don’t forget your international students – whatever you chose must be easily accessible for them to use
Thank you for your time this morning.
I hope you found it informative and if you want any other data, reports or quotes I suggest you download this white paper which is available free from our website – www.monitorit.co.uk.
I hope it will help you either prepare you own business cases or even just provide some handy tips.
If anyone has any questions????