Out with the Chip,
In with Online Flexible Spending
Online Transaction
Presented By Joel L. Weidner
April 13, 2005
Introduction
• Session Objectives:
– Outline the reasons behind Penn State’s decision
to switch from smart cards to an online flex
account
– Present case study on the implementation of the
new flexible spending program
• Innovation
– Leveraging of existing Blackboard Transaction
System and departmental technical infrastructure
• Results/Outcomes
– Increased program participation, revenue, and
customer satisfaction
LionCash Chip Program History
• Started using smart chips for stored
value in 1997 with residential laundry.
• Added chips to University Park IDs in
1998 (~50K cards).
– Added vending, copiers, and off-campus
points of sale
• Two additional campus locations added
to the chip program in 1999.
• Approx. 400 terminals were deployed.
LionCash Chip Program Results
• Program peaked at $2 million in annual
sales in 2002
– $847,000 Laundry
– $318,000 Copiers
– $297,000 Vending
– $539,000 Points of Sale (on- and offcampus)
LionCash Program Challenges
• Card cost and reliability
• Small average point of sale transactions
amounts
• Self imposed $99 purse limit excluded
higher end merchants
• Offline program administration efforts
• Contracted provider, Diebold Inc., exited
business in 2002.
• Schlumberger technology was aging
with no strategic replacement plan
Impetus for Change
• Ended contract with service provider
(Diebold Inc.) in 2003
– Inherited technical infrastructure that did
not appear to have much of a future.
• University decision to replace SSN
would probably require the re-issuance
of new ID cards sometime in 2004
– If things were going to change, now was
the time to do it.
Overview of Events
• Sept 2002 - Discussion paper floated
• July 2003 - Project Team begins regular
meetings
• Dec 2003
– Proposal for program transition presented
to Sr. VP for Finance & Business –
(concept approved)
– Bulk equipment purchase (year-end
incentives)
Overview of Events (cont.)
• Jan 2004 – Project team roles up their
sleeves (sub-groups gets moving on
details)
• May 2004 – start marketing new
program at freshman orientation
• May-Aug 2004 – installation of laundry,
off-campus merchants, pilot vending
• Aug-Sept 2004 – copier installations &
full-scale role-out of program
Proposal Development and
Approval
• Nine page document delivered to Sr. VP
on December 9th, 2003
• Outlined program history and
justification for moving to online system.
• Included 5 year projections on costs,
cost savings, and revenue streams.
• Outlined benefits and risks of new
program.
• Critical for achieving high level support.
Risks of moving to an
online flexible spending account
• Opening Diners Club ($3.5 M debit
program) to off-campus businesses
• Bleeding of A La Board ($18 M debit oncampus food services only) funds to offcampus businesses
– Although funds would be restricted to oncampus, students have the option to
change meal plan levels at any time during
the semester.
Purchase of Blackboard
Equipment
• Original time-table called for reader
purchases in April 2004
• Blackboard stepped forward with yearend proposal offer that “we could not
refuse”
• Last minute hustle to determine
equipment numbers, find funding, and
cut the PO.
• Large PO issued on 12/22/2003
Technical Infrastructure Planning
System Configuration
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•
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Wiring
Location/Reader configuration
Account/Privilege setup
FDI Interfaces
MDT modem pool and merchant
terminals
• Settlements
Location/Reader Infrastructure
(three campus locations)
• 140 Laundry controllers
– 55 IPCs for networking
• 100 Copier readers (IP based)
• 170 Vending readers (IP based)
• 5 VTS units
Account/Privilege Setup
• Rolled optional dining account, Diners
Club, into new flexible spending account
($3.5 M annual sales)
• Maintained 5 privs for on-campus debit
meal plans
• Added 5 additional privs for new
account
– Merchants, Copier, Laundry, Vending, and
Deposits
• Linked on-campus meal plan to new flex
account
Interfaces and MDTs
• Barnes & Noble on-campus bookstore
serial FDI in multiple stores
• The Student Bookstore (off-campus)
Sequoia TIA
• Got Used Books (off-campus) Nebraska
Books TIA
• Setup MDT modem bank with 5 rackmounted modems, fronted ended with
800 number for campus locations.
Settlement System
• Setup Optim Extract
• Built web-based merchant settlement
system
– Decision to offer daily, weekly, or monthly
settlements (no commission differential)
– Automated ACH records sent to central
accounting
– Emails sent to merchants with settlement
statements
Sample Settlement Email
Administrative Planning
• Operating policies
• Merchant application and agreement
• Cardholder disclosures
Operating Policies
• Administrative merchant account setup
procedures
• Settlements
• Balance limits
• Regulation E legal review
• Acceptable use & restrictions
Merchant Application,
Agreement, and Support
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•
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•
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Verifone terminal setup procedures
Verifone terminal operating procedures
Commissions/settlements
Dispute procedures
Refunds
Accounting/technical support
Cardholder Disclosure
•
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•
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Statements/transaction history
Spending limits
Refunds
Liability
Errors/disputes
Inactive accounts
Marketing & Communications
LionCash+ Brand
Marketing & Communications
•
•
•
•
Internal Politicking
Customer communications
Program promotion
Merchant acquisition
Internal Politicking
• SSN Steering committee
– Some confusion about why we were
implementing this new program before the
new card was issued
• Libraries
– What else do I need to say?
• Food Services
– Director of food services was part of our
LionCash+ implementation team
Customer Communications
• Freshmen communications – only the
new program
• Upper Classmen & Faculty/Staff –
conversion from chip to stripe
• Program name confusion – LionCash to
LionCash+
• More name confusion – Diners Club to
LionCash+/Diners Club
• Collegian articles and newspaper ads
Merchant Acquisition
• Meetings with Downtown State College
Improvement District (DID)
• DID helped us sponsor meetings for
interested Merchants to introduce new
program
• Challenges to speaking to new
merchants and former LionCash (chip)
program merchants
• Merchant Packets/Web Site tab
Merchant
Acquisition
Packet
Cover Letter
Merchant Testimonials
Program Statistics
Merchant
Acquisition
Packet
4 easy steps
Table of
packet
contents
Merchant
Acquisition
Packet
FAQs
Merchant Packet
also included:
•
•
•
•
•
Application form *
Merchant Agreement (contract) *
Cardholder Disclosure *
LionCash+ Accepted here sticker
Business Cards for id+ office
* Also available online at
www.idcard.psu.edu
LionCash+ Rewards Program
• Co-sponsored by id+, Downtown State
College Improvement District, and
participating merchants
• Eight merchants per month donate
prizes valued at approx. $50
• Eight winners are chosen at random
from list of transactions at merchant
locations during the month
• Collegian adds, store posters, and web
site promote program
Results – Off-Campus Merchants
• 47 Off-campus merchant locations,
including
• 2 independent
bookstores
• CVS Pharmacy
• Dominos Pizza
• Jimmy Johns
•
•
•
•
•
McDonalds
Pizza Hut
Sheetz
Subway
UniMarts
Results – Funds Pool
(first 9 months of program)
• Average monthly fund balance is up
over 48%
– Last year chip program and optional Diners
Club average balance - $834 K
– Current year online LionCash+ average
balance - $1.2 M
*includes $140K in residual chip funds
Fund Balance
Monthly Fund Balances
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
-
Month
M
ay
ril
Ap
gu
st
pt
em
be
r
O
ct
ob
er
N
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b
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ec er
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be
r
Ja
nu
a
Fe ry
br
ua
ry
M
ar
ch
Se
Au
ly
2003/04
2004/05
Ju
Thousands
Fund Balance
Old Program vs. New Program
Fund Balance
Monthly Fund Balances
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
-
Month
M
ay
ril
Ap
ch
M
ar
ry
br
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be
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gu
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Se
Au
ly
2003/04
2004/05
Ju
Thousands
Fund Balance
Old Program vs. New Program
Results – Sales
(first 9 months of program)
• Period sales are up over 36%
– Last year chip program and optional Diners
Club program sales were $4.5 M*
– Current year online LionCash+ sales at
$6.1 M*
* 12 months last year compared to 9
months of new year.
Program Sales
Monthly Sales Comparison
1,200
1,000
800
2003/04
2004/05
600
400
200
Month
ne
Ju
M
ay
ril
Ap
ch
M
ar
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br
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m
be
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gu
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Se
Au
ly
-
Ju
Sales
Thousands
Old Program vs. New Program
Program Sales
Monthly Sales Comparison
1,200
1,000
800
2003/04
2004/05
600
400
200
Month
ne
Ju
M
ay
ril
Ap
gu
st
pt
em
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-
Ju
Sales
Thousands
Old Program vs. New Program
LionCash+ Net Sales
July 1, 2004 - March 31, 2005
Vending, $11,310.77
Ticketing, $2,845.75
Miscellaneous, $21,195.61
Laundry, $778,361.90
Bookstore, $655,145.94
Clothing/Retail, $33,826.01
Concessions, $43,424.08
Health & Fitness, $1,575.59
Convenience, $559,166.83
Copying, $83,874.17
Food, $3,569,138.76
Sales by Category
LionCash+ Net Sales
On-Campus vs. Off-Campus
Off-Campus, $1,145,322.51
On-Campus, $4,614,542.90
Sales On vs. Off-campus
Results – Impact on Diners Club
• Merging Diners Club into new
LionCash+ program and opening up
funds to off-campus did not impact
program negatively
• Year-to-year comparison of debit sales
in same food service units up 7.7%
($235 K) over same period for last year
8
20
03
/
Au
g
31
20
20
04
03
/S
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20
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2
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18
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Sales
Thousands
LionCash+ vs. Diners Club
LionCash+/Diners Club
Sales by Day
$90
$80
2004 - LC+/DC
2004 - DC
$70
2003 - DC
$60
$50
$40
$30
$20
$10
$0
Date
Results – A La Board Plan
• New LionCash+ and related off-campus
sales did not impact primary meal plan
program negatively
• Year-to-year comparison of debit sales
in same food service units up 6.1%
($890 K) over same period for last year
8
20
03
/
Au
g
31
20
20
04
03
/S
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t1
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6
ct
20
4
04
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ct
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2
20
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18
No
20
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5
04
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Sales
Thousands
A La Board 2004 vs 2003
A La Board Meal Plan
Sales by Day
$140
2004
$120
2003
$100
$80
$60
$40
$20
$0
Date
What could have been done
better? - Timing
• Copier implementation that should have
taken place during the summer of 04,
actually happened after fall arrival.
• Vending implementation was delayed as
well due to lead time in wiring buildings
• Our goal was to have chip readers
totally phased out before the start of fall
semester, but we didn’t quite make it.
What could have been done
better? - Resources
• Program did not receive the
administrative attention it deserved
during the fall semester due to other
projects
– SSN conversion project
– November re-carding project
• Marketing and merchant acquisition
efforts were not as intensive as they
should have been
What does the future hold?
• Program is off to a great start, but there
is much potential to increase deposits,
sales, and revenue
• We have the technology (transaction
processing/settlement)—now we just
have to leverage it with increased
volume
New Marketing Efforts
• Freshman orientation
– Last year we were not sure what we were
marketing
– This year we have a great program to sell
• Faculty/Staff
– Expanded number of locations makes
program more attractive
– Looking at payroll deduction
On-Campus Expansion
• Barnes & Noble Bookstores – will be
activating FDI at all 23 campus
bookstores for this fall
• Vending just getting cranked up
– Looking to expand at 4 other campus
locations this summer
• Considering building Web application
that will interface via TIA to allow any
campus office to debit account with
existing administrative PCs
Off-Campus Expansion
• New merchant acquisition efforts
• Recently added merchants
– Sheetz
– Subway
– Dominos Pizza (contract, but not active)
• Campus location merchants (Sheetz in
Altoona was our first remote campus
MTD)
Closing
• Online Resources Available:
– www.idcard.psu.edu
• Follow up Contact(s):
– Joel L. Weidner, jlw2@psu.edu
– Cindy Kellerman, cqk2@psu.edu
• IF YOU ONLY REMEMBER 2 THINGS:
– Learn from your mistakes
– Steal shamelessly from others who proceeded you