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Out with the Chip, In with Online Flexible Spending Presented By Joel L. Weidner April 13, 2005 Online Transaction.

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Presentation on theme: "Out with the Chip, In with Online Flexible Spending Presented By Joel L. Weidner April 13, 2005 Online Transaction."— Presentation transcript:

1 Out with the Chip, In with Online Flexible Spending Presented By Joel L. Weidner April 13, 2005 Online Transaction

2 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

3 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.

4 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 off- campus)

5 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

6 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.

7 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)

8 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

9 Proposal Development and Approval Nine page document delivered to Sr. VP on December 9 th, 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.

10 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 on- campus food services only) funds to off- campus businesses –Although funds would be restricted to on- campus, students have the option to change meal plan levels at any time during the semester.

11 Purchase of Blackboard Equipment Original time-table called for reader purchases in April 2004 Blackboard stepped forward with year- end 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

12 Technical Infrastructure Planning System Configuration Wiring Location/Reader configuration Account/Privilege setup FDI Interfaces MDT modem pool and merchant terminals Settlements

13 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

14 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

15 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 rack- mounted modems, fronted ended with 800 number for campus locations.

16 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

17 Sample Settlement Email

18 Administrative Planning Operating policies Merchant application and agreement Cardholder disclosures

19 Operating Policies Administrative merchant account setup procedures Settlements Balance limits Regulation E legal review Acceptable use & restrictions

20 Merchant Application, Agreement, and Support Verifone terminal setup procedures Verifone terminal operating procedures Commissions/settlements Dispute procedures Refunds Accounting/technical support

21 Cardholder Disclosure Statements/transaction history Spending limits Refunds Liability Errors/disputes Inactive accounts

22 Marketing & Communications LionCash+ Brand

23 Marketing & Communications Internal Politicking Customer communications Program promotion Merchant acquisition

24 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

25 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

26 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

27 Merchant Acquisition Packet Cover Letter

28 Merchant Testimonials

29 Program Statistics

30 Merchant Acquisition Packet 4 easy steps Table of packet contents

31 Merchant Acquisition Packet FAQs

32 Merchant Packet also included: Application form * Merchant Agreement (contract) * Cardholder Disclosure * LionCash+ Accepted here sticker Business Cards for id+ office * Also available online at

33 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

34 Results – Off-Campus Merchants 47 Off-campus merchant locations, including McDonalds Pizza Hut Sheetz Subway UniMarts 2 independent bookstores CVS Pharmacy Dominos Pizza Jimmy Johns

35 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

36 Fund Balance


38 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.

39 Program Sales


41 Sales by Category

42 Sales On vs. Off-campus

43 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

44 LionCash+ vs. Diners Club

45 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

46 A La Board 2004 vs 2003

47 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.

48 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

49 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

50 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

51 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

52 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)

53 Closing Online Resources Available: – Follow up Contact(s): –Joel L. Weidner, –Cindy Kellerman, IF YOU ONLY REMEMBER 2 THINGS: –Learn from your mistakes –Steal shamelessly from others who proceeded you

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