Campus Cards >> The Revenue / Service Balance

More than ever before, campuses are finding imaginative ways to generate revenue from campus cards to offset the costs of providing convenience and service.

Ten years ago, students at the University of Vermont had to carry separate ID cards, meal cards, and athletic cards. Today, the single CATcard combines all of these functions, plus library privileges, an optional declining balance program called CAT$cratch, access to computer labs, use of vending machines without quarters, and even a ride on the campus or city buses. Still, UVM is one of many schools that have felt the need to explore whether a comprehensive campus card program is indeed a money-maker or an ongoing expense.

Reaching Beyond the Campus

The University of Vermont CATcard, based on CBORD’s CS Gold system (www.cbord.com), brought convenience and added value to students’ daily lives, and efficiencies to the university’s operations. But operating the card program also costs money. As a state institution, UVM was not permitted to charge students for their initial card, nor is the card operation supported out of the general university budget. So when the CATcard program needed to find ways to support itself and to pay back its $250,000 seed-money loan from the university, it began to look off campus for revenue sources.

“I had some excess capacity in the system that I thought I could parlay into revenue,” remembers Mark McKenna, the program director of the CATcard Service Center. By helping nearby St. Michael’s College (VT) get its card program off the ground, and later doing the same for Champlain College (VT), McKenna was able to be a good neighbor and at the same time spread out the costs of all three institutions’ card programs. UVM provided its sister institutions with consulting and expertise to set up their card programs, and then acted as an application host, relieving them of the responsibility of running their own servers and managing their own software systems. In effect, the two client colleges are able to access UVM’s card office expertise and are sharing hardware facilities (including redundant servers, disaster recovery measures, data backup, spare parts, and other expensive resources). The clients operate the front ends of their own programs, so students and faculty are not even aware that the card operations are actually being hosted at another location entirely.

EXPANDING CAMPUS CARD services need not be costly; services can pay for themselves.

St. Michael’s and Champlain pay UVM about a dollar a month per campus patron (students, faculty, vendors, etc.). That amount just covers UVM’s actual costs to support the outside campuses, while providing revenue that keeps the shared hardware and software infrastructure up to date at a pace that none of the individual campuses might be able to afford to do on their own.

Another important source of added revenue for UVM comes from a different off-campus source: the local merchants in Burlington who depend on students to help their businesses thrive. UVM students can use their campus cards as a form of payment (called CAT$cratch) at local restaurants, fast food shops, grocery chains, video stores, bowling alleys, or any of the 120 businesses that have readers to swipe the UVM card. If a student gets in a fender bender, she can use her CAT$cratch to have her car fixed at one of three local auto repair shops, hire a lawyer, even pay a fine to the Burlington Police Department.

The local merchants pay UVM’s CATcard Service Center a sliding fee of 3.25 to 9 percent on the transactions, based on their annual sales via the CATcard, and taking into account how frequently they wish to receive their payments. That fee is more than most merchants pay to accept bank credit card payments (usually around 2 to 2.5 percent), but they get more than just a way to accept payments for goods and services. The UVM card program promotes its member merchants on its Web site, gives out goodie bags of products at the beginning of the semester, and gives businesses more access to students on campus than they otherwise would have.

By institutional policy, UVM’s CATcard Service Center must break even every year. Even so, there has been enough revenue to plow back into the program, making it stronger and more resilient. And about those loans: The card program paid back its initial five-year loan in four years, and repaid a second upgrade loan in three years. Now UVM is actively talking to more Vermont institutions, to get them to sign on with its campus card operations program.

Card Program on a Sh'estring

When Paul Davies came to Sweet Briar College (VA), he saw at once that his new institution needed a campus card, but he knew also that things would have to be done quite differently than they had been at his last job. Davies had been at Duke University (NC) for 17 years, the home of one of the pioneering campus card programs in the country. “I was familiar with the Cadillac of campus cards,” says Davies. “Duke d'es parking decks, dining, vending, door access, copiers, you name it—running about 350,000 transactions a day.”

Sweet Briar, with its 600 students and its rural atmosphere near the Blue Ridge Mountains, was not on Duke’s scale. But Davies felt a strong need for the kind of management tool that a campus card can provide. He felt a card would give campus administrators a better handle on dining and other campus operations. As a CPA, he knew how crucial financial controls could be, but he also knew how hard it would be to justify the six-figure investment it would take to install a card system, and that he would not be able to hire the technical staff needed to run it properly. His solution came from start-up CardSmith (www.card-smith.com). CardSmith offers institutions the chance to let an outside partner purchase and operate the card system, for which the campus pays an annual service fee.

Because Davies already knew precisely what he wanted, and because CardSmith did all the heavy lifting, the Sweet Briar card (SBC) was up and running only six weeks after signing the contract. Benefits became apparent immediately.

Before the card, virtually anybody who looked like a student could walk onto the campus and eat, even though Sweet Briar has a traditional 20-meal board plan for students. In addition, the card began to reveal a more realistic view of what the dining hall’s true costs were. Davies could now calculate the “missed meal factor”: how many meals the dining program was actually serving, versus meals that were paid for but skipped. This also showed what the actual labor costs were per meal served—a measurement that is also a key tool for quality monitoring. “A large missed meals factor signals bad service or bad food,” says Davies. “A rumor about bad food is one thing; missing 50 percent of suppers is more indisputable.”

There were other benefits, too. “The card speeds up the line in the Bistro, so we don’t alienate paying customers,” says Davies. Plus, the laundry service is showing increased revenues; students can use the card in the library for copies or other fees; the CVS in town now accepts the SBC card; and parents like the declining balance accounts, which also serve as a convenient budgeting tool for families. The next steps for Sweet Briar will be to add vending, says Davies, and to evaluate when to add card access to key buildings and rooms.

Did the introduction of the campus card enhance Sweet Briar’s revenues? “It’s not all about revenue enhancement,” insists Davies. “It’s about the quality service that students expect today, to have things at their fingertips 24 hours a day. It’s about adding a level of sophistication. And it’s a cost management tool.”

Being able to outsource the card system was crucial to Sweet Briar, Davies admits. “I couldn’t imagine doing this if I had to buy my own hardware and hire an IT person. We would still be using a paper system.”

Cost Savings on a Large Campus

Louisiana State University is a big place, so Director of Contracted Auxiliary Services Mark Kraner wants to make sure that the university’s Tiger Card reaches into every nook and cranny of the 31,000-student campus—and synergy is the key to making the card program successful.

“It is a philosophy of mine,” Kraner says, “that everywhere a student gets services, the card is there. Even if it’s only a service, and you’re not gaining revenue, you want your card to be the one they use.”

Small wonder that LSU recently made a large investment toward pulling all its card operations together to create the kind of penetration and synergy that Kraner envisions. Starting in spring 2002, LSU converted its several card programs to Blackboard’s Transaction System (www.blackboard.com), bringing dining, door access, the library, the recreation center, the athletics program, and other card-based services and programs under one roof. LSU procured the help of Blackboard professional services to convert from the old systems, upgrade the equipment, and re-card 50,000 people within a 90-day window. The initial investment: $1.3 million to buy equipment, run wiring to new locations, and hire staff to set up and run the program. Some of the investment was shared by the university’s partners (laundry services and vending companies, for instance), who paid for the readers for their own equipment. Kraner points to a range of savings, revenue sources, and less tangible benefits that justify the expense. For starters, he says, just rolling all the card programs into one resulted in a major cost savings to the university. But from a revenue-building standpoint, Kraner’s experience at past institutions had already convinced him that students spend 7 to 10 percent more with a card. Not surprising then that at LSU, since a 5 percent discount incentive for using the card at the bookstore (for textbook purchases made only with the card) was instituted, bookstore sales have steadily increased without cannibalizing cash sales.

There are some less obvious benefits to the university of taking payments on a campus card. The average deposits have steadily increased and the “float” from those funds adds to the bottom line. Then, too, just eliminating the handling of cash saves money. “That’s one of the hidden benefits,” says Kraner. “The university would like to see fewer places handle cash. There are too many opportunities for mistakes or loss. You have to pay people to count the cash and pick it up, and it takes a few seconds longer to carry out a cash transaction, so you have longer lines. If we get to cashless operations, we have reduced costs.”

As for off-campus merchants, they are a significant source of LSU’s card revenue, but off-campus volume still runs third behind the bookstore and dining. Kraner believes there is a potential to reach $1 million in off-campus sales, but warns, “Off-campus is a revenue source, not an end-all.”

The good news is that LSU’s card program is flourishing. The program accepted $2 million in deposits three years ago, and this year is expected to reach $5 million. But for Kraner, it’s most important to keep expanding the card’s reach. He is hoping to extend cooperation with nearby institutions, so that deposits made on one campus can be used on another. And he sees potential for using the card as part of the Blackboard Learning System, eventually making it easier for students to take courses at cooperating institutions.

In the end, though, the real measure of success is not the revenue alone, but whether the card makes students’ lives easier. Kraner’s goal is ambitious: “TigerCASH is a brand. I deal in brand recognition. I want people to come to see our symbol—the triangle with a tiger eye—and trust our program, so that we can be everything and do everything for them.”

Paying for Expensive Benefits

Trinity University (TX) is heavily committed to using its own Tiger Card for electronic door access, which can be the most expensive feature of a campus card program. For a relatively small student body of 2,500 students, Trinity has installed a relatively pricey access network. Trinity uses CBORD’s Odyssey PCS system to run its card program, and uses electronic locks from Best Access Systems (www.bestaccess.com). All residence hall exterior doors boast electronic access, as do 95 percent of the academic buildings. One residence hall even has 160 room doors equipped with card-based locks.

Other facilities also have been equipped to go the extra mile for student convenience. There are 29 laundry rooms distributed around the campus (so that students never have to walk far), all accepting card payments.

Even so, “This is a very expensive technology to deploy,” admits Jerry Ferguson, director of Trinity’s Tiger Card program. “Our job has been to generate revenue streams to pay for it.” So, Trinity has solidified its card revenue through imagination and innovation, and by paying careful attention to the needs of its students. For instance, after some students were cited by the Recording Industry Association of America for downloading music, and ended up in court, Trinity provided a safe alternative to illegal downloads, based on Tiger Card discretionary spending accounts. The university has partnered with Internet music vendor Cdigix (www.cdigix.com) to enable students to download from a collection of two million tracks, and charge the downloads to their campus card accounts.

Students pay $3.49 per month to download music, and $.89 to burn a track. “We sell [the new program] to the parents as insurance [against legal action],” says Ferguson.

Trinity also makes it easy to put money into a student’s account. A relative or friend can create a gift by going to the Maintenance page of the Tiger Card Web site and entering the student’s ID number and the gift-giver’s credit card information. There are also unattended value transfer stations around campus that let students or family add money to a student’s discretionary spending account.

There are too many opportunities for mistakes or loss in cash-handling, so cashless (campus card) operations mean reduced costs for Louisiana State University.

Trinity supports the card program with revenue from a $50-per-semester student card fee, a 3 percent charge to university departments that make use of the card, and fees from the Barnes and Noble bookstore (www.bkstore.com) and other vendors. The university worked out a favorable deal with FedEx Kinkos, to operate its copy center. The shop d'es not have to accept cash, only Tiger Card payments and in-house departmental charges. That reduces FedEx Kinkos’ operating costs, so the company is able to give better terms to the university.

Over the four years since the Tiger Card program launched, card deposits have grown from $250,000 to $2 million. Trinity has developed its card program carefully, with plenty of open access to the process, including student representation in decision-making. This is because, for Trinity, the card is more about service than revenues.

“Except for the very largest operations, you won’t find any school that says it wants to make a profit off a campus card, because I don’t think you can,” insists Ferguson. “We want to offer cutting edge technology, particularly for door access and other kinds of services that students expect these days. If we also can use the card to offset the expenses, so much the better.”

In the end, whether an institution outsources or self-operates its card program, expands it aggressively, or keeps it simple, the key to managing a campus card program is to keep the larger picture in mind. With or without the built-in revenue to offset the expense of the program, ultimately, a card program will succeed if it makes campus life better for students.

Inside the Card Programs

How do the campus card vendors see their plans? This sampler of snapshots is a good place to start your program search.

CardSmith (www.card-smith.com)
Founded in 2003 to provide hosted card solutions. Managed by people who worked at AT&T from 1995 to 2000, when AT&T was a system provider of card systems to higher education. Currently has six higher ed clients and two are private high school clients. Target market consists of small to mid-size schools for which the cost and challenge to own and operate a card system is not practical, schools of any size with a limited card program, and schools with multiple campuses.

Revenue model. “With everything included, the cost of having CardSmith host and turnkey-manage a card program is typically between $30,000 and $50,000 annually,” according to Brian Farley, VP for Business

Development. “As far as off-campus revenue g'es, if you can reach $500,000 to $1 million a year in discretionary sales, then you will have a successful program. At that level, an institution can expect to earn $20,000 to $30,000 per year toward the cost of the card program, just from off-campus merchant revenue. Other revenue opportunities include increased sales at the bookstore; campus dining, vending, and other auxiliary services; cost recovery from print and copy operations; float on prepaid funds on deposit; administrative and lost card fees; etc.” Farley adds: “A card program generally is not a huge money-maker on its own, but a CardSmith program can create positive cash flow for an institution and deliver a high-value service for students and parents.”

Advice. “Some schools worry that spreading the card off campus will be a threat to their dining operations and providers,” says Farley. We’ve proven that you can benefit your on-campus dining operations with a well-run card program. Done right, the card program lifts all boats, on-campus and off.”

CBORD (www.cbord.com)
In the card business for 30 years. Acquired Diebold Card Systems in 2005. Currently, over six million students use CBORD cards. Maintains two product lines, Odyssey PCS and CS Gold.

Revenue Model. From Bruce Lane, executive VP: “How much d'es a card system cost? There is no pat answer. How much of the elephant do you want to cover? For off-campus transactions, schools charge merchants 10 percent or more. They are used to paying maybe 1 to 2 percent to Visa. So over time, that rate will have to come down.”

Reasons to have a card program. “A well-evolved, well-developed campus card system is increasingly an expected part of student life,” says Lane. “Kids are savvy. They hear the talk among older siblings and friends. The card program is one of the things they expect to hear about on the campus tour. It is one of the things that can keep a school in the game or distinguish it. Schools where it is largely about selling stuff think first about making money. But other schools are more interested in offering a large range of services and privileges managed by a card swipe. Those are the campuses where service comes first.”

Advice. “The three legs of a card program are students, parents, and administrators. If it d'esn’t benefit all three, it won’t last.”

Blackboard (www.blackboard.com)
Founded in 1997. Entered the campus card market in 2001 by acquiring CampusWide Access Solutions (formerly an AT&T business) and Special Teams, a division of College Enterprises Inc. In 2003, Blackboard purchased SA Cash, which became BbOne, Blackboard’s off-campus solution. Blackboard offers the Blackboard Transaction System for dining, commerce, and access. Provides support for off-campus transactions through the BbOne service, and supports online transactions via the Blackboard Community system.

Revenue Model. “On a campus with 20,000 people, off-campus enterprises might add $40,000 in revenues to the bottom line,” says Tom Bell, VP, Commerce Industry Relations. “You can also earn interest on the float. If you have initial deposits of $4 million and keep them for a few months, you can earn $30,000 to $50,000 in interest.”

Management Tool. “From the CFO standpoint, the typical academic calendar only gives you about three full months a year to generate revenue,” says Bell. “Getting good reporting and being able to make quick decisions is extremely important.”

Advice. “At first, card programs were an afterthought—you might find a server located next to the deep fryer. But card systems have evolved from a dining services utility into a campuswide solution. A place like Penn State sees 20 million transactions per year. If that d'esn’t qualify as an enterprise-level issue that deserves the attention of the CFO and the CEO, then I don’t know what would.”

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