Card, mobile credential, payment and security
At the recent National Association of Campus Card Users conference in Orlando, I spoke with several bankers and a number of campus administrators about credit cards. Though far from a scientific study, the conversations suggest to me that the issue of campus cards and credit may be heating up again. In the late 90’s, during the heyday of the affinity credit card expansion, issuers were racing to ink deals with like-minded groups providing cards to group-members that suggested and ‘supported’ the group’s mission. From sports teams to hobbyists, everything was fair game. And college alumni organizations were among the most sought-after categories.
As the signing bonuses and incentive pay provided to major alumni associations grew well into the tens of millions of dollars, the idea of capturing the students before they became alumni (and before the issuer was required to fork over the major dollars) was borne. For years, credit card solicitation tables at events and in student unions were prevalent. But this was a slow churn process and the playing field was level for all issuers. How could one gain massive advantage?
Enter the campus card program … well-established on campus, respected by students and parents, versed in offering/marketing card-based services to campus populations. The fit seemed natural. In addition, card offices were more entrepreneurial than typical campus departments and, almost without exception, they were searching for funds.
Obstacles abound …
When the credit card issuers came calling, however, they quickly found roadblocks that were not encountered in traditional affinity card relationships. A string of emotional, technical, and financial obstacles emerged.
First, a very strong sentiment against ‘institutionally-endorsed’ credit existed among many in the various campus populations. Outspoken students, outraged parents, and gun-shy administrators let it be known that this would not be a hassle-free initiative.
From a technical standpoint, it became clear early on that the issuance of the cards would pose a problem. Most campus card programs required instant issuance so that the student could use the card for essential services (e.g. dorm access, dining, library services) immediately. The major credit brands required that their cards be issued in secure facilities using strictly controlled processes to reduce fraud and counterfeiting. Because students could not wait a week–or even a day—for their ID card, the idea that the actual student ID would double as the credit card took another blow.
Issuers also ran up against financial hurdles. Many administrators stressed that if a credit product was to be issued as a part of the card program, it would have to be available to all students. Credit card issuers, however, use guidelines to restrict the provision of credit to those deemed good candidates for repayment. Students with negative credit ratings did not fit the model, and in many cases, students with no credit rating (arguably the majority of incoming students) would be declined as well.
So what has changed?
The obstacles described above effectively killed the issuance of credit via the campus card in all but a few limited trial programs. Does the current re-emergence of the discussion suggest that times have changed or is it simply talk?
To a certain degree, each of the obstacles still remains though their severities have diminished. Credit is still a ‘dirty word’ to some on campus, though the culture—both on campus and in the country as a whole—seems more tolerant. The staggering statistics regarding student credit card usage show that credit is a fact of life for college students. Perhaps institution-endorsed credit, coupled with mandatory responsible credit education, would be preferable to the current chaotic environment.
The technical issue of instant issuance has been overcome to a large extent as demonstrated by the host of campuses that have successfully deployed Visa and MasterCard branded debit products. Innovative issuers have created mobile secure issuing facilities while others have built processes that issue temporary cards to enable campus functionality while the branded card is processed and mailed. These same solutions could readily apply to credit issuances as well.
Finally, several of the issuers I have spoken with suggest that they understand that 100% acceptance may be required. It has been suggested that a limited-line (e.g. $200) could likely be offered to all individuals with higher lines for those that qualify.
The future campus cards and credit
While it does seem that some of the issues that derailed it in the past may have eased, this is still a thorny issue. What will happen in the coming years? Only time will tell. Certainly a major driver for the inclusion of a credit product from the campus perspective is the potential funding source from up-front and/or ongoing revenue sharing. Card programs continue to seek new sources as pressure to be self-supporting continues to mount. Stay tuned.
Article written by CR80News Editor Chris Corum
