ATM&Debit News
As students head back to school, more colleges and universities are introducing school identification cards that are linked to both open- and closed-loop debit networks.
Slippery Rock University and Truman State University have both installed such combination systems this summer for students, faculty, and staff.
Last year, open-loop cards associated with colleges and universities accounted for $400 million of transactions, and closed-loop cards accounted for $13.6 billion, according to Tim Sloane, the director of debit advisory service at Mercator Advisory Group in Waltham, Mass.
Transaction volumes for both card types have been rising at colleges and universities in recent years as more schools adopt the cards, he said.
About 80% of colleges and universities use some form of closed-loop card, he estimated; only a few have open-loop cards.
Slippery Rock University in Slippery Rock, Pa., worked with Heartland Payment Systems Inc., a Princeton, N.J., payment processor, and Central National Bank and Trust in Enid, Okla., to issue its roughly 9,500 students, faculty, and staff the contactless identification cards linked to a PIN-based, FDIC-insured prepaid account called Rock Dollars.
The system combines cards with adhesive electronic tags that can be placed on cell phones or other items, said Rita Abent, a university spokeswoman. With the electronic tags, cell phones can be used as payment devices.
The Rock Dollars accounts can be loaded through direct deposit of checks, at an on-campus automated teller machine, or by transferring funds online, Ms. Abent said, and users can view their balances online.
Truman State University in Kirksville, Mo., began issuing the identification cards to its 6,500 students, faculty, and staff in July. The cards also function as PIN debit cards if students choose to open an account with U.S. Bancorp and activate the cards' debit capabilities. U.S. Bancorp provides the banking technology, and the university distributes the cards.
At both universities, students who elect not to activate their cards' debit features can still use them for on-campus identification, building access, and checking out library books.
Truman State's open-loop, Visa U.S.A.-branded debit cards also can be used at all ATMs and merchants that accept Interlink, but Slippery Rock's prepaid account debits are only accepted at on-campus merchants, vending machines and ATMs, and at certain off-campus merchants that work with Heartland Payment Systems to accept Rock Dollars.
After issuing a request for proposals for its identification cards and reviewing the responses, Slippery Rock State chose prepaid accounts because it "was an easier first step than partnering with a full-fledged checking account," Ms. Abent said. "It's a big step for universities to do something like this."
Besides Truman State, U.S. Bancorp's flagship U.S. Bank unit issues combination identification and debit cards at 29 other colleges and universities, including Creighton University in Omaha; Northwestern University in Evanston, Ill.; and North Dakota State University in Fargo.
The open-loop cards linked to U.S. Bank checking accounts help establish relationships early in life and can create long-term customers, according to Whitney Bright, U.S. Bank's general manager of campus banking.
Red Gillen, a senior analyst in the banking group at the Boston research and consulting firm Celent LLC, agreed. "From a bank perspective, it's a gateway product," he said. "It gets the student signed up."
The schools also benefit financially. Truman State, for example, receives royalties if a specific number of students open checking accounts with U.S. Bank, according to Judy Mullins, the university's controller. She would not give details of the financial arrangements.
Debit cards, rather than credit cards, are the preferred banking product to link to school ID cards, said U.S. Bank's Ms. Bright. "Everyone needs a checking account," she said. "Not everyone needs a credit card."
Slippery Rock State made a conscious decision to combine prepaid accounts with identification technology.
"Part of our function is to teach people how to live in the real world. In the real world, there is credit, but this is the first step," Ms. Abent said.
"If they spend all the money in their account, they won't have any left," she said, and since many graduates leave school with student loan debts, they do not need the additional burden of credit card debt.
