Banks supporting campus card programs linked to prepaid accounts believe their ties with college-age consumers are meeting the goal of building future loyal customers by giving them basic payment tools and a financial education they can carry on as their start their careers after graduating.
Now American Express Co. is getting in on the action, too.
Amex last month launched the Osprey 1Card at the University of North Florida (
“We are taking this segment very seriously, and we think we can get to a great scale because our product is significantly different from other campus card programs,” Stephan Happ, Amex senior vice president and general manager of the Americas, tells PaymentsSource.
Doylestown, Pa.-based campus card program provider CardSmith LLC powers the Osprey 1Card’s platform through a partnership inked with Amex earlier this year (
Amex agrees campus card initiatives can attract lifelong cardholders, and to gain attention it is touting its low-fee prepaid card model. Indeed, the move to add campus cards is part of Amex’s overall strategy to get its prepaid cards into the general market and to promote the benefits of having an Amex card (
“This is another extension for our prepaid card franchise, and the student segment seems like a natural fit for providing that product,” says Happ.
Amex expects its prepaid campus card program to grow among colleges and universities because of its fee structure, Happ says. The card imposes no maintenance fee, and cardholders pay $2 per ATM withdrawal after an initial free one each month.
The card also boasts the same benefits available to Amex credit and charge cardholders, including acceptance at any location that takes Amex, price protection and emergency roadside assistance, says Happ.
Ben Jackson, senior analyst at Mercator Advisory Group, says Amex is making a clear play for future cardholders. Issuers are seeking to attract younger customers that can build low-risk credit histories instead of waiting to vie for the middle-aged adult once they get careers under way. But the campus card market is a hotbed of activity for other issuers trying to achieve that goal, too, he says.
“There’s been a lot of interest in the campus card space because it’s a nearly captive audience that is easily marketed to” and is open to new technology, says Jackson. “That starts to bring brand loyalty over time,” he says.
Amex and others are targeting young consumers who are a good risk because most parents would provide constant funds for the cards, and the students would provide high transaction volumes, Jackson notes.
One program drawback is that all stores that accept Amex will take the card, thus throwing out all spending controls that a closed-loop system would offer, Jackson says. Most campus card programs support only merchants on or near campus, he says.
“One of the reasons why campuses like [the closed-loop system] is because then you know the kids are not taking it to the bar and buying beer,” Jackson says. “So when parents load their money onto those campus cards, they know it’s going toward something to help the kids study.”
However, many providers today are supporting open-loop programs, including Fifth Third Bancorp, U.S. Bancorp and Heartland Payment Systems.
Fifth Third beat Amex to the campus card market by a few months, introducing in September its first card program at Cedarville University in Ohio (
Cincinnati-based Fifth Third is providing the Ohio university with a combination campus identification and debit card for students, faculty and staff.
“We’ve looked at opportunities before and decided it was the right time because we have a longstanding relationship with Cedarville,” Sue Grathwohl, vice president in Fifth Third’s Bankcard group, tells PaymentsSource. The bank had a business banking relationship with the school and a branch in a nearby town where a lot of students and faculty had accounts, she notes.
“We believe there is a big opportunity here to introduce Fifth Third to a new pool of customers,” says Grathwohl. “We’re looking to expand but will do so rationally at other schools where the relationship makes sense and where we can leverage to relationship with the school and the community.”
Fifth Third also provides treasury and loan-management services to schools and the ATMs its operates on campuses. “Most of the time, these campus card ideas are coming out of the treasury office of a university,” says Jon Groch, Fifth Third senior vice president and director of bankcard services.
The “cedarville1card” enables students to access university facilities such as dorms and the library, withdraw cash from the two ATMs on campus and conduct PIN-based transactions at merchants on campus.
The combination card is optional, and those wishing to use one must have a Fifth Third checking account. The bank has Jeanie, Pulse and Cirrus EFT marks on its campus cards.
The university also can use the program to streamline its payment operations and disburse funds, including financial aid, directly to a student’s checking account, Mark Biddinger, director of accounting for the university, said in a press release.
Fifth Third views the program not only as a campus access and payment card but also as a way to help schools to distribute financial aid and cafeteria food-plan options, Groch says. “What we really want to do is provide a campus card, but a solution to our higher education customers,” he says.
Fifth Third is ready for the growing competition in the campus card market and believes it has an edge over players such as Amex because “we can provide a full-service banking relationship and more than just a card,” says Grathwohl.
Fifth Third’s ability to build new banking relationships with Cedarville University could become a “feeding ground” of sorts for the bank, Madeline Aufseeser, an Aite Group senior analyst, tells PaymentsSource.
Once students mature, Fifth Third can offer a credit card and might be able to migrate them into traditional demand deposit accounts” and other services such as loans and retirement savings, Aufseeser says.
Hardly a newcomer, U.S. Bancorp has been in the campus card business for 15 years. But it sees the campus market in a different way than do other players.
“Initially, our entrance into the campus card market was born out of a desire for campuses to add additional services to an ID card, and we saw it as a way to acquire new, long-term customers,” says Whitney Bright, general manager of U.S. Bank Campus Banking. “So we were looking to develop relationships with students at the beginning of their financial lifecycle.”
The bank adds about eight to 10 new campus card programs per year, she says. U.S. Bank has campus cards branded with Visa and MasterCard and has some PIN-only programs branded with Interlink, a spokesperson tells PaymentsSource.
Though U.S. Bank’s goal is to get student cardholders to maintain their accounts with the bank, it also sees the campus card market as a testing ground for new technologies because younger consumers are often early adopters of technology.
“If we wanted to roll something out, the campus is a good captive audience to test it,” says Bright, declining to name tests it has conducted this far on campuses.
Another veteran of the campus card market is payments processor Heartland Payment Systems Inc., which has secured programs on 155 campuses since it in 2007 purchased campus card company General Meters Corp., whose OneCard system had been on college campuses since 1979.
Heartland supports both open-loop and closed loop systems. Discover issues the open-loop cards and the cards carry the Discover and Give Something Back Network brands on the cards. Give Something Back is a growing nationwide network of merchants that accepts Heartland's OneCard for off-campus purchases, a spokesperson tells PaymentsSource.
Though it is not a bank that can offer additional payment services, Heartland says its advantage is in its sales network.
“As a payment processor we have the knowledge of how to process transactions, and we have the network to process them and a large team of salespeople who manage relationships and can go out and work with retail merchants to get them to accept the campus card,” says Fred Emery, vice president and general manager of Heartland Campus Solutions. “We can help our campuses and surrounding merchants feel confident in our processing system.”
Heartland also incorporates mobile applications, such as security text messaging linked to the holders of the campus card for security or other messages, such as notifying students when laundry machines are free on campus, says Emery. Another mobile app supports account management, enabling students to check card balances, make deposits to their account, and report lost or stolen cards.
“It’s mobile efforts are “working along the lines of Near Field Communication, and it’s a way that campuses are looking forward to going,” says Emery, who notes that about 10 campuses are testing the mobile functions.
Heartland views Amex’s entrance as a good thing that helps legitimizes the campus card market. And its entrance adds variety to the market players, Emery says.
“The idea of having financial-processing companies and card brands involved provides a greater strength to campus cards as a whole and elevates their usage to make it more of an everyday thing,” says Emery. Adding card brands opens that market up to global usage, so it becomes a primary financial tool for the students and having the various players involved strengthens that concept even more.”
How the market grows with such large players as credit card companies, banks and processors remains to be seen, but the campus card market will demand as much, if not more, services than the general banking market, including such developments as text-message access and mobile apps.
“The campus card market is a great niche in the overall scheme of things, but in the worldwide banking situation we’re going to follow that lead,” says Lowell Adkins, executive director of the National Association of Campus Card Users (NACCU). “So when banks decide what the predominant way to conduct transactions is, the rest of us will move there as well.”
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