Tuesday, 9 September 2014
The Digital Shift (Library Journal)
Following four months of discussions with SirsiDynix and a brief pilot test this summer, Maryland’s Frederick County Public Libraries (FCPL) on September 5 officially launched the “I Love My Library” prepaid Visa debit card. Developed by SirsiDynix in partnership with Visa and Card Limited, the new affinity cards double as a patron’s library card and aim to help libraries achieve three goals:
Offer “unbanked” patrons access to a debit card with a transparent fee structure as a component of a library’s financial literacy programming.
Develop deeper ties with local businesses through a Linkable Networks feature that will enable local and national merchants and restaurant owners to partner with libraries and offer discounts to card holders.
Provide a new revenue stream to libraries, which will receive a small donation from Card Limited each time a card is activated—one dollar in FCPL’s case—as well as seven percent of each card’s monthly fee, a portion of transaction fees, and typically one percent to two percent of each affinity card transaction from merchants that partner with the library through the Linkable Networks feature. These fees cannot be waived by the library if a patron opts to register the card. However, if a patron chooses not to register the card, it will still work at the library.
Some librarians may find the concept of offering a prepaid card as a revenue stream unusual or possibly in opposition to the non-profit tradition of public libraries, acknowledged Eric Keith, VP of global marketing, communications, and strategic alliances for SirsiDynix. However, there is a real need for these services among many demographics that are heavy library users. Libraries, unlike convenience stores or other retail outlets that sell prepaid debit cards, have the opportunity to tie these cards into financial literacy programs, Keith noted. And, where many prepaid cards have an average lifespan of six months, according to a 2012 study by the Federal Reserve Bank of Philadelphia, users are much more likely to retain a dual-use card, thus avoiding a new cycle of activation and other fees when obtaining a new prepaid card.
In its most recent National Survey of Unbanked and Underbanked Households, published in September 2012, the Federal Deposit Insurance Corporation (FDIC) found that 8.2 percent of U.S. households—or one in 12—are unbanked, meaning that no one in a given household had access to a traditional checking or savings account. An additional 20.1 percent of U.S. households are “underbanked,” meaning that they have access to a bank account, but have also had to rely on alternative financial services (AFS) such as money orders, check-cashing services, payday loans, rent-to-own services, pawn shops, or refund anticipation loans during the past twelve months.
AFS tend to have significantly higher fees and interest rates than traditional banking products. According to estimates from the Center for Financial Services Innovation, a nonprofit financial services consultancy, the unbanked and underbanked spent $89 billion in fees and interest using AFS in 2012.
“There’s a large cash-only population out there,” FCPL Director Darrell Batson told LJ. FCPL is participating in a local financial literacy council sponsored by the United Way, and has hosted financial literacy programs to help patrons sign up for savings accounts, for example. Batson said that he does view this prepaid card as having the potential to provide a bridge toward improved financial stability for some patrons, if libraries can successfully link it to broader educational efforts.
“If we can get [unbanked patrons] interacting with financial institutions, or establishing credit, or actually securing their finances in a more mainstream way, they’re not so liable to be prey to check cashing schemes and [payday loans],” Batson said. “If they’re out of that, then they really do have the resources to improve their lives.”
There is significant demand for financial services for people who do not want or cannot obtain a standard bank account. In its 2013 study “Prepaid Cards: How They Rate” Consumer Reports estimated that $167 billion would be loaded onto prepaid cards alone in 2014. Yet many of these services charge fees or interest rates that are significantly higher than those charged by banks. Consumer Reports, for example, singled out one prepaid card with an activation fee of $19.95, which also charges users up to $4.95 to load money on to their card, and $2.00 each time they call customer service.
Frederick County Public LibraryThis is an extreme example. In comparison with the cards analyzed by Consumer Reports, the I Love My Library card’s one-time activation fee of $5.95 and ongoing maintenance fees of $5.95 per month are in the middle of the pack. However, Justin Swain, end user services consultant for SirsiDynix, noted that SirsiDynix had specifically worked to avoid hidden fees and to make this card’s fees as transparent as possible.
For example, unlike many other prepaid options, users are not charged fees to load money onto their cards via direct deposit or electronic transfer (although many retailers will assess their own fees if users want to load cash onto a card). Customer service calls, online card account access, electronic bill and check payments, and text and email alert features are all free. There are no overdraft features, so there are no overdraft penalties or fees. If a card goes unused for 45 days, monthly maintenance charges will cease, and will resume only when the card is used again or reloaded with funds, without incurring a separate re-activation fee. And while there is a $2.50 charge for using ATMs and a $1.95 charge for each PIN-based transaction (including cash back at retailers), there are no fees for signature-based transactions.
In addition, financial information is never shared with the library, and the library never shares patron information with Visa. Lost or stolen cards are protected by Visa’s Zero Liability policy.
“We worked for a solid year to put together a program where the fees are at the lower end of the [prepaid card market] scale,” Keith said. “We’ve got low activation fees, low monthly fees, and low transactional fees.”
BETA FEEDBACK LEADS TO CHANGES
SirsiDynix publically announced the new affinity card as the BLUEcloud Library Visa Prepaid Card at the annual COSUGI user group meeting in May, as a component of its Community Funded Services revenue stream platform. In addition to FCPL, Michigan’s Lansing Public Library was part of the earliest discussions with SirsiDynix about the new product, and two other systems in Florida and Mississippi began testing the new cards this summer. The cards will be available to all interested SirsiDynix libraries in Q4.
“When we heard about the concept, we thought it had some possibility…. But we were apprehensive,” said Batson. One issue was the BLUEcloud branding. While familiar to librarians who are current SirsiDynix customers, the BLUEcloud brand wouldn’t have any significance for patrons. And, while FCPL did its own research and found the proposed fee structure of the cards to be competitive and fair, Batson didn’t think that the library affinity program alone could compete against other prepaid cards in a crowded market.
“My point to them was, ‘what’s your hook?’” Batson said. “There are thousands of cards out there…. To their credit, they took a core of an idea, and polished it.”
PARTNERING WITH LOCAL BUSINESS
Frederick’s Central Library is in the center of a vibrant downtown historic district and adjoins this lovely riverwalk
In addition to the new name and new look, Batson was enthusiastic about partnering with local businesses via Linkable Networks, another feature that was added after the initial discussions. A short walk outside of FCPL’s central C. Burr Artz Public Library quickly explains why. The library is located in a large and vibrant downtown historic district with hundreds of locally-owned businesses. On launch day, FCPL also kicked off its annual outdoor concert series, Music on the Terrace, with afro-pop band Elikeh jamming as locals dined at cafes, pubs, and sandwich shops lining the riverwalk behind the library. Restaurant staff handed out event-only coupons alongside an I Love My Library card display.
FCPL is already engaged with Frederick’s business community, and Batson hopes the card will help strengthen those relationships. He has already discussed potential partnerships with the Frederick County Chamber of Commerce, which has expressed enthusiasm about the possibilities as well. Batson and Swain separately noted that reaching a critical mass of such partnerships will help broaden the appeal of the card for patrons who do have bank accounts, but will view the card as a way to support their library and support local businesses.
“It’s not by happenstance that downtown [Frederick] is vibrant. The community as a whole works for that,” he said. “When we talked to SirsiDynix and we talked to the Chamber of Commerce, we said ‘we agree with this [Linkable Networks] product, but the first place we’re going to is our local businesses. We’re not going to Wal-Mart and we’re not going to Target. We’re doing family, we’re doing our companies downtown’… That’s how we’ll be [explaining] it to our patrons.”
The launch of the new prepaid card coincided with the beginning of FCPL’s annual Music on the Terrace outdoor concert series
Card Limited will be working to bring national retailers and chain restaurants on board with I Love My Library card discount partnerships. Based on the library system that their card is affiliated with, patrons will be able to view a list of “linkables” deals available to them on the ilovemylibrarycard.com site, whether that business is a local sandwich shop or a national pharmacy chain.
Asked whether the library’s tapping a new revenue stream dependent on commercial activity might set an unfortunate precedent, perhaps even threatening municipal funding down the road, Batson said, “well, you’d honestly have to show me libraries that have experienced massive increases in their municipal budgets during the last ten years.”
Later, he circled back to the card’s potential to enhance FCPL’s ties to local businesses and the local community.
“A lot of things are mandated by law—fire departments, police,” Batson said. “Libraries aren’t mandated by law. There’s no law we can point to that says ‘you have to fund us, you have to maintain us.’ Libraries are here because communities insist on us and believe in us. If we don’t continue to build that credibility and interaction, we won’t be here.”