Recognizing this and the impact of these financial accounts, banks and credit card companies have positioned themselves to be an integral part of the college experience. Some have chosen to get involved on the front lines while others have opted to wait for the business to come to them. And a few innovators have gone one step further, actually be-coming an official part of campus life through a contracted relationship with the campus ID program.

Types of Financial Accounts

Almost every campus card has some type of financial account tied to it. Many have two, three, or even more accounts of different varieties serving distinct functions. Letís review the more common variations of these different financial accounts.

Declining balance accounts

The number one function, besides identification, of campus cards is meal plan access. An estimated 85% of card programs link to a meal plan. Although some meal plans are still points-based or usage-based, many offer declining balance accounts in place of, or as a supplement to, the earlier meal plan options. With declining balance accounts, students deposit funds that they can spend at food service locations on campus and, in some cases, at other points of sale including bookstores, campus convenience stores, vending machines, etc. In a declining balance system, funds are deposited into the account (typically via check or transfer to the meal plan provider or institution) and are ìspent downî over time. Online system providers like Diebold, General Meters, Blackboard, and CBORD utilize declining balance systems as the basis for their ëflexible spendingí programs.

Stored Value

Another financial function frequently provided with university ID cards is the stored value account. Though arguments as to what defines stored value, or any of these accounts for that matter, are frequent, a common definition is pre-payment of monies to a card/device that enables future purchases to be made on demand. The key here is that most providers of stored value systems avoid using the term ëaccountí when describing stored value. That is because an account implies that the owner of the money is simply entrusting it to the holder. In stored value systems, most consider the value pre-spent when added to the cardñso ownership of the deposited funds transfers to the holder on deposit.

These stored value accounts function much like gift cards or other pre-paid cards. They allow the cardholder to spend only the amount on the card or in an account as cashless payments for goods and services. These accounts fall under different regulations than your normal bank account. Typically schools hold all cardholdersí stored value funds in a single bank account. The average purchase made from these accounts is typically under $10 in value. On campus, more frequently, the amounts are far lower as vending, photocopy, and laundry payments are the most common uses of stored value. A dormancy fee is often charged against remaining funds after a certain period of time. As a general policy, these stored value funds are not typically converted back into cash.

Banking partnerships

The third financial tie commonly linked to campus card programs is created when the institution partners directly with a financial institution. Between 10% and 15% of campus one-card programs are believed to have an official relationship with a bank for the provision of financial services associated with the student ID card. In the diagram, we have listed more than 60 colleges and universities who have partnerships with national, regional, and community banks as well as credit unions. A dormancy fee is often charged against remaining funds after a certain period of time. As a general policy, these stored value funds are not typically converted back into cash.

Students benefit from the cardís use in ATMs in local, regional, and global networks. Debit card functions are also enabled at accepting merchant locations. Many campuses are working with their second and third generation of banking partnerships. In the typical bank partnership, students can opt to sign up for a demand deposit account (dda) with the bank partner. This is a standard bank account like any other, but with certain elements geared toward the studentís needs and/or toward limiting the bankís costs associated with maintaining the accounts. The campus ID card becomes the ATM/debit card associated with the account. In essence, two cardsñthe campus ID and the bank cardñsimply share a single piece of plastic. The 16-digit ID number, called an ISO number, is used to reference the bank account and on-campus functions. Depending on the bankís internal systems, the existing ISO number (if the campus has and uses one) can be maintained while in other cases the bank may require a new ISO number be used so that the cards can be utilized in the ATM/debit networks.

New banking models

The newest bank partnership model makes the student ID card a major label debit card (e.g. MasterCard, Visa) with photo ID. This maximizes the global acceptance of the card, ensuring its use in any ATM or POS device that accepts the worldwide payment platform. While this has been done in the past on a trial basis, Connecticut-based Higher One and Wachovia Bank are the first to make this option a core component of their campus offerings.

What do these models have in common?

In general, all of these financial modelsñdeclining balances, stored value, and bank partnershipsñall seek to accomplish a single goal. They all are created to enable a student to pay for services using the campus ID card. And in essence, all of these accounts require funds to be in place and available before a purchase is allowed. So how does a campus decide? And further, why have many campuses opted to have two or even all three of these account types on the same card? Letís examine the argument that can be made for the use of each type of account.

Declining balance

ï ìI can restrict the studentís spending to my on-campus locations thus maximizing my share of the profits.î

ï ìI can keep the card from being used in undesirable locations such as those serving alcohol or with adult entertainment.î

Stored value

ï ìIt enables transactions to be conducted without the need to check an external database to see if funds are available (e.g. in offline mode)î

ï ìIt is ideally suited for small value transactions such as vending, photocopy, and laundry payments.î

Bank partnerships

ï ìI can maximize the locations that the card is used for payment.î

ï ìI get out of the business of ëacting like a bankí in case regulators decide to pursue potential violations.î

ï ìI can create a new revenue stream for the card program via revenue sharing from the bank partner.î

This is a complex decision process and there is no single correct model or combination of models. Each campus has its own set of needs regarding payments and desires regarding the extent to which they want to get involved in the discretionary spending of their students.

But regardless of the model selected, there are several principles that hold true:

1) The more seamless the financial account is with the ID card; the more successful both the offerings tend to be.

2) The more locations at which the card can be used, the more likely the cardholder is to use the financial account.

3) The more education and marketing provided about the cardís functionality, the more likely the service is to be utilized.

Why do they do it?

For the partnering financial institution, the relationship provides preferential access to the students and the opportunity to cultivate a long-term relationship with the cardholder. For the institution, the relationship provides a stable account to deposit student refunds and financial aid payments and to withdrawówhen authorized by the studentótuition and other fees. Companion or affinity credit cards are even being offered on campuses to help students establish a credit history responsibly by offering a lower credit limit and reasonable interest rate. And, such partnerships often create a revenue stream for the campus.

The bottom line is that a partnership with a financial provider expands the functionality of the card and often provides essential conveniences to the cardholder. For many campuses banking partnerships have become a key component of the card programs. Interest is at an all time high. In a recent survey we conducted, more than 50% of the campuses responding reported interest in a banking partnership. It seems the marriage between the campus card and financial institutions is here to stay.