Multi-Functional Smart Cards Promote Customer Loyalty

Approximately eight million consumers in the Netherlands have an electronic purse on a smart card called Chipknip that grants buying privileges without the need for cash - and offers prizes as well. Chipknip is a multi-functional smart card - a simple card with the potential to be a bus ticket, an access control, ID device and an electronic purse.

"The Chipknip smart card eliminates the problem of ‘plastic fatigue,' where you have a separate card for every bank, retailer and transportation system," says Walter Smith, senior partner with Crawford, Smith Consultants, who designed the loyalty system for the smart cards. "Plus, Chipknip builds loyalty between buyers and sellers by giving consumers loyalty points that can be redeemed for anything from free products to movie and museum passes."

Bankers Identify The Potential In Smart Cards
The formation of the Chipknip began with eight Dutch banks interested in providing value-added financial services to their corporate and public customers using a smart card. The banks formed a consortium called Easychip and quickly discovered the potential for the smart card in several different areas, especially customer loyalty. One niche that expressed immediate interest was retailers.

"Our initial research showed that average consumers were spending $15 per purchase when they visited a retail establishment. Additional research also found that persons using smart cards averaged the same amount for purchases," explains Smith. "We recognized the synergy between the two and began an effort to demonstrate to retailers and consumers how the smart card could build loyalty, while providing simple, convenient, value-added buying and selling."

Seeking Out A Solution Provider
Easychip immediately began efforts to implement a full-scale program, but needed more than retailers and consumers to make its electronic- purse system work. It needed a technology partner. "We had the vision and the green light from the consortium, but needed the help of a systems integrator who could create a central system," says Smith.

Crawford Smith, Consultants had designed the loyalty system and initiated working with point of sale suppliers in the Netherlands. Smith explains, "We were looking for a company to build the central system, but couldn't find anyone familiar with the fundamental requirements to control multi-retailers and multi-schemes on one card."

He adds, "We faced incredible deadlines to begin implementation. We had to find a provider that would share ownership in this program and who would be a partner in development and installation. The provider would also operate and maintain the technologies, as well as the relevant data. And everything needed to be reliable, secure and easy to use."

ICL Retail Systems Experienced With Loyalty Programs
After a competitive review, Easychip selected ICL Retail Systems, a systems integrator which specializes in open-systems development for retailers. "ICL Retail Systems was the partner of choice because of its breadth of experience with technology and retailers. It had real experience with PrecisionRetailing and consumer loyalty programs. These factors, plus its high scores in areas such as cost, confidence in response and quality of development site confirmed our decision," said Smith.

With Easychip at the helm, ICL Retail Systems outlined its rapid application development strategy using an innovative methodology for building, enhancing and customizing a system. The system created a network among several hundred POS terminals in the Netherlands and a central site in Reading, England.

Smart Card Project Completed Within 72 Days
"The challenge is to always deliver outcomes that outperform what the customer expects," said Keith McNamara, ICL Retail Systems' global brand manager of consumer relationship marketing. Within 72 days, ICL had completed the project, which included integration among the Chipknip card, the Datalnet POS terminal and a central, integrated system using Fujitsu Team servers running on Windows NT. This then connected to a customized database provided by ICL's COREMA™ software system.

During this time, Easychip had secured commitments from 50 retailers to participate in the consumer loyalty program and install point of sale terminals. By February 1998, consumers were using their Chipknip electronic purses for in-store purchases and ICL Retail Systems was processing the data.

Eight Million Chipknip Smart Cards Used Nationwide
Today, there are more than eight million Chipknip cards in the hands of Dutch residents. And within the next six months, 150,000 POS terminals will be able to accept Chipknip electronic purses.

"Thanks to Chipknip technology and the system developed by Easychip and ICL Retail Systems, smaller retailers in the Netherlands have gained a strong following as being innovative and convenient. They also now also have the ability to compete against large retailers on the loyalty front," concludes Smith.

Outlook For Smart Card Adoption Is Strong
Both McNamara and Smith believe smart cards will expand in market share in Europe and the United States over the next five to 10 years. For value-added resellers and systems integrators, the outlook is promising, they claim..

"It's quite possible that smart cards will become the mainstream point of transaction medium for the world," says McNamara. "The technology is still in its infancy, but a project such as Easychip is living proof of smart cards' limitless potential."

Loyalty Programs Help The Drive Toward Smart Cards
Walter Smith adds, "Smart cards offer service providers an open door of opportunity,"says Smith. "The catch is for us all to figure out how consumers will embrace smart cards and how they prefer to use them. Loyalty programs such as Chipknip are the first experiments in multi-functional use of smart cards by consumers."