The Shell Technology for Development Award
The Winner: Smart Application Systems
Swaziland in 1995 leapfrogged Britain and the rest of the world with a simple and robust electronic credit and payments system which doesn't require telephone links or mains electricity. It offers a way to introduce modern payments systems in countries which are not wired up.
Farmers and owners of small businesses with loans and lines of credit from an institution called the Growth Trust Corporation (GTC) carried smartcards. These had all the holders' account details on a microchip which recorded every transaction they made.
Except for prepayment for electricity and phone calls, smartcards are little used in Britain. In other countries, people load their electronic purses at automated teller machines and spend their e-money at shops and cinemas and on bus and train fares. The Swazi system was more sophisticated.
Don Henry, an American, ran the USAID project which established GTC, and he thought of the smartcard system. Miles Emerson, a British analyst, was employed to refine the prototype. With Patrick Gobin, a Belgian computer specialist who played a key part in engineering the Swazi system, they have started a new business, smart application systems (sas) Ltd, to perfect and commercialise their off-line technology. They are designing new systems to meet international standards and requirements that have been developed since the Swazi smartcards were introduced.
Unlike the card systems in Europe and North America, sas's technologies do not depend on reliable telephone networks, automated teller machines, on-line computers or power supplies. All that is required is a terminal to read the smartcards. The terminal can be battery powered.
GTC didn't want to bear the cost or risk of fraud associated with transacting in cash or cheques. Instead, banks and merchants had GTC's smartcard terminals to identify customers and read and adjust their card balances when cardholders wanted to draw money, make repayments or pay for goods.
Smartcards cost rather more than ordinary plastic cards, typically £2 to £4 each, because real smartcards have a microprocessor and memory right there on the card. But savings in transaction costs soon outweigh the total cost of the hardware, design, training and maintenance. At the banks, GTC had a single account covering all the cards. The banks didn't have the expense of operating hundreds of small accounts separately.
GTC's smartcards could also hold as many as four separate accounts on the same card, so smartcard users don't need wallets full of plastic. Smartcards are more secure against fraud than the more familiar magnetic stripe cards and some of GTC's women customers found their electronic purses very useful in safeguarding their money from their menfolk.
GTC was also one of the first financial institutions in Southern Africa to successfully prosecute a major in-house fraud. The culprit successfully erased the evidence in the accounting system but the bogus transactions were still safely recorded in the smartcards.
The Swazi system demonstrated how commercial banks can serve small-scale entrepreneurs and farmers whom conventional banking often declares expensive and unprofitable. The off-line smartcard terminals are robust. They can be sited in post offices, banks, shops and other agencies, and they are easily carried from place to place and village to village.
The technology can also bring people discounts usually enjoyed only by big customers who place large orders with guaranteed payment. The Swazi scheme included a road club, backed by German aid, for small bus and truck operators who obtained discounts on fuel, oils, tyres and spares. GTC paid the merchants in a single monthly payment. Thus, from the merchants' perspective, the road club was a single large customer.
The club system recorded not only the financial value in the transaction but also the goods involved. In that way, the types of goods and services could also be monitored and controlled. Aid, relief and other agencies could use the same features to control and account for what they distribute, where it is distributed, when and to whom.
Smart Application Systems, Wadbury View, Great Elm, Frome BA1 3NZ
Tel: 01373 813287