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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.
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