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Cashless world on hold

ERG has been in the wars of late, including more court cases, big write-downs and concerns from its auditor. Hugh Halloran examines a largely forgotten project the company launched three years ago with much fanfare.

IN July 1998, 450,000 members of WA’s biggest health fund, HBF, received their new “smart” membership cards and with them a promise the cards were the way of the future.

The smartcards were developed by ERG Ltd, which was about to begin its impressive run on the stock market, and the launch itself was conducted by (then) Premier Richard Court.

As well as proving membership of HBF, the cards offered the benefit of being an “electronic purse”. They were an alternative to cash that could be reloaded at all manner of retail outlets; they would make trading safer for businesses and nobody’s pockets need become filled with bothersome pieces of small change.

At the time of the cards’ launch, they were said to be able to be used at more than 1,200 retail stores. Participating shops displayed a mainly yellow “ECARD” sticker in their windows, and ERG saw there were plenty of other possibilities for their use. Public transport fares, public phone calls and parking meter fares were all touted as areas in which the cards could take over from cash, and ERG predicted more than 700,000 cards would be in use in WA as people’s awareness of their uses grew.

Nearly four years later, the results are distinctly different from the intentions.

The yellow stickers have all but disappeared from shop windows and while the cards themselves can technically still be used – the data-storing technology still works – there are few current practical applications.

As one technology executive described the situation, the cards are a valid idea that might prove highly lucrative in the future, but between their launch and the present day, there has been insufficient interest in using the cards to their capability

“As with most technology, the problem is not so much with the technology but the selling and marketing of it,” the executive said.

WA Retailers’ Association chief executive Martin Dempsey backed this line of thought, saying the idea just never caught on with retailers.

“The idea has still got some legs, but it has to work on the ground, not just in boardrooms,” Mr Dempsey said.

“It needs a lot more of a level-headed commercial look, not just ‘If we dream it we can achieve it’. That’s fine for sports people, but in the commercial world it very quickly comes down to profitability.”

Mr Dempsey also suggested an important issue was the attractiveness of the purchase or lease arrangements for the use of the special terminals required to use ECARD, though he qualified this by confirming he did not know what these were.

Chief executive of the Retail Traders’ Association of WA, Brian Reynolds, said he had heard virtually nothing about the venture since its launch, and there had been no discussion about it within the RTA. He understood, however, that some retailers were still participating in the scheme.

“I think there are two issues involved here. Not only is it a question of whether or not retailers have been prepared to take the new technology up, but there’s an equally important question of whether the market – consumers – picked it up,” Mr Reynolds said.

WA’s premier bank, BankWest, worked with both HBF and ERG to co-develop the hundreds of special smartcard-reading terminals, though a BankWest spokesman said that, other than maintenance work, that was the extent of the bank’s involvement in the scheme.

“From our point of view our involvement was purely involved in the terminals … what happened after that is an HBF issue.”

HBF itself appears to be unperturbed by the general lack of interest in the smart functions of its membership card. Although insiders regard the project as a failure, a company spokesman explained that ERG supplied the cards at no cost to HBF, and although the electronic purse capabilities did not currently function, this part of the bargain was not HBF’s concern.

Unofficially, however, industry sources suggested ECARD’s development and market launch was driven more by ERG’s desire to prove its abilities than to supply a latent consumer demand for a new product.

A spokesman for ERG said the company was no longer responsible for the project and referred Business News to ECARD – originally an ERG company that was spun off in mid-2000, with Telstra and the ANZ Bank each buying into it. That company did not return calls. In mid-2001 ECARD was reported to be performing so poorly that it might not last the year, but the company has so far survived.

But although the value of ECARD seems to be diminished, HBF clearly believes all is not necessarily bad with respect to practical uses for the smartcards. The health fund is nearly halfway through a trial program in Bunbury that uses the cards to store so-called biometric data. Members’ fingerprints are scanned, the scan is converted to a Personal Identification Number, and that PIN is stored on the card.

When the member receives treatment from a provider (currently only some ancillary benefits are covered – physiotherapy, chiropractic, podiatry and pharmacy) their HBF card is placed in an Eftpos terminal and the provider enters details of the treatment.

The member’s fingertip is scanned and the PIN is re-created and compared to the PIN stored on the member’s card. If the numbers match the claim is processed, with HBF paying the benefit directly into the provider’s bank account. The member pays any out of pocket amount balance and the claim is settled.

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