An analysis of the CommunitySmart fundraising and loyalty program

While on a WE in the Russian River area, 2 hours north of San Francisco, my payment-obsessed eye noticed a “Community Smart Bonus Rewards” sticker on the entrance door of the Food for Humans organic supermarket.

CommunitySmart Bonus Rewards

Back home, I researched this program and found out that Community Smart Bonus Rewards is essentially a merchant-funded local fundraising program for local non-profits and community services like schools. Participating merchants set a rebate, participating customers choose a school or charity in their community that they would like to support, and for each qualifying transaction the cash value of the rebate minus a small administration fee is paid to the chosen school or charity. This reminded me a lot of Community Way, except that in Community Way, rebates are re-circulated as local currency, so they have a multiplier effect.

Merchants decide how to structure their rebates. The most common seems to be an amount or percentage based on a minimum purchase amount with an optional capped amount on each rebate, but many other options are possible:

  • a flat dollar amount,
  • a fixed percentage of the purchase amount,
  • a tiered percentage of the purchase amount,
  • an amount that is available on certain shopping days or promotional periods.
  • a special percentage or amount (to override a normal percentage or amount) on certain shopping days or promotional periods.

Participation in the program only requires merchants to have a POS terminal, and only requires customers to have either a Community Smart-registered credit card, or a CommunitySmart program card (shipping/handling fee $4.95) for customers who wants to pay by cash or check.

When paying by cash or check, customers slide their CommunitySmart program card in the POS reader. Because the card is not a payment card the payment is declined, but the information about the purchase and the amount is recorded. This method of capturing customer transaction data by routine declining of authorization requests is the core patent of Nietech, the company supporting the Community Smart service.

Nietech is a Santa Rosa, CA-based company.  According to this report, their annual revenue is $750K. According to this article, they are a 14-people operation with among other customers, the Interra Project, a social commerce non-profit started by Dee Hock, founder of Visa International, and Greg Steltenpohl, founder of the Odwalla juice company with the goal to harness consumer power – 70 percent of the Gross National Product – for social change…

I haven’t had enough time to find much information about the current status and success of CommunitySmart or Interra. In 2005, Nietech reported having raised $75K for a local school in partnership with a local bank issuing their CommunitySmart card, but I haven’t found any news about a successful national roll-out. Similarly, Google News does not have much news about Interra Project in the last few years. I didn’t have much time to research and may have missed news, so if you have any information about these projects, please comment.

The need for an Open Money Foundation

I’ve discussed this topic with Michael Linton and Marc Armstrong this WE.

Problem: community currencies are a $0 Billion market and promoting their development in a way that ensures and maximizes their potential for communities is expensive. Examples include travel costs or Web hosting costs. Today, although many parties are interested in the development of community currencies, there is no organization that represent their common interests that is able to officially receive donations for interested parties. These common interests today are mostly public awareness and technology interoperability, but will eventually include – should we be successful – right to exist under rules dictated by the government of each nation where these currencies are used.

Solution: we formalize Open Money into an Open Money Foundation, a non-profit dedicated to ensuring and maximizing the potential of community currencies. We use Community Way to raise money: corporate sponsors that may include telcos, computer manufacturers, airlines, etc. These companies donate to the foundation their excess capacity in the forms of consumer coupons/vouchers (ex. voice minutes, bandwidth, computers, offices, miles, etc.) and the foundation uses these donations to finance its mission either by directly using them, or by reselling them for the currency needed.

Using CommunityWay to save a local community service in San Francisco

Like many community services, Access SF, San Francisco public access station might close its doors because of a $500K budget cut.

I think Community Way might be a good model for them to raise these $500K. Here is how it would work:

  1. Access SF issues Access SF dollars.we could also call them vouchers or coupons
  2. Access SF negotiates with local businesses to get Access SF dollars accepted as payment for part of what is owned by customers. For instance: a local restaurant would accept 10% payment of the bill in Access SF dollars. Access SF explains that they will advertise Access SF dollars benefit on their channel and Web site, which will attract new business.
  3. Access SF sells Access SF dollars to SF residents on their Web site and at their office. These US dollars are used to fund the $500K.

Local businesses get advertising. Local residents get to support a community service without losing purchasing power. The community service gets its real dollars.

If Access SF sells $50 worth of Access SF dollars on average to 10,000 local residents, they’d get their $500K.