We know that cards replace cash. And we develop products with payment systems’ electronic infrastructure. There is also another phenomenon which replaces cash and actually older than cash itself: Barter!
In the old days even before cash, people used to exchange what they produced to make a living. And even today in some emerging countries like Turkey farmers use this method to trade with State Agencies or Unions which help them. So we took a look at it and found that we could develop an infrastructure for it too.
A Barter prepaid card therefore is focused on the trade between the farmers/producers and the distributers.
It is designed to preserve the rights of farmers and producers in transactions with the union and the third parties.
The transactions between producers/farmers and buyers (union) used to be tracked and recorded manually which was causing many conflicts between the parties, mostly ending up with a loss on producers’ end. With the Barter Card involving in this trade, the transactions are kept in the bank and the payment process is done through the bank. This process prevents any conflict between the parties.
Barter Card basically enables the farmer/producer to exchange his/her goods, receiving the payment in terms of product instead of money. It is used both for selling and buying goods.
At the end of the cycle period the bank sends statements to the producers and displays the transactions they made throughout this period and displays the balance amount as a sub total.
If the producer is in a creditor position the bank deposits the balance to the producer’s bank account. If else, bank blocks an amount in the bank account that covers the balance amount. In order to make the payments to the producers the bank collects the money from the unions.
How does it work?
When a farmer is selling or buying a product to a union, he inserts his Barter Card into POS terminal owned by the union.
The POS terminal recognizes the card and a Barter Card specific menu is opened on the POS screen.
All types of products to trade predefined by the union are listed on the POS screen which enables to select the appropriate product to trade (e.g. Milk). Following the selection;
– If the farmer is selling his products;
The amount (e.g. 100 liters) of the product sold is entered in the POS screen. When the amount is submitted two slip documents are issued for each of the parties.
– If the farmer wants to buy a product (e.g. Fertilizer);
The amount of the product requested is entered in the POS screen. When the amount is submitted this request is sent for authorization. If the farmer has sufficient amount of products in the system (other products he already sold to union; e.g. Milk), the transaction is approved. If not, it is declined.
To be able to make such an authorization, all the predefined products of trade have corresponding unit prices in the system.
Thus when the system makes this authorization check, it calculates the requested products’ amount and farmer’s already sold products’ amount in currency, and compare these amounts.
In order to give authorization; farmers already sold products’ amount must be greater than the requested products amount.
When the authorization is given, the purchase amount is subtracted from the farmer’s existing funds.
The system has an online interface where the unions can enter product parameters (product, quantity, unit price etc.)
Barter parities to be used are calculated and displayed via this online interface for each union;
• 2,25 lt Milk = 0,08 gr Pesticide = 1,92 kg Fertilizer
• 1 lt Milk = 0,03 gr Pesticide = 0,85 kg Fertilizer
Milk producer John Farmer goes to the Livestock Union to sell 100 liters of milk. He inserts his Barter Card into the union’s POS.
The POS recognizes the card and opens a menu that is specific to Barter Card transactions.
On the menu SALES option is selected and product types are listed in the next screen. These product types are Livestock Union’s authorized product types that the union can trade.
The union selects MILK and on the next screen the amount of MILK is asked to be entered. 100 liters is entered on the screen.
When the amount is submitted the transaction is completed, the POS receipt is issued and the transaction is sent to the host system.
So POS terminals can be used with the combination of prepaid cards to offer unconventional solutions. Perhaps the market in Turkey is not very big. Yet I am confident that in Africa such solutions can go a long way. And such solutions help Garanti Bank to deal with a segment namely farmers who are not very much penetrated by the banking.