The second meeting of the Kilkenny Economic Forum, an off-shoot of Future Proof Kilkenny, will take place this coming Thursday 25th March at 8pm in the Ormonde Hotel. All are welcome.

The subject of this months meeting is local currencies, electronic loyalty schemes and liquidity networks. The purpose of the meeting is to inform about these schemes and to discuss how they might be realised. There will also be members of Kildare’s Transition Initiative “FADA” in attendance.

A draft discussion document on Liquidity Networks and ZAPA loyalty schemes can be found below the fold.

Future Proofing Kilkenny’s Local Economy

As the amount of money in circulation continues to shrink and credit dries up local economies are suffering. What were once viable local businesses with many customers are now struggling. The two principle reasons for this are:

• lack of credit
• out of town and Internet shopping

Future Proof Kilkenny is promoting two initiatives which help to address both of these issues:

1. Liquidity Network (LQN)

A local currency is an important step in creating local economic resilience. Put simply it gives the players in a local economy the means to exchange local goods and services with one another with something other than the euro. It is not intended to replace the euro but to complement it and provides some insulation from the boom/bust cycles of the global economy. It is especially valuable in the current climate when euros, which come into existence through bank loans, are in short supply.

There are many local currency examples throughout the world and the majority of these in use have tended to focus on paper as the media which is purchased for an equivalent amount of national currency. The paper notes are then spent in the local shops and keep circulating within the local economy. In this regard they are similar to Kilkenny’s voucher scheme but because each note can be given out as change and spent again there is a multiplier effect which creates more economic exchanges for the same note. The cultural, touristic, community and fundraising benefits are significant and well documented elsewhere. Nevertheless it is questionable how much economic impact they have (largely because it is difficult to measure) relative to the amount of energy required to set up and maintain them.

The Liquidity Network (LQN) is an electronic local currency proposed by FEASTA, the Foundation for the Economics of Sustainability. Rather than exchanging euros for paper notes the Liquidity Network’s “trading units” are spent into circulation by a city council on the basis that they will accept them back again at a later stage for local taxes and charges. They are similar to an IOU from the council but because the system is electronic rewards can be built in encourage members to use it amongst themselves rather than simply returning them to the council. This system is a true local currency, independent of national currency and introduced on the basis of local goods and services exchanging hands.

The LQN system is being designed by FEASTA’s LQN group. The software which runs the system is in the beta stage and the group is now in a position to demonstrate to County Councils and Chambers how economic exchanges take place between parties using online accounting (for businesses) and mobile phones (for retailers and individuals).

In addition the LQN group is now working with ZAPA Technology (see below) on how to integrate the two systems together.

You can download a leaflet on the Liquidity Network here.

2. ZAPA

ZAPA is a contactless electronic payment system that can be used in a variety of formats. The technology consists of a smart chip that can be embedded in a plastic card (ZAPA Card) or stuck on the inside of a mobile phone (ZAPA Tag).

A ZAPA card is usually configured as a Gift Card (see Tuam Gift Card). It is essentially a voucher card that is available in different denominations that can only be used within the community. A customer can make a purchase by tapping the card against the ZAPA terminal in the store.

A ZAPA tag is usually configured to get discounts and collect loyalty points. Tags, preloaded with a certain number of discounts, can be purchased on a store and registered on line. They are normally stuck on the inside of a mobile phone. When a customer makes a purchase they tap their phone against the ZAPA terminal to avail of any discounts. As they continue to shop and tap they build up loyalty points and above a certain threshold are eligible for another discount. All this information can be communicated to the user by SMS or on-line.

ZAPA technology can be also used as a payment system for retailers and offers lower transaction fees than using the current payment systems provided by the major banks. Indeed, it is this area of the business where ZAPA make their profits.

As mentioned before ZAPA and the LQN group are working together to provide some integration between the two systems. How this would work out in practice is that an employee of the council who had agreed to take some of their salary in Katz would receive a ZAPA tag or card. They could then spend their Katz using the tag or card. When they tapped their terminal at the retailer the system would ask whether they wished to pay in Katz or Euro and then continue with the transaction.