Adam Smith: Luck, timing, and chance encounters

Chance encounters can be profitable, as Adam Smith knows. When the dotcom bubble of the late 1990s burst, he found himself looking for a job. The ex-MD of internet firm Telewest Broadband's business services unit, he had fallen out with senior management over strategy. Fed up and keen to "experience something completely different", he went to work for Vodafone in Egypt.

But by 2004 he was ready to return to Britain where, at a networking event, he ran into Peter Matthews, the owner of e-commerce and marketing firm Nucleus. The pair agreed to go into partnership and soon after won a contract to support the Oyster smart card system for London tube operator Transport for London (TFL).

They thought they had struck gold. TFL saw a growth opportunity for Oyster cards. "People wanted to use it for other stuff, like buying a coffee." So the pair set about building a bid for the work. However, TFL later withdrew the tender, leaving them with a load of research and a tough choice. "Drop the project and forget the work we'd done, or carry it on and try to develop a smart card on our own." They opted for the latter.

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Luck and timing were on their side: new European regulations were making it easier for firms outside the banking sector to become involved in electronic payments. The technology was also improving. They formed a separate firm, sQuid, in 2006, to make a card that could replace cash for transactions under £10.

Unlike their rivals, who were building applications that would work on top of existing bank platforms, they wanted to develop a stand-alone system that would handle everything from the payments to the cards themselves. "It meant we would be able to do more with our cards."

But it wouldn't be cheap to develop they needed more investors on board. Finding them "wasn't easy. Everyone we spoke to said it was a great idea but they also wanted to see more progress." City professionals also thought sQuid would be crushed by the banks. "We kept on telling them: It's a huge market, our competition is cash, not the banks'." But venture capitalists and investment banks wouldn't commit, so the pair turned to wealthy private investors.

After scraping together enough money, Smith hit the road and started trying to sell his card. "I did a lot of miles in the early years." By 2008, he had landed Bolton Council. "They wanted to help disadvantaged children by giving them money to do constructive' activities, such as sport." sQuid developed a card that could only be used to pay for certain goods or services. "If they gave them cash there was no knowing what the children would do with the money. Our cards helped the council control that spending."

Smith targeted schools, bus firms and councils with custom-made smart cards. "Having our own system was a huge advantage as it meant we could adapt our card for each client. It also meant people didn't need to have a bank account."

In 2011, sQuid merged with fellow British smart-card player Applied Card Technologies in a £50m deal. Sales at the new firm, Smart Transactions Group, hit £10m last year. Now Smith, 48, is looking at new ways to replace cash in the aid sector. Smart cards can "help money get to the people who need it most".