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Friday, December 7, 2007

Fifth Third banks on gift card kiosks

Fifth Third Bancorp has jumped on the gift card bandwagon, rolling out gift card kiosks to all its branch locations in its eleven-state footprint. After an October trial of the Gift Card Center in pilot markets proved successful, the Cincinnati-based financial institution rushed the kiosks into its 1,200 branches in November to take advantage of the holiday shopping season. But the kiosks reportedly will remain in place year-round, the product offerings changing to suit customer preferences.

The bank now offers its customers not only checking and savings accounts, but also a wide range of prepaid gift cards, including MasterCard Worldwide- and American Express Co.-branded gift cards in any denomination, or gift cards from retailers such as Foot Locker, Lowe's, J.C. Penney, Dell, Eddie Bauer, Borders Books, Circuit City, and restaurants such as Applebee's and Subway.

Fifth Third makes money each time a gift card is purchased. The MasterCard and AmEx cards include a fee, a portion of which goes to the bank.

The move toward banks becoming more like retail environments, selling its customers products that are normally found at retail stores such as Wal-Mart and Best Buy, gained momentum in 2005 when eFunds Corp., an electronic payments provider, introduced Card in a Box, a prepaid service offered to small and mid-sized bank and credit unions.

Then, in 2006, Lake Oswego, Ore.-based West Coast Bank teamed with coin-counting machine and prepaid card provider Coinstar to offer its Gift Card Mall suite of gift cards within its bank branches. It's not a kiosk, but instead the cards are displayed on J-hooks.

Retailers and restaurants taking part in the program include Starbucks, Hollywood Video, Linen n Things, Borders Books, Lids, Tony Roma's, Chili's Grill and Bar, Circuit City, AMC Theatres, KB Toys and Timberland. The bank also offers cards from prepaid card provider Green Dot Corp.

The strategy behind banks offering gift cards in their branches is seen as two-pronged:

  • Create a new distribution channel for existing customers.
  • Reach out to new consumer segments, namely teens and the unbanked.

Robert D. Sznewajs, President and Chief Executive Officer of West Coast Bank, said the bank's gift card program has been effective as a "one-stop convenience for the customer." But as a way to draw in new business, "I don't really think so," he said.

As for the future of gift cards in banks, Sznewajs is philosophical. "Banks have always been trying to emulate other successful retail concepts. … gift cards are another payment device, and a fast growing one."

Although gift cards are a relatively small part of the overall equation, Sznewajs predicts "they're here to stay." end of article

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