The Green Sheet Online Edition
June 25, 2007 • Issue 07:06:02
Coinstar and the unbanked
This story was originally published on ATMmarketplace.com, March 20, 2007; reprinted with permission. © 2007 NetWorld Alliance LLC. All rights reserved.
Editor's Note: Marvin Lazaro is the Editor of Kiosk Marketplace and Self-Service World, two of ATM Marketplace's sister sites.
The sight is common at grocery stores and other locations across the United States: people standing in front of dollar-green kiosks, tilting coffee cans and sawed-off milk jugs full of coins over a metal grate and standing back while the kiosk counts the coins and displays a running tally on a monitor.
They are like slots players, holding still while the machine decides how much cash the user will take home. Now, the maker of that kiosk â€” Coinstar Inc. â€” wants to help people do more with their money than convert it from one form to another.
The Bellevue, Wash.-based company is entering a growing field of financial-services providers that enable the unbanked and underbanked to pay bills without the intermediary of a checking account, with plans calling for its first bill-pay kiosks to roll out in mid 2007.
"Our intent and goal is to create a quasi-banking capability for those people who are not bankable or who choose not to work with banks," said Charlie Crawford, Senior Product Manager at Coinstar. "We believe we'll be covering an area that's poorly served right now."
Coinstar began in 1991 in San Francisco with four coin counters but has since expanded to a network of over 12,000 machines located mainly in the United States, but located also in Canada, Puerto Rico and the United Kingdom.
Over time, the fee users are charged has increased, to 8.9% of the amount counted, which is shared with retailers that host the machines.
In 2005, many machines began offering users the option of loading the value of their coins â€” with no counting fee subtracted â€” directly onto gift cards for businesses such as Starbucks Coffee Co.
Expanding its services, Coinstar entered into an agreement with McDonald's Ventures LLC, a subsidiary of McDonald's Corp., for a 47.3% stake in Redbox DVD rental kiosks.
Coinstar also acquired Travelex Worldwide Money in May 2006, a worldwide money transfer company. The publicly traded company (CSTR) posted approximately $22.3 million in profit for 2005.
A growing sector
Coinstar won't have the market to itself when it enters the bill-pay space. TIO Networks and 7-Eleven, which owns and operates the VCom financial kiosk line, already offer extensive bill options to the underbanked and unbanked.
The challenge for Coinstar will be identifying markets where those groups do business, said Tracy Kitten, Editor of ATM Marketplace, a Web site that covers the ATM industry.
"Most deployers want to model their financial-kiosk placements after their ATM placements, and doing
so has proved detrimental for most," she said. "Providing basic cash-dispensing services makes sense in just about any part of town, regardless of the demographic, etc.
"With services like bill payment and check cashing, which target underserved consumers, placement of self-service terminals that offer those services must be much more strategic." The investment stakes for multifunctional financial kiosks also are much higher, she said.
"If the deployment flops, you're out a lot of money â€” upwards of $30,000, in some cases, for the equipment alone," Kitten said. "Investment in a basic cash-dispensing ATM can come in more than three times lower than that, so if a particular deployment doesn't work, you haven't lost your shirt.
"You can pick up the ATM and move to a new location. It's not so easy with a multifunctional unit that's already emptied your pockets."
The new kiosk will use Coinstar's existing user interface, so customers will have very little new to learn.
It will be able to dispense a wide range of prepaid debit/cash cards, prepaid wireless and long distance cards, gift cards and card reloads, all of which will be nondenominational to permit consumers the freedom to load any cash amount they want.
There will be no charge to use the financial services kiosk unless there is a service or similar charge levied by the receiving company. The machines will be configurable for future products such as bill payment and money orders.
Placement and opportunity
The initial 200-unit rollout of the new kiosk is planned for locations similar to where the coin-counters are deployed, with no specific geographic placement in mind.
Crawford said that if the test is successful, the company plans to place the machines in shopping malls, specialty retail stores, transportation centers and even some financial institutions (FIs).
The decision to place the kiosks in FIs comes at the request of some who hope to attract new walk-in traffic. "We're having no trouble at all getting people to place these machines on their sites," Crawford said.
Coinstar also is hoping to incorporate its recent acquisition of Travelex into the kiosks, enabling the kiosks to transmit and receive money transfers worldwide.
The financial services kiosk will initially roll out as a stand-alone machine, but if the model is successful, much of its functionality can be put onto existing Coinstar kiosks through product upgrades. Coinstar's customers will then have the option to have the all-in-one coin counter on their selling floor or the financial services kiosk.
"Our intent is for the system to become a reload network so that any person with any branded prepaid card could come and load their card on our financial services center," said Crawford. Currently, Coinstar is only offering Greendot.com prepaid MasterCard cards.
Bob Baker, Vice President of Financial Services for Coinstar, said the company's vision was to enable bill payment not only on the financial services kiosks, but also on coin count kiosks that are equipped with a bill acceptor and a card swipe.
The financial services kiosks will be regionalized to reflect local utilities. Coinstar is also offering customers the option of self-branding the kiosks.
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