Nuttall said Better ATM Services contracted with an outside research firm to investigate the prepaid card buying habits of credit union (CU) customers. The results were that over 56 percent of all CU members surveyed buy prepaid cards. However, only a little over 5 percent of those buyers stand in line at CUs to purchase the cards.
Nuttall believes that percentage will rise dramatically once ATMs are configured to dispense gift cards because of the following statistic generated by the research: 86 percent of CU customers use ATMs, and 70 percent of those same customers routinely purchase prepaid cards at other locations, such as convenience stores and supermarkets.
Nuttall stated, "What it meant was the only behavior that we have to bridge is, 'Hey, you're already at the ATM, do you have any birthdays coming up? Or do you need to get a card for your son who is in college?' 'Yeah, I do.' 'Boom. Push the button. You've got it. You're done.'"
Mesa, Ariz.-based Better ATM Services has been breaking new ground on the convergence of prepaid and ATMs since late 2011 when it partnered with ATM manufacturer Triton Systems to offer closed-loop gift cards via Triton's network of off-premise ATMs. A pilot program with Visa Inc. soon followed to test the effectiveness of ATMs that dispense open-loop, Visa-branded gift cards.
Fast forward to December 2012, when the company partnered with Discover Financial Services and InteliSpend Prepaid Solutions LLC for ATMs that dispense Discover-branded gift cards that can be used at networks of select retailers. Then Visa disclosed that it was allowing any Visa issuing financial institution in the United States to adopt the company's new ATM technology.
Not lost on Nuttall is that all of this activity is generating mounds of data about consumers and their purchase behavior at ATMs. "There's a lot of data about ATM users," he said. "And there's a lot of data about prepaid and its growth all over the world and who's buying them and what for. But there's very little data that correlates the two."
Nuttall stated that this new research is integral to the evolution of the ATM industry. He said, "In the past, ATM owners only cared about how many people hit their ATMs – meaning I've got 4,000 people a month to this branch's ATM. … Well, now that you have a noncash product with variance – it can be metro, it can be Visa, it can be Amazon – you now need to know who these people are.
"So, for the first time in history, the ATM industry is going to begin looking at the demographics, what are the behaviors of people and who they are."
For example, a clothing retailer trying to reach new markets with its gift card program might like to know that ATMs in break rooms and call centers are being used by women 25 to 50 years old, Nuttall stated.
Nuttall said the response to the company's prepaid dispensing ATM programs has been strong. The new programs are only available to banks and credit unions presently, as they have established relationships with consumers that allow them to easily communicate the new ATM functionality. Independent ATM operators have not yet been offered the programs because they lack that direct marketing pipeline to consumers, according to Nuttall.
But the cash-to-card value proposition is clear. "When you give someone 100 dollars cash from your ATM, everything about that costs you money, and you make nothing from that cash," Nuttall said. "But for every 100 dollars that you can get someone to take on a card, you're part of the merchant discount, you're part of the flow, you're part of the transaction, you're part of the services.
"And so it's a complete reversal of the financial model of ATMs, both for financial institutions and independent ATM owners."
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