"Any bank that has a Visa relationship can now leverage ATM issuance of prepaid as part of its channel," Nuttall said. "So it opens up literally every institution and prepaid program manager to extend their [prepaid] programs to the ATM."
In late 2011, Better ATM Services entered a pilot program for its new technology at FIs in Arizona. The company said the enthusiastic response the pilot garnered from consumers and FIs prompted Visa to expand the program nationwide.
Better ATM Services' technology integrates into new and existing ATM models, allowing Visa prepaid cards to be dispensed via cash trays. Bank customers can load any amount onto prepaid cards, such as Visa-branded gift cards. The cards are dispensed as "sheets" of three "panels." The first panel is the card; the second panel contains customer service information and fee disclosures; and the third panel can offer targeted incentives and promotions.
For consumers, the main advantage of ATMs dispensing prepaid cards is convenience. Instead of having to go into gas stations or supermarkets to purchase gift cards, consumers can just pull up in their cars to ATM drive-thrus to make those purchases, Nuttall said. "If you're a bank that has your card program behind the counter, it's still there for your customers," he added. "But now you can also put it in your ATM. … You are now more convenient than a convenience store or big-box store."
The linkage between customers using ATMs and prepaid card purchasers is very strong, according to Nuttall. He cited PNC Bank research, corroborated by other research, that 77 to 80 percent of bank customers use ATMs.
"We also know that 70 percent or more of consumers buy some type of prepaid card, whether it's a gift card, GPR or whatever," he noted. "What we're finding is there is a high correlation. It's not just the unbanked that are prepaid consumers; it's middle America. And so the same people who are using ATMs for cash are the same people that go into the convenience stores to get prepaid cards. And this marriage of the ATM and the prepaid allows these people, whether they are stopping for cash, to now get their prepaid at exactly the same time."
Better ATM Services' solution is not just beneficial for banks; ISOs win, too, as prepaid card dispensing ATMs open up a new sales channel for them. "The ISO world is hungry for an additional revenue stream," Nuttall said. Better ATM Services is partnering with ISOs that have established prepaid marketing channels with banks, he noted. Such ATM ISOs can thus benefit from the program to reduce the costs of handling cash. "It's a huge cost reduction with recurring revenue potential for ISOs," Nuttall said. "So we know in the long run it's a very big play for ISOs."
"If you look at cash, especially in the ISO world, everything about cash costs them money," he added. "They're losing money on interest and float, the cost of handling cash. When you load a machine with a cassette full of cards, those cards are just dead plastic – pennies apiece. There is no cost of it sitting in the machine.
"And yet, as soon as somebody purchases it, that money is loaded on a card. And depending on it – the ISO has their own card program, or they use ours – that card is generating revenue throughout its entire life cycle."
Nuttall expects more announcements in advance of the 2012 holiday season that involve creative combinations of prepaid card programs at ATMs that will appeal to holiday shoppers.
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