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  1. Analysis
March 29, 2012

Prepaid in an instant

Visa and Better ATM Services have joined forces in a pilot with three credit unions in the US state of Arizona to develop the first prepaid card dispensed through ATMs a thinner, transit card-like product that consumers can request in selected denominations at walk-up and drive-through ATMs.

By Verdict Staff

ATM technology is developing apace, and many in the industry expect to see some major upgrade programmes rolling out in the next year or so. Here, Charles Davis looks at a pilot scheme running in the US where ATMs are being used to issue cards


Visa and Better ATM Services have joined forces in a pilot with three credit unions in the US state of Arizona to develop the first prepaid card dispensed through ATMs – a thinner, transit card-like product that consumers can request in selected denominations at walk-up and drive-through ATMs.

An in-market pilot programme is currently underway offering Visa Gift cards at ATMs in select locations throughout Arizona. Credit Union West, MariSol Federal Credit Union, and Pinal County Federal Credit Union are participating in the pilot, and have already begun offering the facility to their members.

Todd Nuttall, CEO of Better ATM Services, says the partners are delighted with the early results of the pilot, and added that Better ATM Services is experiencing heightened interest in the product as word spreads throughout the industry. Nuttall says that bank deployers of ATMs, facing flat transaction volumes and the encroachment of debit transactions, need new ways to find revenue. Prepaid cards offer an ideal way to add functionality to ATMs at little cost to the bank and with no costly retrofitting.

“This is a way for ATMs to capture greater revenue streams by opening prepaid, multi-merchant systems, event passes, and government benefits, all of which can use this platform,” he says. “We’ve learned people like and will use it, exceeding our expectations. We had limits of four cards at a session, and we had to raise that limit immediately.”

The addition of prepaid cards at the ATM is remarkably simple, now that Better ATM Services tackled the hard work of designing an ATM-compatible prepaid card product. ATM menu screens at the Arizona credit unions now include a “Purchase Visa Gift Card” option and prompt the user to designate the value to load on each card.

Cards are available with no activation fee in USD25 denominations during the pilot, but eventually will be available in any denomination the customer wants.


Dispensable materials

The new ATM-dispensed gift card is made of a durable yet thinner material, which allows cards to easily pass through the cash mechanisms of ATMs, Nuttall says. Better ATM Services provides the cards and collects the interchange when they are used.

The prepaid cards resemble transit cards, as they are printed on thin plastic, which is more easily dispensed by a machine. The cards come on a perforated sheet, which is about the size of a dollar bill and includes a coupon and customer service information.

Nuttall says this is just the first step in what will soon become a national push to place prepaid cards in ATMs.

“When ATMs were first introduced in the 1970s, consumers began a love affair with convenient banking services and today we continue to expand those benefits through new innovations,” he says. “We are working with ATM manufacturers, independent sales organisations, and financial institutions to make ATM-dispensed gift cards a common offering at ATMs throughout the country.”

Visa’s research indicates that 85 percent of US consumers ‘would appreciate receiving a branded gift card’. The association says that in 2011, gift cards were the most requested holiday gift for the fifth year in a row.

Visa has not reported the number of gift cards purchased in the test, but Nutall says the network did it shared its findings from focus groups and individual sessions with consumers who purchased the cards.

Fears that customers would be turned off by the thinner cards turned out to work in the opposite direction, he says.

“Consumers told Visa the thinner card was easier to store in a wallet or money clip than thicker cards. Our focus group customers loved them,” he says. “We were pleasantly surprised by that finding, and by the fact that many of the ATM prepaid purchases are being made after hours.”

Nuttall says Better ATM Services spent the past five years perfecting the technology and card design.


Development plans

Though the technology currently serves just the credit unions’ members, it could also be used to serve the unbanked by letting ATM users deposit cash to load cards.

“Cash-to-card is not a part of our pilot, but we do have the technological capacity to make that happen,” Nuttall says. “This is a platform that can grow into a number of different products and services in the future. When I look at new business, I try to see how we can expand distribution channels that already exist, by bringing new capabilities.”

For the short term, Nuttall sees tremendous potential in getting banks into the prepaid market through the ATM. Following an agreed-upon adoption cycle, starting with the credit unions first through the end of the first quarter of 2012 and into the second, Better ATM Services will move on to banks nationwide.

“Independent retail-placed ATMs are half of the US market of 425,000-odd machines out there, and they have been deployed in these really high-traffic locales, right where people need them, and they know how to use them,” he says. “Mobile is coming, but prepaid cards are going to be here a while and really hit certain market opportunities best of all. Sticking them on J-hooks at the supermarket is the best in class right now, but it’s not the best way to distribute cards. Every one of those cards would like to jump off that rack at the grocery store and get to the ATM world.”

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