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.”

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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.”