Prepaid products are catching on. From cell phone top-ups to gift cards to reloadable credit cards, prepaid products are popular among teenagers and the unbanked.
C-stores jumped on the prepaid bandwagon early. "There's been a big push for c-store owners to diversify their income," said De Lone Wilson, vice president of sales for Jackson, Miss.-based NetBank Payment Systems. The company provides c-stores with prepaid services at the ATM and point-of-sale.
"Historically, c-stores made money from cigarettes, gas and beer," he explained. "But they don't get as much out of those sales anymore, and they see the prepaid industry as being a niche for them."
That trend isn't surprising, he added, because of rising gas prices and dropping cigarette sales. According to Wilson, c-store operators can pull between 17 percent and 20 percent from prepaid products, on average.
Understanding the market
U.S. retailers are beginning to understand the market, said Gary Palmer, chief operating officer of Florida-based Wildcard Systems Inc., during a presentation on prepaid at the ATM Industry Association Conference East in February.
Prepaid products have been available at ATMs in Europe and the United Kingdom for years - and their offerings have matured, Palmer said. In the States, where prepaid products at ATMs and other self-service terminals are just beginning to take off, it will take some time for the market to pick up on the trend.
"When prepaid was designed, it was designed for the credit disadvantaged," Wilson said. "But a lot of young people like it today because the (prepaid cell phone) rates have gotten very similar to what they would pay for typical service, and they don't have to sign a contract. When they run out of minutes, they can let their phones sit dormant until they want to buy more minutes. It's convenient."
Other prepaid products, like stored-value cards and gift cards, are catching on, too. They're convenient for customers, and they save retailers money.
A word to the wise
For c-stores that are considering adding to their prepaid offerings, or considering offering more prepaid products at the ATM, there are a few things to consider. First, Wilson said, c-store operators need to talk with a number of service providers. Some may offer higher commission rates, but if they don't help advertise the prepaid products in the store, they probably aren't worth working with.
"You need to ask for signs and merchandising to help sell the prepaid products," he said. "It would be better to do that than get a higher commission rate, because if you advertise, you're going to sell more."
Second, c-stores operators need to make sure the service company has an accounting system in place that accurately tracks prepaid sales.
"You want to be sure you can balance the money and see how much you're bringing in every month," Wilson said.
