NEEDHAM, Mass. -- Consulting firm TowerGroup, in a new report entitled "Island of Opportunity in a World of Withdrawals? Prepaid Top-Up Emerges at U.S. ATMs," predicts that ATM-initiated mobile phone top-ups will account for 7 percent of all top-ups in 200, generating $124 million in annual revenues for ATM operators.
The report notes a convergence between mobile network operators' desire to cultivate new
customer relationships through prepaid services and ATM operators' desire to offset slowing growth in ATM transaction volumes and produce new revenue streams.
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According to the report, cash withdrawals, deposits and account information requests comprise 83 percent of ATM activity, with non-financial content accounting for only 1 percent of U.S. ATM traffic.
The physical nature of early non-financial content like postage stamps made it difficult to handle, the report said. With pressure growing to generate additional ATM revenues, non-financial electronic transactions (including prepaid airtime top-up for mobile phones, Internet shopping and prepaid stored-value card recharge) are now being explored as a more cost-effective way of creating new revenue streams.
Simultaneously, U.S. wireless phone operators like AT&T Wireless (GO Phone), Verizon (FREEUP) and Virgin Mobile USA are driving increased consumer adoption in the prepaid mobile phone market, particularly within new user demographics like youth/student markets.
Deployment of new electronic transactions is largely concentrated in retail sites, according to the report. Because these ATMs have lower average transaction volumes than bank machines, they have a stronger need for alternate revenue.
"The attention being paid to mobile top-up at the ATM is important, since its rise will lead to a significant incremental ATM revenue stream over the next five years," said Ed Kountz, senior analyst in the Emerging Technology Solutions practice at TowerGroup and author of the research.
While Kountz doesn't believe the ATM will become the dominant channel for payment mechanisms like mobile top-ups over the next few years, he still considers it a critical venue to explore.
"If ATM operators do nothing, they'll continue to face rising competition, slowing volumes and a payments market that is increasingly displacing both cash and the frequency of cash withdrawals," Kountz said. "It makes sense for ATM operators to begin exploring the location, branding, marketing and content aggregation issues that exist in a space like mobile top-up."
