Article

Hybrid ATMs and retail revenue

TIO Networks takes cash-acceptance to the ATM.

April 9, 2007 by Tracy Kitten — Editor, AMC

TIO Networks Corp. isn't a new name in the realm of financial services. The company, which made its mark in the bill-payment space under the Info Touch Technologies title, has been shaping relationships with retailers and utility companies for the last decade.

With its payment-processing platform, consumers pay bills to companies like Cingular and Memphis Light, Gas and Water at kiosks located in retail outlets like Circle K stores. The platform was designed to target underbanked and unbanked consumers by allowing them to pay an array of billers at one terminal. And with the recent activation of TIO's 2,000th location, the idea of aggregated bill payment seems to have caught on.

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TIO's billpay offering is well known on the kiosk side of the house. Now the company is making a name for itself in the ATM space - a move planned since the company's inception, says TIO founder and chief executive Hamed Shahbazi, but one that is just beginning to garner attention.

"It's been part of the business plans since the beginning, it just may not have been out there in the public like it is now," Shahbazi said.

And it makes sense for a financial-services company to target ATM deployers, he added. Because they are part of an established and relatively mature industry, ATM players know financial transactions, from processing and equipment to deployment.

"But there's only one problem: The industry is dying," Shahbazi said. "ISOs need something else."

The convergence of ATM and kioskfunctionality has been abuzz in the industry for several years, but it's taken a while to catch on. But software and hardware enhancements, consumer acceptance and a better understanding of transactions, as well as the markets where certain types transactions will flourish, are fueling new acceptance, Shahbazi says.

Earlier this month TIO announced a distribution deal with Electronic Cash Systems, a California-based independent ATM deployer. And in late 2006, it announced plans to deploy hybrid ATMs developed by Fremont, Calif.-based Tranax Technologies Inc. in 2007 through a distribution deal with Houston-based ISO Cardtronics LP.

TIO's distribution network, which launched less than a year ago, now includes about 10 companies, many of which, like ECS and Cardtronics, are traditional ATM ISOs.

"TIO is offering an alternative for ATM deployers," Shahbazi said. "Advertising (at the ATM) hasn't really worked for most (in North America), and bank-branding is solid, but that's really for the biggest ISOs, like Cardtronics. The only other truly transactional opportunity is to accept cash. While everyone was building an ATM business, we were monetizing cash acceptance, because we felt that cash acceptance would be the future. And now we see manufacturers buying into this, too. Everyone understands now that you cannot be a one-trick pony anymore."

It is a concept Tranax is banking on. The company is pushing its line of Self-Service Terminals and hybrid ATMs to distributors, and Tranax's president and CEO, Dr. Hansup Kwon, says the move is picking up momentum. (Read,Tranax wants to be first to ride wave of change.)

"The hybrid ATM is creating opportunity not just for the ATM deployer, but also for the kiosk deployer," he said. "When the customer looks at these hybrids, they know it's a one-stop shop."

Tranax has been working with TIO to perfect bill-payment functionality on its line of hybrid ATMs, kiosks and SSTs for a couple of years now.

Where other functions have failed, Kwon said, cash acceptance has proven profitable. And through cash acceptance, TIO has capitalized on bill payment.

TIO's open billpay network, which provides access to more than 800 billers throughout North America, is still relatively unique in the marketplace, he said.

"Bill payment can be a successful item for services; it is proven that it works and that it can generate profit," Kwon said. "While check cashing is a very attractive item, it is not widespread yet, and it is still in the testing phase. We've been working with TIO a long time, and we've tested a lot of things to have it all finally come together."

It all goes back to cash acceptance

For Tranax's director of product management, Jeffrey Lee, it all goes back to understanding how to maximize the robustness of existing ATM platforms. And where cash goes out, it makes sense to have cash come in.

The ability to accept cash will open doors for other revenue-generating functions, such as mobile-phone top-ups and stored-value/gift card dispensing and activation. It makes sense for the ATM, Shabazi said.

"Retailers want to see the cash go through a self-service device like the ATM because it takes the cash away from the clerk," he said.

Other services that target the unbanked and underbanked, like money-transfer, also are attractive, but from TIO's perspective, current growth will come from billpay and card programs.

Sandra Hartfield, president and chief executive of PDNB Electronic Banking Solutions, a division of California-based Palm Desert National Bank, agrees that the ability to accept cash at the ATM will open revenue streams and cut costs for ISOs. Take TIO's deployments as an example. TIO uses PDNB's reverse vault-cash system - a system PDNB has coined. When cash comes into the ATM or kiosk, PDNB owns it and pays billers directly. The process also reduces the cost and time associated with cash replenishment, since cash is always going in rather than just going out.

"I think it's very important for the ATM owners to try to find a way to generate new revenue, and if you look at what TIO is offering with bill paying, they have a great opportunity," Hartfield said.