STRATEGIC PARTNERS
Ever wonder where deployers get all of those fascinating stats on ATM usage? Meet Randy Batsell, one of the men behind the numbers.by Ann All, editor
March 11, 2002
As an ATM owner, you're interested when PULSE announces that, among consumers with checking or savings accounts, Hispanics lead the U.S. in possession of ATM cards. Your initial reaction is probably, "Wow, who knew?"
Your second thought: "How does PULSE know that?"
That's where Randy Batsell comes in. A marketing professor in the Jones Graduate School of Management at Rice University in Houston, Batsell also runs a market research company called Analytica. He's one of the people who helps generate those intriguing statistics for PULSE and other EFT networks.
Batsell has been researching consumers' awareness, attitudes and behaviors regarding electronic banking and ATMs since the late 1980s.
Now that you ask...
In one of the earliest studies he conducted for PULSE, he separated 1,000 Texas consumers into three categories: those without an ATM card, those who had a card but rarely used it and frequent users. When he questioned those who didn't have a card, he got an unexpected answer: Over 50 percent of them said they had never been offered one.
"That single number was a real important discovery," Batsell said. "The bottom line was there was this huge, untapped potential market."
PULSE followed up on Batsell's survey by engaging in some "mystery shopping" at banks and savings and loans in the Southwest. Posing as potential customers, PULSE employees inquired about different types of accounts and services. They discussed their hectic lifestyles, mentioning that they traveled a lot -- in short, acting like perfect candidates for an ATM card.
Yet in many cases, they weren't offered one. The result: Banks tweaked their employee training programs and created accounts in which ATM cards were automatically offered to customers.
Batsell's later surveys for PULSE showed an uptick in cardholders. More significantly, the number of non-cardholders who had never been offered one dropped dramatically.
"A lot of market research finds really complicated results and answers, but this was a simple little statistic that had a pretty big impact," he said.
The age game
In the same study, he uncovered "one of the most dramatic examples of a relationship between adoption of a product and a demographic that I've ever seen." Simply stated, the older a person was, the less likely he or she was to have an ATM card. While about 60 percent of those aged 18-24 had an ATM card, the number hovered around 10 percent for those 65 and older.
"Older people formed their financial habits and preferences when they were young and ATMs weren't around," Batsell said. "It wasn't that they were scared of electronics. They just didn't see going to the bank as a big hindrance."
He added, "As time marches on, that graph is going to change by definition."
Batsell believes the current generation of older ATM users was first exposed to the ATM because of an emergency -- they were on the way home from dinner, say, when they realized they needed to pay the babysitter in cash but had no money in their wallet. Once they used the ATM and discovered how convenient it was, a person was more likely to make a conscious decision to use it again.
Batsell was baffled by an unexplained jump in ATM usage among senior citizens -- from 8 percent in 1990 to 26 percent in 1991 -- that showed up in Midwestern studies he conducted for the Magic Line network (now NYCE).
After he presented the survey results at a Magic Line conference, representatives of two of the biggest banks in Michigan took him aside. They confided that, after hearing his earlier numbers, they had interviewed seniors in focus groups and identified a new target market: retirees who wintered in Florida and Texas. They successfully sold the snowbirds on the idea of a card that allowed them to access their funds at home and saved them the trouble of opening out-of-town checking accounts.
"The idea didn't occur to them until they learned the behavior and habits of those senior citizens," Batsell said.
Age also factors into his latest research, a well-publicized study for PULSE. Batsell found that, if they had a bank account, African Americans and Hispanics were more likely than other ethnic groups to have an ATM card and to use it. In general, he said, those groups "skew younger" than others.
Those results "immediately led to the notion that merchants in heavily ethnic minority neighborhoods ought to adopt POS as well as put an ATM machine in their store," he added. "Probably some of those merchants weren't aware that many of their customers had these cards in their pockets."
Know thy market
Jim Judd, senior vice president of NYCE, said Batsell's research lets the network know how well its marketing efforts are working. "We spend a substantial amount of resources promoting our brand and our services. Consumer feedback is the most tangible and quantitative way that we understand whether we are doing a good job or not."
Also, Judd said, keeping tabs on consumers' attitudes helps NYCE identify market trends early on, an important advantage in the ever-changing world of EFT. "We can't materialize new products and services out of thin air overnight. In a network environment, we have to give ourselves as much lead time as we possibly can."
Mary Brown, PULSE senior vice president, said Batsell's studies help the network's 2,000 financial institution members "market the full utility of that card."
For instance, she said, PULSE created informational brochures about POS debit and distributed them to its members after discovering that consumers were largely unaware of its benefits. "There was a huge educational opportunity there. The consumer needed to understand they could use it when they traveled, they could get cash back with it."
Both Judd and Brown said that giving their members access to information they might not be able to compile on their own is an important benefit. "For small and medium-size institutions, and for many large institutions, the level of expertise and focus is so much greater than what they could apply," Judd said.
The networks occasionally pool their resources to examine issues that are of interest to all. One recent collaborative project: a study of Visa's Check II debit card.
Crunching the numbers
Batsell relies on a technique called multiple classification analysis. When studying some measure of a consumer's adoption of a product -- like an ATM card -- he applies all of the demographic information he knows about that consumer -- such as age, gender, income and education.
"The model tells you the likelihood that each of these variables contributes to the dependent variable," he explained.
In his experience, he said, "age is the most important variable" when it comes to ATM usage. According to Batsell, 71 percent of consumers have ATM cards. "You take that number and, depending on age, you can add or subtract a number. Between the ages of 18 and 24, you add 11 percent. If 65 or older, subtract 27 percent. There's a huge effect due to age."
Add other variables such as income and education, and an even clearer picture emerges. Take 26-year-olds who have attended some college and make $27,000 a year: 82 percent have an ATM card. Only 24 percent of 66-year-olds who didn't attend college and make under $20,000 a year have a card.
"This segmentation model gives you a very clear picture of the probability that someone has a card," Batsell said. Noting the lesson of the Magic Line members who boosted their population of older cardholders, he said, "If the probability is low, don't think they're not necessarily going to get a card -- but realize you've got to think carefully about what the benefits are to them."
Batsell predicts that ATM usage will continue to grow. "The only question is if, in the future, something comes along that is to ATMs as ATMs were to the old teller."
One possibility: smart cards combined with the Internet. These days, Batsell said, his clients want to know more about consumers' computer usage.
"When you get to the point where merchants accept cards with money on them, and you can get on your computer and deduct money from your account onto the card...That technology could be toward ATMs as ATMs were toward tellers," he said.
