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Pulling ahead with P2P
Noting that deployers are determined to find new revenue streams in light of the declining rate of per-machine ATM transactions, Les Riedl, a senior vice president at Atlanta-based consultancy Speer & Associates, said, "Stamps, ticketing, couponing – none of it has hit big. (Money transfer) is the first alternative transaction that may generate enough volume to matter."
March 4, 2002
Person-to-person money transfers are big business. According to the Nilson Report, more than 130 million such transactions occurred in 2000, accounting for nearly $41 billion.
Immigrants living in the U.S. make the majority of those transactions. According to the Bank of Mexico, immigrants living in the U.S. in 2000 sent $12 billion to Latin American countries, including $6.28 billion to Mexico alone. While final figures have not yet been tallied, Mexico's total for 2001 is expected to reach $8 billion to $10 billion.
The Nilson Report also forecasts that P2P payments will continue to grow, to more than 280 million transactions worth $108 billion by 2005.
Money transfer matters |
With figures like this, it's not surprising that deployers are interested in offering money transfer at the ATM.
Noting that deployers are determined to find new revenue streams in light of the declining rate of per-machine ATM transactions, Les Riedl, a senior vice president at Atlanta-based consultancy Speer & Associates, said, "Stamps, ticketing, couponing – none of it has hit big. (Money transfer) is the first alternative transaction that may generate enough volume to matter."
Money transfer was one of the first applications, along with check cashing and money order issuance, that 7-Eleven opted to include on its advanced function Vcom terminals. In a partnership with Western Union, 7-Eleven currently offers the service on 94 terminals in Florida and Texas with plans to roll out more this year.
Big gun fires first shot
Western Union, which is owned by First Data Corp., has partnered with two other ATM deployers to offer P2P payments via the ATM. According to Nilson, Western Union is by far the current market leader in money transfers, with nearly 99 million transactions valued at $34 billion in 2000, well ahead of second-place MoneyGram (owned by Travelers Express) with its 15 million transactions worth nearly $4 billion.
After a five-city pilot in late 2000, American Express has rolled out the service on 2,800 of its machines, with plans to eventually increase that number to 6,000. The machines, most of which are located in 7-Eleven stores, can be used to receive but not send funds.
After initiating a transaction at a Western Union agent, the sender chooses an identification number and also receives a randomly-generated confirmation code. The sender relays this information, along with the amount of money sent, to the recipient. The recipient can visit any participating ATM, key in the dollar amount and both codes, and get the cash. No bank card is required. The randomly-generated number is only used for a single transaction, which ensures the process is secure.
Customers pay the same fees to send funds via the ATM as they do through an agent.
Genpass Inc., the owner of the MoneyMaker and Moneybelt networks, is adding money transfer to 300-500 ATMs in the second quarter of this year. The machines will be a combination of bank, ISO and Genpass-owned ATMs. Genpass hopes to introduce the service later on some of the other 20,000 ATMs it drives.
Bonnie Hill, senior vice president of strategic planning for Genpass, said "We plan to roll (money transfer) out in phases, depending on the compatibility of the various ATM vendors."
Western Union partners on P2P |
The initial group of ATMs will all be Diebold and NCR machines, she added, with other vendors supported in the future. "We expect that over the next several months, the technology will become available to support the majority of machines we drive."
Hill said that money transfer capability is part of Genpass' plan to add functionality to its ATMs and differentiate itself from other transaction processors, a strategy long espoused by Genpass President and Chief Executive Officer Bipin Shah.
"You can't offer one thing and expect to multiply the number of transactions ten times over. It's a matter of offering multiple transactions," she said. "If we as an industry aren't intent on putting as much functionality as we can at the ATM, where will we be five years from now?"
Growing the business
There seems little doubt that others will eventually offer the service.
"Our overall mission is to achieve as much ubiquity as we can," said Chuck Templeton, vice president of Western Union's ATM Money Transfer Network. "We're directing our resources early on to establishing relationships that will give us the maximum volumes in terms of distribution."
Western Union in 1997 purchased the rights to the patented technology that allows the card-free receipt of funds at the ATM, called Z-Cash, from EDS. Templeton said that EDS will switch all Western Union ATM money transfer transactions and provide settlement.
In May 2001, Western Union inked an agreement with ACI Worldwide, whose BASE24 transaction processing software is used by seven of the top 10 EFT networks in the U.S., to add money transfer capability to BASE24. "ACI was obviously one of the right people to partner with early on," Templeton said.
The well-known Western Union brand lends "instant credibility" to money transfer at the ATM, Templeton said. "We've been in this business for 130 years, so we've established a reputation for speed, reliability and trust." The other big value add, he said, is Western Union's network of more than 100,000 agents, including some 40,000 in the U.S.
Speer & Associate's Riedl predicted that a network owner such as Concord EFS, which drives 55,000 of the approximately 324,000 ATMs in the U.S., will set a "de facto standard" – whether it's Western Union's technology or another alternative. "If it leads, others will follow," he said.
Better to send and receive
The next step is for Western Union to add the capability to send funds via the ATM. Western Union hopes to do so in the first half of 2002 but has not yet announced a target date.
Only cardholders of participating networks like Genpass would be able to do send funds at ATMs, which will be branded with a Western Union logo. As other networks become affiliated with Western Union, their cardholders will also be able to use those ATMs to transfer money.
When full functionality is in place, Templeton said, Western Union hopes its customers will use all available channels to send and receive funds: from agent to agent, from agent to ATM, from ATM to agent and from ATM to ATM.
Holding the cards
In addition to the Western Union model, Riedl said there are several existing categories of ATM money transfer that require cards at both ends of the transaction. Card-based transfers, whether done via a prepaid card or by issuing a second ATM card to an account holder who then supplies it to the person to whom he sends money, are the easiest methods to support, Riedl said. "They work with the ATM system the way it's set up today."
However, he added, "You want to simplify the receiving side as much as possible. Taking the card out of the equation is ultimately the way to win the widest audience."
Riedl believes that money transfer at the ATM is likely to be more popular with ISOs than with financial institutions. "(Banks) want to have plenty of cash on hand available to their customers; the idea of dispensing cash to someone who's not going to be a potential customer is not going to be all that attractive to (banks)," he said.
Offering the option of collecting funds at ATMs might require deployers to replenish cash more frequently, Riedl said. But, he added, "I think that's a problem that most ISOs would love to have."
Two card draw
At least a handful of financial institutions are issuing two ATM cards to customers, who then can send one to relatives in Mexico or other countries. First Bank of the Americas, which has $60 million in assets and three branches in the Chicago area, has been doing so since November in a program it calls QuickCash.
Withdrawals can be made at ATMs in the U.S. or at ATMs throughout Mexico that are part of the Cirrus network. The cost of withdrawal is limited to the regular cost for the use of the ATM in Mexico, which is typically $1.50.
David Cordova, vice president of Blast Advertising and Public Relations, the bank's marketing agency, said that there is a daily withdrawal limit of $250 and that account holders can set further limits or limit the number of withdrawals. Account holders also obviously control the amount of money deposited into their accounts, he said.
First Bank of the Americas created the program after meeting with Mexican President Vicente Fox. The Fox government has formed a commission to simplify money transfer methods for Mexicans living abroad and to lower the costs of sending money.
According to Cordova, the QuickCash program was a collaborative effort involving Juan Hernandez, director of Mexico's Presidential Office for Mexicans Abroad; the Archdiocese of Chicago; the Archdiocese of Mexico; and the International Coalition for Mexicans Abroad (CIME).
David Voss, chairman and chief executive officer of First Bank of the Americas, said, "We remain deeply committed to serve the needs of the people in the communities we serve. Through our 'QuickCash' program we are reaching out to those on the fringe of banking and financial services, which promotes the development of our neighborhood economies and subsequently helps our bank grow."
Cordova said that Voss' commitment to the community extends beyond the QuickCash program. Voss worked with the City Colleges of Chicago, for example, to arrange for a weekly English as Second Language class at bank branches.
While the capability exists to offer the QuickCash service to other countries, Cordova said there are no plans to do so in the immediate future. "We know it's working in Mexico, and we know what the procedures are there. We haven't yet begun investigating this in other countries."
Like several other financial institutions, including bigger players such as U.S. Bank and Wells Fargo, First Bank of the Americas has cleared the way for those without Social Security numbers to open accounts. These banks will now accept an Individual Taxpayer Identification Number (ITIN) issued by the Internal Revenue Service, along with two other forms of identification such as a Certificate of Consular Registration (Matricula Consular), passport or credit card.
While a Wells Fargo spokeperson said the bank does not offer money transfer via ATMs to these account holders, it does offer a service called InterCuenta Express, which charges a flat $10 for money transfers of up to $1,000, less than the four percent to 10 percent of face value typically charged by Western Union and MoneyGram.
InterCuenta Express is open to both account holders and non-account holders, the spokesperson said. A onetime $10 charge to open an InterCuenta Express account is waived for those with a Wells Fargo account.
Wells Fargo has also established a joint venture with Grupo Financiero Bancomer SA, Mexico's second-largest bank. The money transfer service will eventually link Wells Fargo's 3,000 U.S. branches to Grupo Financiero's 2,000 branches in Mexico.
On the prepaid plan
While these efforts mark banks' efforts to reach out to the Hispanic community, many Hispanics just may not be interested, said Robert Acosta, the CEO of eViva Group, a company whose prepaid Quick Money ATM/debit card is currently being piloted at a Huntington Park, Calif. Carl's Jr. restaurant.
Targeted specifically toward Hispanics, the card can be purchased for $5 at the restaurant, where it can be loaded and re-loaded with value, up to $750 a day. Cardholders pay a $5 fee each time they re-load. The card can also be used to withdraw up to $300 a day at any Cirrus ATM or to make purchases at any retailer accepting MasterCard.
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Banks are extremely volatile in Mexico and other Latin American countries, so a huge number of Hispanics don't trust banks," Acosta said.
Acosta's views are borne out by a 1999 research study commissioned by the PULSE EFT Association and conducted by Houston research firm Analytica. That study showed that Hispanics were the least likely among all major ethnic groups to have a bank account. Some 76.1 percent of Hispanic respondents had bank accounts, compared with 93.7 percent of Asian-Americans.
Acosta said the Quick Money card can be used to make money transfers. Customers can buy multiple cards and will receive a PIN number and separate account number for each one. An 800 number can be used to transfer value from one card to another. They can also call to change the card numbers, which Acosta said is encouraged for added security, and to register cards, as eViva will replace them if they are lost.
Recipients will pay the standard ATM fee, as well as an additional MasterCard fee to convert foreign currency, to collect funds at ATMs in other countries. Acosta said all fees are listed in a disclosure statement included with each card.
Acosta believes the cards could serve as "a bridge for (Hispanics) to start building relationships with banks" by helping them become more accustomed to using ATMs to access funds and to carrying cards rather than conducting cash-only transactions.
However, he doesn't think it will happen overnight. "It could take years to build that kind of a trust relationship," Acosta said.
The first Carl's Jr. location has sold about 15 cards a day since the service was launched on Feb. 12 "with zero promotion," Acosta said, adding that eViva plans to use some of the $12 million it has received in two rounds of funding to promote brand awareness of the card. Promotions will include direct mail campaigns and ads on Spanish-language radio and television stations, as well as bus stops and telephone booths.
Hispanics are "heaven, from a marketer's point of view," Acosta said. The population is highly concentrated, with more than 70 percent of Hispanics in the U.S. living in just four states – California, Florida, Texas and New York. "Word of mouth within those communities is just phenomenal."
Acosta hopes to line up more locations to both sell the cards and to load them with value. While small, family-owned stores would be ideal to reach Hispanics, he said eViva will concentrate on well-known chains such as Carl's Jr. at first until the card is better established.
"The mom and pop shops are too vulnerable in the beginning because the bank (card issuer West Suburban Bank of Chicago) doesn't know them," Acosta said.
The cards can carry any logo. Acosta said he would like to enlist partners such as radio stations, which could give them away at concerts or other promotional events. Churches, schools or other non-profits could also sell them as a fundraiser, Acosta said.
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