Article

Scrip machines scratch and scrape for a piece of the ATM market

The little-known scrip machine is struggling for recognition in a market dominated by low-end cash dispensers. Will scrips strip away any more market share, or are they destined for defeat? by Ryan DuBosar, contributing editor

February 21, 2002

Insurance companies will cover them all day. Retailers love their instore sales-generating ability. Owners are partial to their low price, surcharge-ability and unused-revenue potential.

Finally, after years of struggling against legislation and scant acceptance, scrip machines have returned to the mainstream cash-dispensing marketplace.

Scrip machines are simple to use. A customer slides her ATM card through the terminal and enters her PIN. She chooses a dollar amount and receives a scrip coupon or voucher which can only be redeemed at the store she's standing in (or another store in the chain).

The space-saving machines beat out their ATM brethren on cost (about $3,000 vs. $7,000), security (no cash to steal), and when revenue goes unclaimed after scrip cards expire or small change is left on them by travelers.

The lure of the market drew Ms. Yaffa Fried of New York-based ATM/Debit Source to offer GreenMachine 2000. In fact she saw so much potential for scrip machines that she joined with a larger, publicly owned company to distribute the units.

The market for c-stores and similar locales will allow the dispensers into places where ATMs would normally fail, she said. Scrips allow retailers to hang on to more than just the surcharge, and customers are more likely to make impulse buys at the places they use the scrips.

"People who use ATMs are peculiar," she said. "They like to do it in privacy. They go off to their corner, do an ATM transaction, they take their money and they run out of there."

A scrip machine forces the customer to slow down, make eye contact with the clerks, and more likely make an impulse purchase such as cigarettes, coffee or snacks.

"For a merchant, it is more important than the money he makes on surcharges," she said.


Fun, food, frolic

Yaffa Fried and her husband, Art, foresaw an explosion in the debit market, instead of the conventional wisdom that predicted the growth in credit cards.

Her company entered into development stages for a year and then merged with their vendor, the public company Sims Communications.

"The target market is anywhere people are having fun, food and frolic," she said. "C stores, billiard halls, bowling alleys and night clubs."

Ernest Burdette, president and CEO of Triton, said scrip machines offer the convenience of an ATM in locations that would have too few transactions to justify the cost of a cash dispenser, such as fast food restaurants.

In the early 1990s, Burdette built his ATM Jr. as a training device. Then he added a receipt printer and dial-up capability to create a scrip machine.

Triton has since modified the unit, adding a few more features and is selling it as a scrip machine.

Some early bank customers suggested adapting it into a desktop terminal that would look and act like an ATM. Triton engineers built a printer into the machine and developed the software needed to tie it into ATM networks. The model 9000 emerged.

Triton announced its new model, the SuperScrip, with a new user interface. It will replace Triton's low-end scrip terminal, but not any of its ATMs. "They are complementary products," he said. "The ATM is really intended for higher traffic locations, as well as places that might have sporadic traffic like a sporting location."

Now others have joined the bandwagon. Joseph Vu, president of Universal ATM, entered the scrip business seven years ago. He started with machines that accepted Cirrus and PLUS cards via the Honor gateway to the ATM networks. But that market collapsed in 1993, when the networks refused to pay the interchange fees on thousand-dollar units, Vu said.

Vu designed a machine based on a credit card terminal. Now his scrip machines are self-serve units. He added phone card banks at the locations so customers can purchase vouchers for the cards.

The unit has advanced to revision number seven, a standalone unit called the MoneyTel TZ. About 500 units are deployed in coastal states.

The new unit runs a POS transaction and not an ATM transaction, allowing cardholders access to higher credit lines. Without the standard $300 limit, scrips can provide casino gamblers more fun-money than ATMs. Universal is experimenting in northern California with a chip card to provide similar services.


Good for merchants

Countertop scrip units save expensive retail space and can use a non-dedicated phone line. The units are generally cost-effective because of the low maintenance and plug-and-play convenience.

Fried said, "You see a lot of ATMs with out-of-order signs. Scrips will last 15 years with trouble-free maintenance."

She added that in California, fast food stores such as Burger King, McDonald's and Dunkin Donuts have adopted scrip machines.

"Merchants typically like it because they don't have to hassle with the security factors of cash," Vu said. "Scrips go in places that don't qualify for an ATM dispenser, such as neighborhood c-stores, fast food outlets and nightclubs. Also, in the clubs, we can get away with the higher surcharge."


No threat

Far from threatening the ATM market, scrip machines are neither universally popular nor universally used. Network limitations restrict the scrips to regional networks. These networks are typically found in the Southeast, the East Coast and the desert Southwest.

The government's latest welfare actions could further dampen their use, Burdette said. The feds will move to electronic benefits transfers, or EBT, by 1999. This will require that recipients of federal benefits use debit devices geared toward the automatic withdrawal of money from welfare accounts.

Counterfeiting has also been a concern, and scrip makers have attacked it by printing on watermarked receipts, using printed serial numbers on the receipts to foil photocopying, and using a PIN pad at the cashier location that can verify the security number on the scrip receipt.

Still, placing the cheap units in low-traffic areas still untapped by ATM ISOs may help the struggling technology find a niche.

"We think that scrip machines are appropriate to a certain segment of the market, and not to the broad retail market," Burdette said. "I don't ever expect that you will see scrip machines deployed widely unless things change dramatically in the market."



>Sources:

• Ernest Burdette is president and CEO of Triton, phone 800-367-7191, fax
228-868-0850.

• Joseph Vu is president of Universal ATM, phone 916-487-9800, fax
916-487-9852, URL www.universalatm.com, e-mail joevu@universalatm.com

• Yaffa Fried is a founder of ATM/Debit Source, 888-286-4733, fax
201-894-4723.

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