Article

Top-ups at ATM move into market

A year after ATM vendors and deployers began to move toward adding prepaid phone top-ups to their ATMs, a rollout of the functionality seems to be gaining momentum.

July 28, 2003

A year after ATM vendors and deployers began to move toward adding prepaid phone top-ups to their ATMs, a rollout of the functionality seems to be gaining momentum.

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Two deployers, Welch Systems and E*Trade Access, have introduced top-ups on about 400 ATMs in the St. Louis and Boston metro areas. FTI (formerly Financial Technologies), hopes to have 40 machines with top-ups by the end of this month. Cardtronics quietly rolled out a handful of ATMs offering top-ups last month.

Euronet, one of the providers of the service, has inked agreements with 13 ISOs with some 22,000 machines between them -- including FTI.

Euronet's top-up application has been certified by Core Data Resources (which is owned by Concord EFS), with at least two other transaction processors expected to follow suit later this year.

Triton has partnered with Euronet to offer top-ups as one of the first value-added software applications in its Waves program (the others are check cashing via CashWorks and Western Unionmoney transfer). At its recent Distributor Conference, Triton gave away 20 phones and invited the recipients to purchase prepaid minutes at an ATM in the demonstration area.

Ron Ferguson, Euronet's vice president of business development, said Euronet is also working with Wincor Nixdorf and Tidel Technologies. Wincor reportedly has plans to introduce top-ups, along with other non-traditional ATM transactions, at retail outlets owned by Valero Energy Corporation.

Unlike ATM advertising, phone top-ups are not being hyped as the greatest thing since the surcharge. However, there is cautious optimism that offering them may enhance revenue streams for both ATM managers and owners.

Anita Nobles Arguelles, Triton's manager of marketing and product management, said that an average of 13 percent of a prepaid top-up transaction is available to ATM deployers, who typically share part of the proceeds with merchants. Prepaid users spend an average of $300 a year on minutes, Arguelles said.

According to the Yankee Group, a Boston-based consulting firm, about 12 percent of the country's 130 million wireless subscribers are on prepaid plans. The Yankee Group expects that number to grow to more than 30 percent of the overall wireless market by 2006.

A package deal

The handful of deployers that are already offering top-ups plan to offer other new services at the ATM as well. Both Triton, with Waves, and NCR, with its iATMglobal program, are introducing new software applications in packages or "bundles," so that deployers can pick and choose which ones they want to offer.

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Jeff Hewitt, vice president of Welch Systems, a Peoria, Ill.-based ISO that is offering prepaid phone top-ups through iATMglobal at 250 ATMs in St. Louis, said that top-ups have been more popular on his machines than the other iATMglobal applications -- prepaid long distance, movie tickets and flowers -- but not by a huge margin.

"It's not ten-to-one or anything like that," he said.

Hewitt doesn't believe that top-ups or any other non-traditional transactions will ever supplant cash. "This is not about offering another killer application," he said. "If it was just prepaid wireless, I wouldn't do it. You're not going to get a significant enough return based on just one new transaction to make it worth your time and effort."

Though Hewitt declined to share specific numbers, he said top-up transactions have increased every month since Welch Systems began offering them in late 2002. The service has also attracted a significant number of repeat users.

Welch Systems expects to offer top-ups and other services through iATMglobal at about 450 machines in St. Louis by the end of the year, Hewitt said.

Selling it

The biggest challenge, Hewitt said, is marketing the top-ups to ATM users. Verizon and Cingular, the two wireless carriers working with iATMglobal through a partnership with Boston Communications Group (bcgi), mailed fliers to prepaid users in the St. Louis area and provided some promotional items like "Ask me about prepaid wireless" t-shirts to employees at stores where the ATMs are located. Carriers also provided two-for-one minutes and similar introductory deals for prepaid users topping up their phones at ATMs.

The ATM Gold logo, which E*Trade Access is using to promote new services such as prepaid phone top-ups at its ATMs.

Welch Systems also spent thousands of dollars of its own money on promotions such as hiring disc jockeys from local radio stations to broadcast from stores offering the service, Hewitt said.

Dale Dentlinger, director of E*Trade Access, which is offering prepaid top-ups at about 120 of its ATMs in Boston through a partnership with bcgi, agreed that no new ATM services will win consumer acceptance without marketing muscle behind them.

He believes that the product providers -- in this case, wireless carriers -- will be the key to selling users on the service. Verizon, one of the two carriers working with bcgi and E*Trade, has supported E*Trade's efforts with some direct mail advertising in Boston.

To help attract prepaid users to E*Trade ATMs and make it easier to promote top-ups and other new services, E*Trade Access has designed a brand called ATM Gold. A Gold logo, featuring a stylized sun, will be posted on all ATMs offering non-traditional transactions, Dentlinger said.

Another key to marketing, Dentlinger said, is working with large retail chains. "Getting category-leading brands behind it on the retail side makes it possible to get a lot of ATMs (offering new services) out there quicker. It's harder to justify the cost of a sale like this to a smaller retailer."

Carriers will be more willing to spend marketing dollars if they can direct users to a well-known chain of stores, Euronet's Ferguson agreed. "They're not going to spend the money to say, 'Go to the ATM at Big Ed's Tackle Shop to top-up your phone.'"

Getting "critical mass" in a metro area -- which Ferguson defines as at least 20 percent of ATMs -- also will make it easier to promote top-ups, he said.

While nearly all of the interest in ATM top-ups to date has come from ISOs, "banks are beginning to come around," Ferguson said. Offering top-ups on bank machines will boost consumer awareness because they have higher transaction volumes, he said.

Because electronic top-ups are more cost-effective for carriers than the traditional scratch-off cards, Ferguson said carriers are eager to migrate users to ATMs and other self-service terminals and may do so by offering more competitive rates on those top-ups.

Like E*Trade, Euronet has created a brand called PaySpot that it is encouraging all deployers offering top-ups to post on their ATMs.

Multiple methods

It remains to be seen whether retailers that sell prepaid time via other channels such as point-of-sale terminals and scratch-off cards will see ATM top-ups as a complement or competition to those methods, Dentlinger said.

David Lipkin, president of Merchant Profit Solutions, a New York-based ISO that is conducting a prepaid top-up pilot at a handful of retail locations in the Northeast, said that many retailers want to offer top-ups at both ATMs and POS terminals to make sure they can serve all of their customers.

"Some people come in to the store, and they're just planning to go to the ATM. They want to be able to get in and out quickly. They don't want to worry about going to the counter and waiting in line if the store is busy," he said.

Many stores, particularly larger chains, "don't want to have a $5.15 an hour employee facilitating these transactions," said Lipkin, who is working with several carriers including Alltel, AT&T, Verizon and Cingular through a relationship with Dallas-based transaction processor Everything Prepaid.

The PaySpot logo, which Euronet is encouraging all ATM deployers offering prepaid phone top-ups to post at their machines.

Lipkin sees sites where counter speed is crucial, such as fast-food restaurants, as a "virgin market" for ATMs with additional services such as top-ups.

Lipkin believes he has an edge at getting into such sites because the machines he is using, Lipman 6050s, are equipped with cash acceptors. The Lipman base unit, the Nurit ATM Kiosk 6000, can be upgraded with a cash acceptor and/or a card hopper for dispensing prepaid cards, said Michael Danziger, Lipman USA's vice president of marketing and account management.

With these upgrades, "I can offer 90 percent of what is on the Vcom (the NCR unit being used by 7-Eleven to offer check cashing, money transfer and other advanced services) at a very affordable price point," said Lipkin, who left Lipman in January to become a reseller of Lipman products. Like E*Trade, Welch Systems and other deployers, Lipkin said he plans on offering several non-traditional services in addition to top-ups.

Technology passes the test

There have been few technological glitches in rolling out top-ups.

E*Trade's Dentlinger said his company drives all of its ATMs offering top-up transactions on Mosaic Software's Postilion platform, with financial authorization requests routed through Genpass Technologies.

E*Trade is currently offering top-ups on Triton ATMs, and testing the application on Diebold and Wincor Nixdorf models. The cost to upgrade machines to offer top-ups in the E*Trade network ranged from "zero to $500," Dentlinger said. While E*Trade covered the cost of the upgrades in the intial rollout, it doesn't want to bear the entire upgrade expense in the future.

E*Trade experienced a large number of transaction denials when it first began offering top-ups in October. However, the problem was on the receiving side. "It's amazing the number of large banks that don't support point-of-sale transactions on the authorization end," Dentlinger said, noting the problem was solved by working directly with the financial institutions involved.

"It took longer than we thought it would" to introduce the application, Dentlinger said, largely because of logistical issues like coordinating needed service calls.

Euronet's rollout has been delayed by a sales tax issue. While the initial plan was to post a disclosure stating that "an appropriate sales tax will be added to the transaction" in the 38 states that require sales tax to be assessed on prepaid minutes, the ATM networks nixed the idea, saying that users must be informed of the specific cost before buying.

"That pushed us back a little bit," Ferguson said, noting that ATM vendors had to modify their software to assess tax rates based on the zip codes of ATM sites. Now that the issue has been addressed, he said, "I think it opens the door for us to offer other products and services that are subject to sales tax at the ATM."

Ferguson said it was simpler to introduce prepaid top-ups in the UK and other European countries because Euronet owned the ATMs and processed all of the transactions itself.

Based on early installations, Merchant Profit Solutions' Lipkin said the biggest challenge was the user interface, which Lipman is tweaking to make more user friendly. "Top-ups are not what the consumer expects to do at this box, so you have to make it as intuitive as possible."

The issue is complicated even more because Lipman's Nurit 6050, with its cash acceptor, may attract prepaid customers without an ATM card. "You've got experienced ATM users and you've got consumers who have never used an ATM before," said Claude Ricks, president of Lipman partner Everything Prepaid. "You've got to get it down to a level the non-ATM user is comfortable with, without alienating your experienced users."

Ricks, who has worked with Lipman since 1997, said the manufacturer is ahead of the curve with top-ups and other prepaid products because they are considered POS transactions even when they originate at the ATM. Lipman is a leading POS manufacturer, and all of its self-service terminals are based on its own Nurit operating system.

"Anything you can do at the POS terminal, you can migrate to the kiosk," Ricks said.

Critical mass

All of those interested in offering top-ups, as well as other new services, agree that putting them on as many ATMs as possible is the key to making them viable.

"In this industry, we've all been guilty of one-upmanship," said Triton's Arguelles. "But in our opinion, none of these new services will work unless we can get them on as many ATMs as possible. We can't expect a consumer to go and seek out a Triton ATM to top up his phone or do a Western Union money transfer."   

Doug Deitel, executive vice president of corporate services for Cardtronics, doesn't think that adding new services to tens of thousands of ATMs will be as daunting as it sounds. "If this catches fire, everybody will want to jump on it and certify it and get their versions out there," he said.

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