An Earful at the ATM

Cellular phone services, already widely popular in Europe, will soon be offered through ATMs in the U.S.

"Topping up," as it's commonly called in the UK, is the purchase of prepaid cellular phone time via POS terminal or ATM. Available in Europe for about three years, the service will be offered to American customers on the East Coast within the next few months.

ATM users top up in two basic ways:

• The user transacts to purchase airtime, his bank account is debited for the cost, the cellular phone service provider issues an access code, which is printed out on a receipt. When the user dials in the access code on his cell phone, the phone time is activated immediately.

• A second method skips the access code receipt and automatically activates the paid-for time immediately.

The paperless model is most economical, says Charlie Denwood, vice president of international sales at PSINet, headquartered in Reston, Va. The expense of printing a voucher "can be costing an operator between 20-80 percent of the face value of the voucher. In some cases they're making no money at all."

Electronic transactions, he added, not only lower expenses for ATM operators, but cellular service providers enjoy greatly reduced administrative costs. That has made them very eager to distribute their services through alternative channels, such as ATMs.

While still the most widely used method of topping up, the access code receipt can be lost or stolen as easily as a prepaid hard card, said Mosaic Software's Johann Dreyer. A fully electronic top up, he believes, is the most secure option.

"Where the transaction is authorized in real time and the activation is done in real time, there's no possibility of theft, no leakage, no inventory (of hard cards)," said Dreyer, executive chairman for the Ft. Lauderdale-based company. "If a batch of 100 cards gets lost and they each represent $50, you've lost $5,000. It represents money."

The prepaid cellular phone market originated in Europe as a means of ensuring high-risk cell phone clients didn't get behind on their post-paid bills. But when service providers realized how prepaid transactions eliminated the burden of tracking down unpaid bills, they offered that payment option to the whole market.

Today, more than half of all European cellular users prepay for their airtime. In Italy, that figure is 70 percent, according to PSINet's Denwood.

Numbers like that should only become more common, said, Clare Theakston, PSINet's vice president of strategic development. In England alone, she said, 5 million new cell phones were sold during the Christmas shopping rush-proof of a prepaid transaction boom to come. "People wanting to purchase prepaid will almost double the market in the coming year," she said.

Mosaic has experienced the rising tide of volume, too, said Dreyer. "Four years ago it wasn't an interesting market for us, but we've sold the majority of our (programs) in the last nine months."

But even in a cell-phone-crazy culture such as Europe, Dreyer pointed out that only 1,000 ATMs currently are programmed to dispense prepaid cell phone time. Phone time can be purchased at the majority of the region's POS terminals, but offering it through more ATMs will require more partnerships between terminal owner/operators and cellular phone service providers. The realization of that, he trusts, is just a matter of time.

As president of iATM Global, Shami Patel believes ATMs have a leg up on POS terminals when it comes to sales of prepaid cell phone airtime. They're widely available, accessible 24-7 and easier to use, he says. No walk from the car to a c-store line to cue up. Just drive up or walk up, and top up.

"People already visit the ATM on a routine basis, so by adding incremental offerings that are intuitive and consistent with convenient access, we're able to add a convenient, self-service (option)," said Patel. His infrastructure software company is working to facilitate the sale of prepaid airtime in East Coast U.S. ATMs this year. "If you can provide offerings in a way that make them easy to use and that … resemble a cash-dispensing transaction, then people will consume alternative goods and services such as this."

Adding prepaid cell phone service to the menu of ATM offerings is simple, sources said. The major work involved is in partnering the cellular service provider with ATM owner/operators, and then finding companies to create the proper interfaces to manage the transactions.

Sources also said that whether ATM transmission is done by dial-up or lease-line doesn't pose a significant challenge either. Patel called it "a no-brainer for dialup … but there may be some minor communications upgrades with lease-line situations" in order to make the ATM to work on the TCP/IP protocol.

Making the system work globally requires the same steps, plus developing interfaces that work with multiple proprietary networks. (The UK uses a uniform standard network dubbed LINK.) And as use of GSM cell phones grows, the demand for access to prepaid cell time anywhere in the world will grow significantly.

"With mobile phones, you want to be able to top-up anywhere," said Theakston. "But that payment's got to be authorized in France, for instance, and also the prepay aspect has to come to, say, Vodaphone in the UK.

"As well as providing a country-by-country solution, we have to provide a cross-border solution as well."