STRATEGIC PARTNERS
Default Proof Credit Card System thinks it has the next "killer app" for the ATM: debit card dispensing.by Ann All, editor
March 20, 2002
Debit at the point-of-sale has taken off in the past few years, with the nation's EFT networks tallying increases of 30 percent or more in POS transactions in 1999. At the same time, ATM transaction volume has leveled off.
But David Koss, president and chief financial officer of Default Proof Credit Card System, believes he's found a way for ATM deployers to capitalize on debit's popularity rather than being victimized by it.
Default Proof recently patented a process that will enable consumers to purchase prepaid, PIN-based debit cards and collect them at an ATM. The Florida-based company is negotiating with several financial institutions to find an issuer for the cards. A patent is pending on ubuydebitcards.com, which will allow consumers to buy the cards on the Internet.
"We can't think of a more appropriate new function for an ATM than dispensing prepaid debit cards," Koss said. "They're a financial tool, and people go to ATMs for financial purposes rather than to shop or to buy stamps."
An ATM's capability to offer delivery on demand is especially attractive, Koss said. "The sooner you're able to put that card into a user's hand, the more usage you'll see." For that reason, the company is also developing a debit card to be sold over-the-counter at retail locations.
Until Default Proof lines up distribution deals with ATM owners, the company plans to mail its cards.
While an obvious audience for the cards is consumers without bank accounts, Koss said there are other possibilities, such as those who want to send a card to family members or friends in distant locales.
"If you're in New York and you know somebody in trouble in L.A., you don't want to have to find the nearest Western Union location and pay a 15 percent fee to wire money," he said.
Koss said Default Proof would like to add an ATM locator to its Web site so that customers can simply enter the zip code of the location where they wish to have a card dispensed. To pick up the card, those on the receiving end must enter a special code.
The cards have a multi-currency function, so they can be purchased in foreign denominations -- a selling point for travelers who may not want to purchase traveler's checks or worry about exchange rates.
But banks should "look at the big picture," Koss said. Serving non traditional -- read unbanked -- customers is a way for them to achieve "deeper penetration" into the debit market and to lure non-ATM users to the machine.
"You are putting debit cards into the hands of people who wouldn't otherwise have been using your ATM," he said.
Koss concedes that, to really appeal to the low-income market, it's important to be able to accept cash. He predicts that cash acceptors will become more common on future generations of ATMs, along with Internet accessibility.
"Why shouldn't cash acceptance be just as standard a feature on an ATM as on a stamp machine or a calling-card dispenser?"
