A payments technology company is touting the sale of gift cards through automated teller machines.
Thomas E. Honey, the chief development and marketing officer of Better ATM Services Inc. of Mesa, Ariz., says that it has developed a way for ATMs to dispense gift cards through the cash slot, and that several restaurants began testing the technology this week.
ATMs have been used to sell gift cards before, typically through a unit called a sidecar that attaches to the machine and stores the cards. Better ATM Services says its cards are thinner than typical gift cards, so no sidecar is needed.
Banks and ATM companies are debating whether the machines should offer financial services beyond the standard withdrawals and deposits. Cardtronics Inc. recently purchased 7-Eleven Inc.'s Vcom kiosks and is evaluating how to earn a profit from their more advanced functions, such as bill payment and check cashing. U.S. Bancorp is testing its own line of multifunction kiosks.
"What we're doing is adding a new dimension to ATM technology that's changed little in the last 30 years," Mr. Honey said in an interview Thursday.
Consumers will need to make a "slight adjustment" to get used to the idea of buying gift cards through an ATM instead of at the point of sale, he said. "This only requires a slight change in consumer behavior without any major technological change. Granted, it may take a while to catch on, but when it catches on, it will be amazing."
Better ATM Services is testing the machines at a handful of Arizona restaurants: Mi Amigo Mexican Grill of Phoenix and Mesa, Maycayo's of Scottsdale, and Tavern on Mill of Tempe. The machines are driven through U.S. Bancorp's Elan Financial Services.
David Candland, the president of Comida Management LLC, which operates the Mi Amigo restaurants, said that selling gift cards at an ATM offers convenience to customers and several benefits to merchants.
Automating the sale "takes the labor equation out of it for us" and eliminates any human error in filling out and presenting a card to a customer, he said.
The machines also reduce costs for the restaurant, Mr. Candland said. "Most of our sales are credit card sales, which have a credit card fee attached to it. To be able to take that out of the equation and receive this like a cash sale for us is a huge positive." Getting a prepaid sale is also "a guaranteed sale for us, whether they redeem their card now or three years from now."
Mr. Honey said that his company's closed-loop cards are not linked to any major card network and cannot be used anywhere except at the merchant that sold them. Mi Amigo sells only $25 cards, though he said that Better ATM Services hopes to modify its system to let consumers purchase cards of any value and reload them at the ATMs.
Purchasing a gift card takes a bit longer than a typical cash withdrawal, he said. Funds from the customer's account are debited to pay for the card.
Mr. Honey has a long history in the payments industry. He has worked in the past with Visa U.S.A. Inc. and the debit company NYCE (now part of Metavante Corp.).
H. Leon Majors 3rd, the president of the payments research group at Phoenix Marketing International in Rhinebeck, N.Y., said the market is still undecided about whether ATMs should offer advanced financial services.
Some ATM operators want to offer new types of transactions, because "those machines are very much at the mercy of cash usage, which is falling," Mr. Majors said. "Here is something you can add on that will give you some incremental transactions, so you're not completely at the mercy of falling cash volumes."
