Concord to Test ATM P-to-P for Unbanked

Approaching territory dominated by First Data’s Corp.’s Western Union, the payments processor Concord EFS Inc. is planning to test an ATM service for sending money to anyone — even people without bank accounts.

Concord, which runs the Star electronic funds transfer network, is working with Travelers Express/MoneyGram, a subsidiary of Phoenix-based Viad Corp.

Concord, which is based in Memphis, has a patent on the person-to-person service, Star MoneyGram. To use it, a sender goes to an in-network automated teller machine, keys in the amount to be sent, and is given a one-time-use personal identification number. The sender tells the recipient the amount and the PIN; the recipient uses these and a special access card to retrieve cash from any ATM.

The pilot program, scheduled for this fall, will be limited to two ATMs, but the companies say they hope to eventually roll out the service to all 209,000 machines in the Star network.

Star MoneyGram would compete with First Data’s Western Union money transfer system as well as other P-to-P services, such as PayPal Inc.’s, which also allows people without bank accounts to retrieve money from ATMs. First Data also owns the NYCE network, which has another P-to-P product in the works.

A Star MoneyGram sender would need an account with a Star network bank, but the recipient would need just the access card, which would not store value.

The card would work only for this type of transaction, said Ann Jackson, the vice president of product development at Travelers Express/MoneyGram. The ATM handles the transaction as “a regular cash withdrawal,” she said.

The reusable access cards will be available through Travelers Express/MoneyGram outlets, certain banks, and direct mail, as well as a toll-free number. The companies are also looking for retailers to distribute the cards.

The sending ATM would require some new software, but the receiving ATM would not. That gives the Star MoneyGram a fighting chance, said Alanna Kellogg, the president of Kellogg Group, an ATM industry consulting firm in St. Louis. “More ATM owners can participate at least on the receive side without … having to make changes,” she said.

If both sides needed to be upgraded for the system to work, Ms. Kellogg said, ATM owners would have to ask, “Should we make this investment? What’s the return on investment? Who’s going to do it?” Ms. Kellogg said. That would delay “critical mass,” she said.

Ken Kerr, a senior analyst for Gartner Inc. of Stamford, Conn., said Concord is going after the unbanked — about 13% of the adult population. “The total revenue is going to be small,” he said, “but the margin on these transactions could be significant, because unbanked people are used to high fees to move money.”

Ronald A. Congemi, Star’s president, said that fees for the new service have not been set but will be lower than Western Union’s.

And anti-laundering laws passed this year mean the transactions will be scrutinized by federal agencies, he noted.

Ms. Jackson said that Travelers Express/MoneyGram views the new service as a way to steal market share from the industry leader, Western Union.

The rival companies were once affiliates. For a while First Data, which American Express spun off in 1992, owned both Western Union and MoneyGram, she said. But in 1995 the Federal Trade Commission ordered First Data to sell one, and it spun off the newer company, MoneyGram, which was subsequently sold to Travelers Express in 1998.

Both Western Union and Travelers Express/MoneyGram let customers send and receive money across national borders, but the Star network is a domestic one, and Mr. Congemi said the MoneyGram P-to-P service will be limited to U.S. customers, at least for the short term.

“There are a number of opportunities to expand our reach,” he said, but international transactions are “not our focus right now.”

NYCE’s P-to-P product will permit customers to initiate real-time money transfers through ATMs and — at bank option — by phone, through a teller, or over the Internet, said senior vice president James S. Judd. Unlike the MoneyGram system, it could send only to direct deposit accounts.

Mr. Judd said that the various P-to-P services on the market and on the drawing board have different features, price points, and target audiences. The NYCE service might be useful to people “with multiple accounts at different banks,” he said, while the Star MoneyGram might be aimed at “consumers with recurring transactions.”