With profit margins as high as 40 percent, prepaid phone cards aren't just customer marketing tools, but also proven money-makers.
Distribution of the cards in banks was boosted recently by an alliance between BLT Technologies and TransAlliance, a Washington state- based leader in electronic funds transfer technology. TransAlliance is marketing the cards to 800 western U.S. banks and financial institutions. BLT, a pioneer in phone card technology with alliances with several other transfer tech firms, is providing the phone time. "When banks sell this card, they are buying at a wholesale rate and selling at a retail rate, and the difference between them becomes a new source of profit," says Denny Dumler, president and CEO of TransAlliance. The wholesale rate will be determined by a bank's financial commitment to the card provider: The more minutes the bank buys, the lower the cost.
Mahala Renkey, marketing director of prepaid cards at AT&T, sees tremendous growth in 1997 for the $1 billion prepaid phone card market. "Our research shows consumers are using the cards at all income levels to control spending and (for) gifts. (AT&T) revenue returns are determined by how actively a bank markets the cards, the number of bank branches and the number of selling locations."
AT&T's marketing program includes point-of-sale materials and ATM menu design assistance. "A bank can link phone cards to point of purchase by offering additional minutes in exchange for maintaining an account balance or for doing business with the bank," says David Ford, MCI's director of prepaid marketing.
MCI will soon issue an ATM card that stores dollars as well as minutes.