MasterCard Inc. is throwing more muscle behind its prepaid growth strategy by offering surcharge-free ATM access to its issuers and program partners.
By partnering with Cardtronics Inc.'s Allpoint Network, the Purchase, N.Y., payments company could better compete for business with prepaid card issuers and program managers, which consider surcharge-free access to automated teller machines an important tool to attract customers, analysts said.
"It's a great opportunity for prepaid companies that are looking to differentiate, are looking for ways to provide value for their cardholders, looking to continue progress in the evolution of their products and the way they are going to market," said Neil Dugan, a vice president and head of U.S. markets prepaid product management for MasterCard.
The announcement, made Thursday, also is a coup for Allpoint Network, which has 32,000 surcharge-free ATMs in the United States located primarily at retail stores such as Target Corp., Costco Wholesale Corp. and 7-Eleven Inc.
ATM withdrawals made with prepaid cards are a small part of the network's business but the company wants to boost that volume, said Ben Psillas, the president of Allpoint Network.
"We're trying to leverage our infrastructure as a financial kiosk leader to sell more products and services to this growing segment," Psillas said.
The ability to offer access to surcharge-free ATMs is important for prepaid card issuers and program managers to compete for cardholders, said Tim Sloane, the director of the prepaid advisory service at Mercator Advisory Group in Maynard, Mass.
"Consumers who have a general-purpose reloadable card need access to cash, and the more convenient that you can make that, the better off you are," Sloane said.
There are also state laws requiring payroll and other programs to provide users access to their funds at no cost, Sloane added.
MasterCard does not have any prepaid card issuers or program managers that have agreed to use the Allpoint Network, Dugan said, but some have expressed interest.
Traditionally banks and other customers pay Allpoint Network a flat monthly fee based on the number of cards that have access to its ATMs, Psillas said. Neither he nor Dugan would discuss the financial arrangement of MasterCard's agreement.
By going through MasterCard to connect to Allpoint Network, issuers and program managers receive a price benefit, Dugan said.
"We believe that our partnership provides a simplified process for our members and partners to be able to provide access to Allpoint ATMs for their cardholders and to be able to do that at a lower price," he said.
