Although attempts to push nonfinancial items like stamps and movie tickets through automated teller machines have fallen flat, providers continue to seek a product that might boost the terminals' fee-generating potential.
A growing number are looking at telephones as a possible answer.
A mini-wave of experiments in prepaid "air time" are underway, including one at E-Trade Group Inc., which plans to expand a pilot in which its E-Trade Access unit lets customers recharge prepaid cell phone accounts through ATMs.
Manufacturer NCR Corp. is working with five independent sales organizations to test the service on about 140 ATMs, mostly in St. Louis, and Canadian Imperial Bank of Commerce announced in June that customers can use its ATMs to buy prepaid time for their long-distance calls on cell, regular, and pay phones. It is working with a private Toronto company called Prepaid Direct to offer the service.
In further activity on this front, First Data Corp.'s Western Union Financial Services Inc. subsidiary said Monday that it had bought a majority stake in Eposs Ltd., a company in Cambridge, U.K., that specializes in payment services for the prepaid cellular market.
As E-Trade continues to expand the functionality of its ATMs, it is keeping a close eye on 7-Eleven Inc., which is blanketing its stores with advanced teller machines called Vcoms that offer standard ATM services along with check cashing, money orders, money transfers, and bill payment. The Dallas company also plans to offer online shopping at its kiosks by yearend.
E-Trade has been testing the cell phone top-up feature at 150 ATMs in Boston for six months. Though executives would not disclose just when they plan to make it more widely available, they said they were eager to do so promptly.
The Menlo Park, Calif., company has about 15,000 ATMs across the country, more than any brick-and-mortar bank, and sees them as a linchpin in its strategy of delivering financial services mostly through remote channels.
The cell phone recharge service fits into E-Trade's twofold ATM strategy, said Steve Gutterman, its chief operating officer.
The first part of the strategy is to boost revenues by generating more per-visit transactions. "Now, customers withdraw cash and they leave," Mr. Gutterman said. "We're trying to increase the number of transactions per visit to two to three or four."
The second part is to add services to ATMs that maximize customer convenience, Mr. Gutterman said. Options under consideration include limited look-ups of stock quotes and statement information. E-Trade is also weighing bill payment through ATMs, as well as services for people who do not have bank accounts, such as money orders and money transfers.
In the pilot test consumers can use regular ATM cards (not just those issued by E-Trade) to direct funds from their deposit accounts to their prepaid cell-phone accounts. They can begin making calls right after the transaction.
Interestingly, E-Trade's enthusiasm for the program seems to be linked more to the anticipated proliferation of prepaid cell phone use than to actual results from the Boston pilot.
Though it would not say how that pilot has been going, one executive acknowledged that use of the service has been underwhelming.
"We need the [cell phone] carriers to market the product to customers," said Dale Dentlinger, E-Trade's director of banking relationships. He said E-Trade recently started marketing programs that explain the service to consumers and show them where they can go to use it.
Despite the slow uptake, cell phone top-ups have certain qualities that make them attractive to push through the ATM, Mr. Dentlinger said. For one thing, E-Trade's service involves moving data as opposed to dispensing something of value, he said. "Providing data is easier, and it's a lot more profitable."
Second, E-Trade executives said they believe cell phone accounts will soon be as popular in the United States as they are in Europe. "We'll be well positioned to take advantage of that" when it happens, Mr. Dentlinger said.
It is predicted that the prepaid airtime market will grow, particularly among younger consumers, now that the market of people who buy cell phone airtime in monthly installments is relatively saturated. Of the 52% of the U.S. citizens who use cell phones, only about one in 12 was on a prepaid contract in 2002, according to report released in June by TowerGroup Inc., the Needham, Mass., financial research and consulting firm.
But TowerGroup expects the number of prepaid users to grow 17% a year through 2007, versus just 3% for post-paid.
"The prepaid market in the U.S. is not as big as in Europe," said Ed Kountz, a senior analyst at TowerGroup and the author of the report. But carriers' efforts to market prepaid accounts as fashionable tools for the contract-averse are "helping to increase visibility and adoption," he said.
The ATM is far from the only method that companies are promoting to top-up prepaid cell phone minutes. Others include the Internet, automated voice response, and scratch cards that let users type in temporary codes.
TowerGroup expects ATMs will capture 7% of the total U.S. mobile top-up market by 2007, and estimates that ATM owners will derive additional revenues of $124 million a year from top-up services.
E-Trade said that the telecom carrier involved in the Boston pilot, Boston Communications Group Inc., pays it a percentage of the dollar value of each cell phone top-up transaction. E-Trade then splits that revenue with the retailer hosting the ATM. According to TowerGroup, commission streams of 15% to 20% are common at the point of sale, the most popular method of recharging phones.
As with many of the services E-Trade is considering, online shopping presents a queue-management issue, Mr. Gutterman said. "You start running into very real logistical questions about how long the person behind you is going to wait."
There is also the question of whether consumers really would rather shop at an ATM than by home computer. "We're still in the exploratory phase to really gauge customer preferences," Mr. Gutterman said of online shopping.
One consultant emphasizes that ATM deployers must tread gingerly in widening their machines' functions. "Cash is king" at the ATM, said Les Reidl, a senior vice president at Speer & Associates Inc. of Atlanta. Cash withdrawals have accounted for more than 80% of ATM transactions for the past 20 years, he said. Balance transfers and inquiries make up about 10%, and deposits 5%.
"All those other ancillary services make up less than 1% of ATM transactions," Mr. Reidl said. "They're a rounding error."
