When it comes time to offer premiums or run promotions, banks can lose the coffee mugs and T-shirts. There s one thing everyone wants and uses, regardless of age, income, gender or checking account balance: free long-distance talk time.

New Market pops up

This accounts for why more and more institutions are getting into the prepaid phone card business, says Aric March, president of Highland Park, IL-based MHA Communications. Three years ago, I had to tell people about phone cards, but not anymore, he says. March is a reseller who has sold the cards to major national and regional banks including Chase Manhattan, Mellon, Shawmut and First Union.

The cards began in Europe in 1988 as consumers needed a way to move across borders without worrying about whether they had enough francs, pounds or drachma in their pockets to pay for a call. They ve been slower to catch on in the United States as private owners of pay phones stateside have failed to standardize their technology to accommodate the cards.

Banks can use the cards, made of plastic or paper and customized to any design, for a variety of purposes. Every time a customer uses one, he or she sees the bank s name, making it a portable billboard. And when the phone card is used free talk time is accessed with a PIN a message from the bank is heard by the customer. Some cards require a short survey before the telephone time can be used. There s no limit to what the programming can do, March explains. It s the virtual toaster of the millennium.

March also counts insurance companies and Merrill Lynch as customers. Merrill Lynch gave out 500 cards to thank people who attended an investment seminar.

Prepaid phone cards work well because they offer immediate response to customer surveys, with a maximum of eight questions, March says. If the survey response is low, the questions can be re-recorded, unlike direct mail campaigns, which cost more and can t be re-tooled halfway through the process based on customer response, he adds.

Banks of every size can benefit from using the cards because they are so easily and inexpensively customized, he says. A card targeting Hispanic consumers for a community bank, for example, can have a survey recorded in English and Spanish.

Robert Mogler, vice president of Elgin Financial Savings Bank, a community bank in Elgin, a town of 80,000 persons 50 miles northwest of Chicago, recently used prepaid phone cards as a premium to entice new customers to set up free checking accounts.

competitive weapon

Faced with competition from the big guys, Mogler wanted something innovative and unusual. He used the cards from April to July 1998 to attract a specific demographic group: younger, more affluent consumers moving to Elgin from suburban Chicago. I had to get educated about the cards, Mogler admits. I had never held one before.

With 250 new accounts directly attributable to the cards, the promotion went very well, Mogler says. We really didn t know what to expect. Mogler bought 500 cards for $12 each from MHA Communications (Most larger phone companies demanded a minimum of 1,000 cards.). Then, via a card recording, the bank disseminated information to customers on other services such as equity loans to new home owners. Thirty to 40 calls came though as result, although it s too soon to know if loans resulted, Mogler says. I would do it again, he says. I hadn t heard of another bank doing it and that was part of the appeal.

Robert Kapolnek, marketing director of MidAmerica Bank, a regional bank in Clarendon Hills, IL, used prepaid phone cards twice this year. To mark the bank s 75th anniversary, he bought 750 cards for $3.30 a piece, each with 15 minutes worth of free long-distance phone time. The cards, called Diamond Dialers in honor of the diamond anniversary, were given out in all 23 bank branches. Typically, only 51 percent of the time is actually consumed, although 90 percent of the cards were used at least once, Kapolnek says.

building traffic

We wanted them to act as a traffic-builder into the bank and as a way to express customer appreciation. We did not use them to sell anything, he explains. A second effort, used to attract Polish customers into a new Chicago branch, was less successful, Kapolnek concedes.

The attention caught the eye of officials at MCI, which got into the prepaid card business about 18 months ago, says Rick Pileggi, financial market accounts manager. We saw an untapped market in non-traditional retail outlets, such as banks. Many were very receptive. The cards are used internally for employee awards and motivation and externally for surveys. In limited instances, they are being sold through ATM machines. Star Bank in Cincinnati began selling the cards in April. It s a very good deal for the banks, depending on where you retail it, Pileggi says. Phone time can be bought cheaply, then re-sold on the cards for as much as 25 to 35 cents a minute, a 20 to 50 percent markup, he says.

Other MCI prepaid card customers include Chase, Citibank and PNC Bank, all of whom have begun using the cards within the last year, he says. Everybody uses long distance, Pileggi adds. Customers see long-distance phone time as valuable as receiving cash. Prepaid schemes work well for phone-time providers, March and Pileggi agree, because most people don t use all the time on the cards. Says March, It s a nice revenue generator for us.

C.Kelly

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