Seniors Are Prime ATM Target

To the banking industry's dismay, ATM card penetration has been stuck at 57% for two consecutive years.

In hopes of breaking through that barrier, marketing programs are targeting older customers. While they have been the most reluctant to use self-service machines, they also present the greatest opportunity for growth.

It's possible, though, that the general aging of the population will actually help solve the problem for banks.

According to the 1991 American Banker consumer survey, customers aged 44 or under are much more likely to hold and use ATM cards than their older counterparts. So it's possible that as these users grow longer in the tooth, they will keep on using their cards, helping to push market penetration higher.

Many to Turn 62

"Between July 2008 and July 2009, 3.5 million people will celebrate their 62d birthday as the first baby boomers pass this milestone," noted a recent issue of American Demographics magazine. "The boom [in retirees] will continue for several decades and peak around 2020."

Card ownership crests among 25-to 34-year-old customers.

Some 68% of customers in that age group - and 65% of those 35 to 44 - have teller machine cards. By contrast, only 37% of those aged 65 or older own cards, according to the eighth annual consumer poll, administered this year by the Gallup Organization Inc., Princeton, N.J.

Gallup conducted 1,007 interviews nationwide with heads of households that have one or more accounts with a financial institution.

Younger Users Active

In terms of volume, 57% of those 18 to 34 years old visit teller machines one to six times a month, while a substantial 25% of those in the 18- to 24-year-old category chalk up 11 or more visits.

The figures, which represent percentages of ATM cardholders, show a distinct decline with rising age. Half the people at least 55 years old are nonusers. Only 34% of those 55 to 64 years old, and 42% of those 65 or older made one to six ATM visits.

In the over-64 group, heavy users - those who visit ATMs at least 11 times a month - comprise a tiny 2%.

Small wonder that many banks are unwilling to wait two decades while their ATM-active customers grow older, and they are launching an array of marketing campaigns to lure mature consumers into the fold.

As with younger customers, convenience may have widespread appeal. One vendor points out: "Senior citizens don't like to stand in line any more than anyone else."

That observation violates another marketing maxim: Never call your customers senior citizens. Many are even getting touchy about the word "mature."

Keeping the Lines Short

Because older customers often live on fixed incomes, many are also on the lookout for a bargain.

Appealing to that interest, Bank of Hawaii this fall staged a huge giveaway in which nearly every user of its teller machines would receive a coupon good for a prize. The gifts ranged from a free soft drink to a new car, travel, and several thousand dollars in cash.

Mobile Unit Effective

Although designed to promote the bank's entire network, the campaign's centerpiece was Bank of Hawaii's new mobile unit, a recreational vehicle retrofitted with a cash machine. Service representatives sent along for the ridge gave demonstrations. During the first week, they also gave customers inexpensive sunglasses.

Locals lined up for the lessons and the free sunglasses, says Donna Hunt, the bank's vice president of retail electronic delivery systems. Further into the campaign, she said, the bank began receiving phone calls from winners, asking to modify the coupon redemption rules.

Most identified themselves as retirees. Often they were calling to ask about one of the gifts: two-for-one coupons for a night's stay at any one of the several Sheraton Hotels throughout the islands.

"They'd say: |I'm retired and I can travel, but I don't want to leave this island,"' Ms. Hunt said. "We made arrangements for them to redeem [the coupons] closer to home."

Other Approaches

If the sweepstakes approach falls short, consultants are waiting in the wings with other suggestions. One is based on a theory that older customers in rural areas don't use ATMs because they simply aren't in that big a hurry.

But there's opportunity in that laid-back lifestyle, says Marcy Massie Rowan, a consultant with Nashville, Tenn.-based FISI Madison Financial. She urges banks to offer frequent, free ATM demonstrations under the guise of social occasions.

"We've recommended that banks have a tea, or serve coffee, with the demonstration and give them time to ask questions. It's the nonthreatening atmosphere that does it," Ms. Massey Rowan said.

But if the personal touch encourages machine use, a corollary says it's concern about losing such service that keeps some customers away - particularly those with higher incomes.

Frequency Is Varied

That's possible, because there is at least a surface correlation between income and ATM use. According to the American Banker survey, 57% of those 25 to 34 years old step up to an ATM between one and six times a week, while just 44% of 45-to-54-year-old customers do the same.

That older segment comprises only 15% of the population, according to statistics compiled by research group Cahners Economics. But it controls 31% of the income in households that make more than $75,000 a year.

To boot, more than a third of the population is over 50, but they control half the nation's discretionary income and 77% of its assets.

In line with these statistics, some consultants pose some questions: Do banks risk squandering sales opportunities by putting an ATM between themselves and older, wealthier customers? If tellers and customer-service representatives don't get to talk to customers, these experts ask, how can the bank cross-sell them such investment products as certificates of deposit, annuities and mutual funds?

One answer to that question comes from manufacturers of teller machines.

Targeting Is Possible

David A. Sacco, director of self-service systems for Dayton, Ohio-based NCR Corp., advises banks to use the latest generation of ATMs as one-on-one marketing channels. Given the machines' technological sophistication, he says, an institution can customize and encode product messages to appear on-screen when target customers punch in their account numbers.

But if cash machines can help to sell a bank's products, other services - or problems with them - may also encourage customers to use the machines.

Last winter, for example, some 8,000 Social Security checks earmarked for retirees in eastern Oklahoma were lost in a St. Louis airport for a week during the holiday mail crush. Because of the snafu, many recipients signed up for direct deposit and and ATM cards, said Lance Woodliff, head cashier of the National Bank and Trust Co. of McAlester.

In another marketing twist, some banks are challenging the idea that mature customers shun ATMs because they are wary of the technology.

Research by New York-based Grey Advertising debunks that notion. The company says its research shows that 82% of seniors, now freed of many responsibilities, are reorganizing their lives and declaring themselves open to new products and experiences.

"The idea of senior citizens not liking technology is a myth left over from a few years ago, says consultant Ms. Massie Rowan.

Some experts also urge banks to promote machines in the context of packages of products and services aimed at older customers.

Social outings are often part of such programs, points out Carol Milden, director of marketing for Cheshire County Savings in Keene, N.H. Thus, a bus trip - say, to a regional shopping outlet - might provide opportunities for bank representatives to carry the ATM message, she said.

In addition, Ms. Milden said, when a customer-service representative sells travelers checks for a trip, he or she might also offer a refresher course in teller machines.

PHOTO : DONNA HUNT of Bank of Hawaii used sunglasses as a giveaway.

Judy Ferring is senior editor of Retail Banking Manager, an American Banker newsletter.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.