The recession left its mark on many industries, but if it had a silver lining for 7-Eleven Inc., it may have been the opening it created to get into a more-profitable array of financial-services products in response to shifting consumer demand.
After experimenting with a few different approaches, the Dallas-based convenience-store chain appears to be on the fast track to ramping up plans to offer a variety of alternative banking products throughout its 6,200 U.S. stores, with a strong emphasis on reloadable prepaid debit cards.
The company earlier this month began selling Netspend cards in 5,000 of its stores alongside prepaid cards from Green Dot Corp. (
7-Eleven also this year began selling Western Union Co.’s MoneyWise reloadable debit cards at its stores as part of a plan to further expand its financial-services offerings, the company says.
And 7-Eleven this month introduced the option for customers at most of its stores to make electronic payments and purchase bus tickets with cash through PayNearMe Inc. (
“Each of these alternative banking products and prepaid cards has subtle differences and unique features, and we want to offer our customers a broad range of choices,” Raja Doddala, 7-Eleven senior product director for services and business development, tells PaymentsSource.
Some research suggests as many as one-third of U.S. consumers lack access to traditional banking services, Doddala says, and 7-Eleven now aims to become a destination for those seeking a full range of alternative financial-services options. In doing so, the company hopes to capture a bigger share of consumers’ growing demand for alternative financial services and to generate more store traffic.
The convenience-store chain first introduced Green Dot’s reloadable prepaid cards in late 2009 as the recession deepened. Immediate results were positive, and the company began making plans to expand its offerings, including revamping its stores to accommodate more such products, Doddala says.
“We were somewhat late to the prepaid market at that time, … but we also entered during what turned out to be a perfect storm,” Doddala says. “The timing coincided with the financial crisis, the credit crunch and a general distrust of financial services companies when consumers began looking around for alternatives.”
Even so, 7-Eleven has moved carefully in evaluating its options in its latest financial-services push because it is not a newcomer to the arena.
A longtime purveyor of reloadable prepaid phone cards and cell-phone services, 7-Eleven several years ago developed a proprietary network of in-store ATMs called Vcoms that enable consumers to perform a variety of banking services, including bill payment.
But 7-Eleven ultimately decided offering more-complex banking services was not a great fit, and it sold the operation in 2007 to Cardtronics Inc. (
“We realized that as a retailer, it made sense for someone else to run that line of banking products,” Doddola says.
7-Eleven continues to receive an undisclosed percentage of profits from some 2,200 of the former Vcom machines and the AllPoint Network ATMs that Cardtronics operates in its stores, a Cardtronics spokesperson says.
After remodeling its stores over the past couple of years to accommodate a broader variety of products, 7-Eleven made its move to expand its prepaid debit card offerings, Doddala says.
Some features of 7-Eleven’s latest financial-services products may overlap with those Cardtronics offers through in-store ATMs, such as bill payments and funds transfers. But 7-Eleven believes the new entries will “complement,” rather than compete with the services Cardtronics offers, Doddala contends.
“We observe that machine-based banking services appeal to certain specific groups of customers, while others want to deal with a 7-Eleven employee when they’re buying a prepaid card, reloading or transferring funds,” Doddala says.
Cardtronics seems to share that view.
Because holders of some reloadable prepaid cards have access to bill-pay services and others do not, “Cardtronics’ 7-Eleven-located multi-function ATMs continue to fill a market need with regard to services such as bill pay and check cashing, ensuring that no consumer, especially those with a cash-preferred lifestyle, falls through the cracks of advanced financial-services technology,” a Cardtronics spokesperson tells PaymentsSource by email.
7-Eleven’s latest moves are in sync with those of other retailers capitalizing on growing awareness and access to reloadable prepaid debit cards, Ben Jackson, senior analyst at Mercator Advisory Group, tells PaymentsSource.
“There is a general recognition that reloadable prepaid cards can be sold side by side, and it provides retailers like 7-Eleven with more foot traffic, which it hopes will cause people to make more purchases while they’re inside the store,” Jackson says.
Although 7-Eleven and other retailers typically receive a cut of the revenues from reloadable prepaid cards they sell, industry profit margins are relatively thin, Jackson notes.
“The key for the card companies to generate profits is to get volume, and clearly that is where they want to go with 7-Eleven,” he says.
What do you think about this? Send us your feedback.
