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Though the economy has shown signs of improving, many consumers continue to show a preference for pay-as-you-go services for cell-phone use and long-distance minutes. Transaction processor Heartland Payment Systems Inc. hopes to take advantage of this trend through an initiative that enables merchants to offer customers prepaid calling services without the need for traditional plastic calling cards.
About 60% of the world's 1.1 billion mobile subscribers prepay their wireless service, according to industry estimates. Most prepaid subscribers reside in Europe, but Heartland expects the number to grow in the United States.
Epay, a division of Euronet Worldwide, offers a similar service in Europe, but Heartland claims to be the first U.S. processor to offer a point-of-sale-based service.
Heartland's decision to enter the prepaid-market for calling services may help card networks, issuers and merchant acquirers capture a share of transactions usually reserved for wireless carriers, according to one analyst.
Instead of traditional plastic calling cards, customers receive personal identification numbers on receipts printed from POS terminals.
Customers can redeem minutes by calling a toll-free number also printed on the receipt and by entering the PIN. The procedure is the same for wireless and landline minutes.
Consumers pay no service fees for prepaid minutes, and they can choose to purchase more than 110 offerings from most major wireless carriers.
To initiate a purchase, a cashier presses the prepaid-services button on the screen of the payment terminal and enters a cashier identification number, which provides extra security for the merchant, according Randy Harp, Heartland senior product sales strategy manager. The cashier picks the provider, and a list shows a number of denominations available. The consumer can pay for minutes with cash or with a credit or debit card.
"In the prepaid-wireless arena, the products are pretty much fair-trade," Harper says. "You buy a $10 card, and that card is going to give you $10 worth of value."
The program is ideal for merchants that lack sufficient space to display and store plastic cards, Harp says.
Heartland believes its program is "a very simple way for the merchants to add to their bottom lines," he says. Merchants can "begin offering products that they might not be offering already and then do it from the same equipment that they're already using for processing payments."
Merchants can download the program software directly to their POS terminal. The ePin It program is compatible with VeriFone Holdings Inc.'s Vx500 series of terminals and its Omni 3740/3750 terminals.
The VeriFone terminals can be purchased new or used for between $100 and $350 each, according to Harp.
The program also operates on Radiant Systems Inc. POS systems.
About 500 merchants have signed up for the program, including convenience stores, gas stations and dry cleaners, according to Harp. Restaurants have become unexpected users of the program, he adds.
Adil Moussa, an analyst at Boston-based Aite Group LLC, believes Heartland's decision to offer the service is a "brilliant idea." "There is a whole segment, and subsegments, of the population that is going into [prepaid wireless and long-distance minutes," he says.
More than 270 million consumers subscribed to wireless service in the United States as of the end of 2008, according to the Cellular Telecommunications Industry Association. Harper believes about 14% of those subscribers prepay their service.
Wireless-service payments are an area escaping the card networks, issuers and acquirers because most come through as automated clearinghouse transactions, Moussa says. "You may see other [processors] start to develop applications for this and have them downloaded to a terminal," he adds.
Euronet has the foreign market covered with mobile top-up purchases available at approximately 421,000 POS terminals across approximately 227,000 retailer locations in 20 countries, including Australia, Malaysia and the United Kingdom, according to the company's Web site.
Euronet officials were not available to comment by deadline.
Merchant feedback about Heartland's program has been positive, Harp says.
"It's a broad array of products," he says. "Almost any prepaid-wireless user would find their product available at a Heartland merchant that is participating in this program."
Heartland plans to explore other prepaid options but did not disclose details. "The program is very amenable to changes, so we can add products and expand the offerings," Harp says. ATM
