Payroll Cards Meet Surcharge-Free ATMs

  The ties that bind payroll debit card providers with the largest independent sales organizations that provide automated teller machine services are tightening.
  Comdata Corp. in late July said it will begin to offer its customers' payroll cardholders surcharge-free access to the 15,000 ATMs eFunds Corp. has under management contracts in U.S. off-premise locations. The Comdata/eFunds alliance, experts say, is further evidence that providing surcharge-free access to ATMs is becoming necessary for payroll debit card programs to succeed.
  Moreover, large off-premise ATM providers are hoping that offering surcharge-free ATM access to payroll card programs can help to grow their businesses at a time when fee-based transaction volumes generally are flat ("Lots of Cash, Little Profit," August).
  The Comdata deal represents the first time Scottsdale, Ariz.-based eFunds, the nation's second-largest ATM ISO, has provided surcharge-free ATM services specifically for payroll cardholders.
  EFunds also gives cardholders in the Ontario, Calif.-based Co-op Network of credit unions surcharge-free access to about 7,000 eFunds ATMs that operate under the Access Cash brand.
  Comdata, the Brentwood, Tenn.-based subsidiary of Ceridian Corp. that processes and supports a variety of stored-value products for businesses, will begin enabling its business customers' 500,000 payroll cardholders to use eFunds' ATMs surcharge-free late this year. Birmingham Ala.-based Amsouth Bancorp issues debit cards to support Comdata's payroll and other stored-value card programs.
  'Controlling Destiny'
  Comdata picked eFunds over other surcharge-free networks mainly because eFunds services its own ATMs and processes most of their transactions, says Andrew Park, Comdata senior vice president. "We looked for a partner that has a lot of control over their destiny," he says.
  Park says Comdata chose eFunds over the Bethesda, Md.-based Allpoint surcharge-free network. Allpoint provides surcharge-free access to 25,000 ATMs operated by the Houston-based Cardtronics ISO.
  Cardtronics outsources most of its ATM services, including maintenance and processing, to other firms. Park says Comdata felt more comfortable dealing directly with eFunds, which is an ATM transaction processor. "With Allpoint, we would be doing a deal with a company in the middle," he says.
  Some other big debit players, however, apparently don't have such concerns. Allpoint has contracted with several payroll debit card providers in recent months, including New York-based J.P. Morgan Chase & Co. and Brookfield, Wis.-based Fiserv Inc. Bank debit card issuers also use Allpoint to expand the availability of surcharge-free ATMs for their debit cardholders without having to buy and maintain new ATMs.
  Allpoint charges fees based on the size of a card portfolio and does not charge a per-transaction fee. Park would not disclose the revenue model Comdata will use with eFunds other than to say it is different from Allpoint's model.
  But Ben Psillas, Allpoint president, claims that Comdata and eFunds will use a per-transaction-fee model, which he says can cost less in the short term but can become more costly as a payroll card portfolio grows. "The cost of entry is going to be less expensive than a card-based model," he says. "But the more employees that use it, the more it is going to cost."
  Besides cost, another major issue is the ability of cardholders to find participating ATMs. About 70% of payroll card transactions are initiated at ATMs by employees withdrawing funds, say industry experts. But operating thousands of ATMs does not necessarily guarantee a payroll debit cardholder can find one nearby, Psillas notes. Branding and visibility, therefore, become issues.
  A Call Center
  Payroll cards supported by Allpoint have the Allpoint brand on them, as do ATMs in the Allpoint network. Cardholders also can use an Allpoint ATM locator Web site. And a call center also is available for employees of national firms who want to know where the nearest surcharge-free Allpoint ATM is, based on ZIP codes, says Psillas.
  Gregg Zastrow, eFunds vice president of branding, says eFunds also is creating an Internet-based ATM locator program that was scheduled to launch in late summer. Payroll cardholders will be able to retrieve information on the nearest eFunds surcharge-free ATM using their card numbers and ZIP codes.
  Ultimately, the Access Cash mark, which is currently on about 12,000 ATMs, will be used to identify surcharge-free ATMs for clients' cardholders, says Zastrow. He adds that, because many of Comdata's traditional business clients are trucking companies, eFunds expects transaction volume to increase at ATMs located in truck plazas.
  Fee-based ATM volume in off-premise locations has been dropping for the past few years, Zastrow notes. Thus, accommodating surcharge-free payroll card transactions is a competitive move to boost ATM activity.
  "If you don't participate in these programs there is a potential of losing customers to some of these other programs," he says.