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Two of the nation's largest surcharge-free ATM networks believe they have found the fountain of rejuvenation: prepaid cards.
The Allpoint and MoneyPass networks, which combined operate 52,000 surcharge-free ATMs nationwide, say prepaid cards are giving new life to their operations, and the boom is just beginning.
The issuance of payroll cards to replace paychecks, debit cards to replace unemployment checks and general-purpose reloadable debit cards for consumers has expanded the universe of potential ATM users, says Ben Psillas, president of the Bethesda, Md.-based Allpoint Network, which operates 35,000 surcharge-free ATMs nationwide.
And the trend helped Cardtronics Inc., Allpoint's parent, improve its third-quarter performance, executives at the company say. Houston-based Cardtronics reported a $6.4 million profit for the quarter ended Sept. 30, which followed a $2.6 million profit the previous quarter.
Cardtronics also attributed the growth in overall transactions and in cash withdrawals per ATM to prepaid cards, particularly payroll cards. The ISO's ATMs handled 99.7 million transactions overall during the quarter, up 9% from 91.8 million for the same three-month period last year. Cash withdrawals totaled 63.6 million, up 7% from 59.1 million.
Monthly transactions per ATM also increased, Cardtronics' executives said. During the quarter, each Cardtronics ATM handled an average of 642 cash withdrawals, up 8% from 595 during the same three-month period in 2008.
Rick Updyke, Cardtronics president of global development, attributes the company's stronger financial performance to other factors as well.
"We believe transaction counts also are being driven by a shift in consumer preferences away from paying with credit cards and toward paying with debit cards and cash," Updyke says. "A significant portion of our U.S. withdrawal-transaction count gain this year is the result of increasing withdrawal transactions from [prepaid] cards utilized through Allpoint. Specifically, general-purpose payroll and electronic benefits transfer, or EBT cards."
Updyke is particularly enamored with payroll cards, which he believes received a giant boost when Wal-Mart Stores Inc. replaced its paychecks with payroll cards, or Paycards.
Douglas P. Miraglia, president of Minneapolis-based MoneyPass, which operates 17,000 surcharge-free ATMs nationwide, also is seeing growth in ATM transactions from prepaid cards, but he is more cautious than Updyke about the cards' overall impact on volume growth. U.S. Bancorp owns MoneyPass.
"We are seeing improvements in transactions because of payroll cards, EBT, Social Security and Aid To Families With Dependent Children," Miraglia says. "I have not seen a groundswell yet, but we are awfully close to hitting it big. If more retailers follow Wal-Mart's example, then I will say this is a great time to be in the business."
Although other retailers, including Best Buy Co. Inc. and Abercrombie & Fitch, also pay employees with payroll cards, Wal-Mart's decision is considered significant because it is the world's largest retailer, says Bob Meara, senior analyst with Celent LLC, a Boston-based consulting firm.
"Wal-Mart's recent move with MasterCard is a harbinger of things to come," Meara says. "As more employers offer workers choice, payroll card usage will continue to grow."
Atlanta-based First Data Corp. process Wal-Mart's payroll cards over its network. MetaBank, which is based in Storm Lake, Iowa, issues the MasterCard-branded Money Network Paycard to 700,000 Wal-Mart employees not already enrolled in direct deposit, according to the Center for Financial Services Innovation, an affiliate of Chicago-based Shorebank.
Bentonville, Ark.-based Wal-Mart employs more than 2.1 million workers worldwide.
Allpoint and First Data signed an agreement in August 2007 that allows cardholders who have their card transactions processed over the Money Network to withdraw cash surcharge-free from Allpoint ATMs, Psillas says.
The transition to payroll cards opened the door of opportunity for Allpoint and other ATM networks. "Before companies began paying employees with payroll cards, we never got their business," Updyke says. "They would go to a check-cashing service with their paper checks."
Payroll cards are getting a lot of attention because of interest by retailers, but Psillas says the move to prepaid cards by federal, state and local government also have help increase ATM transactions.
Miraglia agrees. "We see an increase in our transactions at certain times of the month when EBT, Social Security and unemployment-compensation payments are being made," he says.
According to 2010 edition of the ATM&Debit News EFT Data Book, 25 states now use prepaid debit cards to provide unemployment compensation instead of checks. States are also putting other funds into card accounts, including child-support payments.
All ATM networks benefit from the move to prepaid cards, Meara says. "We agree that [prepaid card] growth is spurring ATM-transaction growth," he says. "It is a good thing for ATM deployers."
And Psillas is happy to see it. "The industry has been pondering, 'where is the new volume for ATMs?' There also has been a lot of talk that ATM industry had seen its best days, but prepaid cards have brought the ATM industry new volume."
Miraglia thinks Psillas is right. "We're in the right place at the right time." ATM
