Phone Plus Prepaid: ATM Recharge

Posted: 09/2002

ATM Recharge
Coming to America

By Tara Seals

SOMEDAY SOON, WHEN YOU'RE STANDING at an ATM machine, you could be presented with a menu that includes the typical withdrawal and deposit functions, along with the opportunity to buy stamps, get a bank statement and recharge your wireless prepaid account.

ATM recharge allows consumers to add more airtime to their prepaid wireless accounts by using their bankcards. It's a simple procedure: After punching in the PIN code to access the ATM, one menu option is wireless recharge in various denominations. The transaction debits the bank account for the selected value and tops up the prepaid account automatically, or the ATM will debit the account and issue a receipt with a PIN number that must be entered into the wireless phone to replenish the airtime (see side bar). The payment option takes the place of purchasing scratch cards at convenience stores or paying for airtime online with a credit card.

Commercial deployments of such technology are becoming more common throughout the world. As of May, U.K. customers have been able to top up their Orange U.K. prepay mobile phones at Abbey National Bank ATMs nationwide. The service is the first of its kind in the United Kingdom, but it's common to see ATM recharge at ATMs in Australia, Japan, Indonesia and many Western European countries.

In the United States, ATM recharge is a fledgling technology. Some platform providers are leading the initiative to bring the functionality to the consumer.

For Boston Communications Group Inc. (BCGI), one of the first to go forward with the technology stateside, ATM recharge is a strategic move. BCGI, which focuses on real-time subscriber solutions for the wireless industry, offers its transaction platforms on a service bureau basis to wireless carriers. It serves four out of the six national carriers.

"The products we deliver are positioned to allow carriers to go after the remaining subscriber base that's left," says Tom Erskine, vice president of business development at BCGI. "As penetration approaches 50 percent in North America, the remaining 50 percent is tough to crack."

To reach more people, especially cash-based markets such as teenagers, wireless operators need to be able to handle alternative payment types. In July, BCGI formed a new unit specifically for payment services. The division offers a suite of end-to-end, integrated solutions for assisted and self-serve payment transactions, including m-commerce platforms, online transactions and prepaid ATM recharge.

"We saw the opportunity with ATMs a while ago," says James Anderson, vice president of payment services for BCGI. "Consumers are comfortable with the device and there are obviously a lot of them in North America, about 325,000 in the U.S. alone, so it's a nice natural footprint we wanted to tap into."

Although the technology is still in its pilot stage, BCGI has signed an agreement with E*TRADE Group Inc., a subsidiary of E*TRADE Access Inc., and the nation's second largest ATM network with more than 11,000 ATMs, according to Thompson Financial's ATM and Debit News EFT Data Book.

A ramp up of commercial deployment to E*TRADE ATMs is expected during the next year. It also has an agreement with I-PIN

For the operator, ATM recharge represents savings over traditional scratch cards. "ATMs seemed like a win-win," says Anderson. "It's a self-service transaction. It doesn't impose the cost on a retailer that a hard-card transaction does. There's no cash handling. There are a number of costs that go away in terms of card inventory. Combine that with the large number of machines, and it's a great savings."

The initiatives also give ATM owners another revenue stream. E*TRADE says wireless top up is an organic fit. "E*TRADE's integrated financial services solution offers customer households expanded access to a growing number of personalized and branded touch points that deliver the tools, services, content and products they need to effectively manage their personal finances," says Mitchell Caplan, chief financial products officer and managing director for North America at E*TRADE Group.

Despite the advantages, there are obstacles to widespread deployment in this country. Complicated ATM distribution chains and low prepaid market awareness are two large issues for those entering the space.

Unlike in Europe, where ATM networks are uniform and there is a limited number of players, the domestic ATM framework is a complicated web of relationships. In the United States, an ATM recharge transaction would involve at a minimum the ATM owner, the merchant location, the electronic fund (EFT) networks and the wireless carrier. In addition, ATM networks use different payment processing companies for back-office transactions.

"It's a very fragmented industry here in the U.S.," says QComm International Inc. CEO Paul Hickey. "Also, ATM companies have to get PINs from the carriers, and that's not easy; it's very difficult to get these wireless contracts. These ATM companies are banging their heads against the wall because there are several national carriers and lots of local providers, not just one or two like it is [in Europe]."

BCGI is hopeful it can circumnavigate that particular issue by signing up as a master distributor with wireless operators. It also takes care of all the transaction processing, reconciliation and settlement issues for the ATM owners.

"That's really been a huge value proposition for the ATM owner because they can have one contract with us and bring in multiple carriers," says Anderson. BCGI receives a commission per transaction and then pays the ATM owner a portion of that.

In contrast, QComm would not negotiate the carrier contracts, but rather it would provide the software that keeps track of all the transactions via a transaction-processing database and reporting mechanism. It also would manage the PIN movement, simplifying the process for the ATM owners. However, the wireless platform provider, for now, is monitoring the situation and not yet playing in the space.

The marketing challenge of poor consumer awareness of prepaid wireless service is looming, says Hickey. "We believe we'll be in the ATM arena eventually. But for now, the U.S has only 10 to 15 percent [prepaid wireless] penetration, as opposed to up to 80 percent of wireless users overseas, so we need to penetrate deeper into the marketplace before ATMs are going to make much money."

BCGI says it wants to speed up the process with its "Wireless Wallet" acceptance mark, which it hopes to include on every ATM that offers recharge via the CBGI platform. "That builds in value over time to the consumer, and therefore the ATM owner, to be part of the program," says Anderson. "We want to tie all the ATMs together with an acceptance mark recognizable to the consumers. We'll work with many different manufacturers, banks and so forth."

BCGI also has built in ease-of-use elements to its platform. Recharge will be a real-time transaction, and customers can immediately use the minutes automatically, without punching in extra PINs or numbers. There are no transaction fees.

"We've also designed a set of screen flows so all the Wireless Wallet ATMs will have the same steps," says Anderson. "That reinforces the convenience and the link with the acceptance mark, and over time, ATM owners will want to participate if the consumers look for that and want to come back again and again."

Despite his caveats, Hickey's outlook remains positive thanks to industry happenings, such as the Virgin Mobile service launch (see article, page 28). Hickey says he believes "We're as close as a year away from nine out of 10 people knowing what [prepaid wireless] is and accepting it as mainstream.

"Eventually, over the next couple of years, ATMs will be a very important and viable place to buy prepaid wireless time," says Hickey.