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ATMs aren't just for cash withdrawals anymore

Ubiquitous machines are becoming alternative payment systems

By Emma Johnson

ATMs - the next generation

Stamps? Gift cards? Bill pay? Concert tickets? In the past few years, automated teller machines have started offering more than cash -- and users can expect to see more of these and other features as technology and consumer acceptance improves, say industry experts.

"ATMs are becoming more like super ATMs with more intelligent software and technology," says Tracy Kitten, senior editor for ATM Marketplace magazine. "Many industries are encouraging self-service, so people are more comfortable with that. We trust technology sometimes more than a person."

The ATM is now 38 years old, and 2 million of them are stationed around the globe. There is no doubt these blinking boxes are a big part of our lives. The American Bankers Association reports that half of the U.S. adult population use ATMs every month, with 40 percent stepping up to the console 10 or more times each month. These numbers, combined with the increase in automated functions at many businesses -- think airline check-ins and grocery store checkouts -- mean people are happy to automate many of their in-person transactions, Kitten says.

ATM innovations slowly gain acceptance
While today it may seem second nature to scan your own yogurt at the local market, and not terribly far-fetched to pay your electric bill at your bank's ATM, the automated revolution has been dawning slowly for the past couple of decades.

Wells Fargo began selling postage stamps through its ATMs in 1994. It took a decade, but it became the sixth largest distributor of stamps in the United States.

Aimee Wilson, owner of a gourmet chocolates and candles company in Philadelphia, recently made a stop at a Wachovia ATM -- which is not where she banks -- for the sole purpose of buying stamps. Her young son was asleep in the car, and she knew the errand could save her from waking him to enter a post office. "It was very convenient to just drive up and get my stamps," says Wilson, adding that she did not withdraw cash from that competing ATM. "I really try not to use ATMs where I have to pay fees. You could say I use ATMs strategically."

A few years after launching its successful stamp program, Wells Fargo began offering tickets to amusement parks and aquariums. None of these functions have taken off. Yet.

Kitten blames a lack of initial acceptance on technology that did not make the transactions easy on customers still warming up to an automated world. Today, thanks in part to more user-friendly ATM systems and the rapid growth of online banking , bank and ATM customers seem to be embracing innovations with less trepidation. Features such as envelope-free deposits -- in which up to 50 signed checks can be deposited at a time without an envelope and images of the document appear on the ATM screen -- have helped.

"Envelope-free deposits feel very concrete. The image of the check or cash legitimizes the transaction just occurred," says Elizabeth Rowe, an analyst with Mercator Group, a Massachusetts-based payments research firm. "As people grow more comfortable with cash deposits, there will be a greater receptivity to engaging in other transactions."

From gift cards to cell phones
Gift cards are poised to be one of the next big things coming out of an ATM, Kitten says. Better ATM, based in Mesa, Ariz., has helped the owners of existing ATMs retrofit their machines to dispense Amazon.com gift cards and local restaurant coupons out of the cash slot. The initial test release in a handful of cities, including New York, Philadelphia and Phoenix, has been a success, says Better ATM CEO Todd Nuttall, and major banks are expected to offer cards soon.

Nuttall, a former American Express executive, says he envisions ATMs dispensing any and all prepaid products, including public transportation passes and event tickets. Throughout Eastern and Western Europe, India and China, Euronet Worldwide's ATMs have increasingly offered services such as money transfers and bill payment for cell phones, cable and utilities, as well as prepaid cell phone minutes alongside requested cash.

How to load minutes on your cell phone with an ATM
How to reload your cell phone with an ATM

Euronet claims to be the world's largest processor of prepaid cell phone airtime. While these features are not yet available in the United States, industry experts expect they will be soon.

"The ATM is the most trusted and well utilized self-service product on the market. It is also naturally a vault," Nuttall says. "It is something people already know how to use, and it becomes a natural destination of choice for many purchases."

Mercator's Rowe, author of the group's 2008 study on ATM innovation, agrees. "Until consumers can print cash from their home computers, the ATM will remain a key point of interaction between consumers, their cash balances and their bank."

Perhaps not all interactions, however. The Mercator report suggests that, for one, ticket sales via ATMs are not likely to take off. Rowe says: "An ATM is not where someone goes to get movie tickets. Why? Because it's weird."

Increasing personalization
As ATMs become "smarter" and know more about their customers, they will also offer more services, industry experts say. Repeat customers might be automatically greeted in their preferred language and offered their customary cash withdrawal. An ATM that knows a customer's family status might prompt a cash-seeker to fill out a credit card or home equity application on the spot. Other advertising opportunities are already employed in Europe, where ATM customers are given the option to donate a portion of a withdrawal to a charity. Third-party advertising is also common abroad and an inevitability in the United States.

Kitten says ATM personalization has already proven to be a hit with customers in Europe and Asia, as well as banks that find that people are more likely to respond to an ATM ad than a mailed flier for a mortgage or credit card. "A 1 percent return on a flier is considered extremely good. At an ATM, the return on such advertisements is triple that," Kitten says. "It makes sense: The ATMs are offering a promotion when people are engaged in a financial service, and they have their attention."

An ATM is not where someone goes to get movie tickets. Why? Because it's weird.

-- Elizabeth Rowe
Mercator Group analyst

Experts also expect the personalization of ATMs to go a step further to offer a gift card deal that is hard to refuse. For example, a customer might belly up to the screen, swipe her card and request a $200 withdrawal. Instead of automatically doling out the cash, the machine might ask if she would prefer $100 cash and a $100 gift card -- plus a $20 bonus on the card. This sort of deal is possible because the financial institution would have cut a deal with the card issuer and passed the savings onto the customer.

Better ATM is already offering similar deals through its gift card feature, giving $25 Restaurant.com certificates with the purchase of$25 Amazon.com cards. Nuttall expects to offer "open loop" secured gift cards-- ones that can be used anywhere credit cards are accepted -- from Visa, MasterCard and American Express soon.

Amanda Vega, who owns a media relations firm in Phoenix, says that some advanced ATM features are handy, while others are bothersome. She frequently uses Wells Fargo's stamp dispensing feature, but gets annoyed when the same machine attempts to sell her financial services. "It's quite annoying when you have to watch commercials just to get your money," Vega says. "Especially when you just need $20 in a hurry."

See related: Voting by ATM is an idea whose time has not come, Give more with less through charity gift cards, Gift cards 2008: Special section, As holidays tighten, gift cards remain popular, 2008 gift card comparison chart, Top 10 creative ways to wrap gift cards, Tips: Don't let those gift cards expire, Specialty gift cards

Published: February 16, 2009


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