ATM’s are expensive. A mid sized bank has to spend $ 50MM every 8 – 10 years to maintain just the hardware in a 1,000 ATM network. Customers demand ATM’s for access to their money, yet, customers are using ATM’s less as debit takes hold.
An insider’s look … from Palm Desert, Calif. | ATM Marketplace News
One program to which PDNB pays special attention is debit. Often a behind-the-scenes player, PDNB is taking a lead role in spear-heading the prepaid debit-card effort.
One alternative noted here at Palm Desert National Bank’s annual partner conference is prepaid debit.
Similar to efforts launched with Portland, Ore.-based financial solutions provider Vero Inc., the outside-the-box financial institution is working to identify and capture a market stronghold in diversified products that cater not only to underbanked segments but fill a void in the financial services space.
In fact, Tingey expects the overall debit and prepaid market to grow between 100 percent and 150 percent over the next 12 to18 months.
“I think the industry as a whole is just scratching the surface with prepaid products,” Nutting said, in between bites at the corner cafe. “By focusing only on the underbanked, you miss a lot of opportunity for some prepaid products that cater to the already banked. The banks are the ones that already understand these cards and how to use them, and to ignore them is one-sighted.”
So what is the potential for prepaid debit?
Wachovia have a commercial product, sold to facilitate relocation expenses, or petty cash disbursements. PrepaidDebitCardBrochure.pdf
Prepaid MasterCard, such as Western Union.
Starbucks prepaid cards, now with loyalty points. While Banks traditionally resist small transactions, and they and traditional merchants charge extra (refer note below), Starbucks recognise the reality of cheap networking and are encouraging small transactions. So why do Starbucks see an advantage for small payments, and yet Banks do not? Someone must have it right.
Vendors:
Note re small transactions from Forbes.
It wasn’t that long ago that small-ticket retailers–such as convenience stores, delis and local restaurants–had a minimum charge for credit cards to cover the costs associated with running the transaction. The credit card associations, like MasterCard or Visa, or cards like Morgan Stanley‘s (nyse: MWD – news – people ) Discover or the American Express (nyse: AXP – news – people ) card, often charge a base rate per transaction plus a percent of the total each time a card is swiped.
Early conclusions:
- Credit cards are winning this battle hands down and banks are allowing them. I judge this by a simple Google search for prepaid debit, and all that shows up are credit cards.
- Prepaid have two primary benefits, a) card solutions for the unbanked, and b) cash replacement for small transactions (micropayments)
- Starbucks and other merchants (Sears etc) have figured out the value of prepaid, but banks have not.
Relevance to Bankwatch:
A great opportunity exists for Banks to get into prepaid debit for the mass market. such cards can be toppped up at the ATM. This will produce revenue from card sales and transaction revenue. This eliminates cash handling costs, because there will be less cash in circulation.
Bankwatch 