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Not All Prefer Open-Loop Prepaid, Better ATM Sees in Gift Card Test

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Better ATM Services offers open-loop Visa prepaid cards through ATMs, but such one-size-fits-all cards don't appeal to all consumers. To appeal to shoppers who prefer closed-loop gift cards, Better ATM is testing cards that work at nine merchants.

The myGift Discover-branded card is undergoing trials this quarter at Banner Federal Credit Union machines at 11 locations in Arizona and should become widely available in the first quarter of next year, says Todd Nuttall, Better ATM's chief executive.

"You have a massive prepaid-type gift card market," he says. "We know that half the people go for open-loop and half the people like to have particular brands."

Consumers can redeem the cards in the test at Macy's, Lowe's, Express, Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Roy's Hawaiian Fusion Cuisine, Fleming's and Cabela's.

"A lot of people really do like a combination of key brands," Nuttall says.

The card differs from the Visa-branded open-loop gift card that Mesa, Ariz.-based Better ATM introduced about a year ago. The earlier card was good anywhere Visa is accepted, unlike the myGift card which is redeemable only at certain stores.

Distribution of the earlier card has grown in Arizona, and it will reach the East Coast soon, Nuttall says.

Both cards are thinner than most payment cards so that they fit through an ATM's cash dispenser slot.

Dispensing prepaid cards from ATMs brings the cards back to the realm of banking, where they started before losing market share to stores, he says.

While financial institutions are most active today in vending prepaid cards from ATMs, independent ATM deployers eventually will offer the option, Nuttall predicts.

Already, some independent deployers are involved because they own and operate ATMs at credit unions that are offering the prepaid cards, he says.

Independent sales organizations that specialize in signing up merchants for transaction services may eventually offer their clients ATMs that dispense prepaid cards, Nuttall says. The ATMs could help ISOs differentiate themselves from competitors, while boosting margins and improving customer retention, he maintains.

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