ATM operators are overlooking an opportunity if they treat gift cards no different than they treat debit cards.
ATMs can serve as more than cash dispensers for gift cards they can dispense the cards as well, Better ATM Services Inc. says.
"The ATM industry has a lot of data [about how customers use the machines], and the prepaid industry has a lot of data [about cards that customers prefer], but there is never a correlation between the two," Todd Nuttall, chief executive of Mesa, Ariz.-based Better ATM Services.
At least until now.
Nuttall made presentations this week to attendees of the ATMIA U.S. Conference 2013 in Scottsdale, Ariz., revealing new research about prepaid card opportunities.
Better ATM and Visa introduced prepaid gift-card issuing through the ATM at three Arizona credit unions a year ago. These cards are less thick than most credit cards, and more closely resemble the thin plastic MetroCards used for fare in New York's subways.
Last year, Nuttall said consumers were embracing this feature.
The recent research revealed that 86% of credit union customers used ATMs and 56% said they buy prepaid cards, Nuttall says.
"But only 5.6% said they buy prepaid cards at their credit union, either at the teller or in the lobby," Nuttall adds. "The others were going somewhere else, like the grocery store, to buy gift cards."
Those figures represent an "historical shift" that took place in prepaid gift card purchasing, Nuttall says. "Many years ago, consumers did get prepaid cards from their banks or Western Union, then about five years ago the grocery stores figured out they could more easily distribute the cards."
With technology that allows prepaid-card issuing from an ATM, financial institutions are in a position to reverse that trend, Nuttall says.
The thin plastic cards issued from an ATM are not an issue with consumers, Nuttall says. "In fact, many of them tell us they wish all of their cards were that thin," he adds.
Most importantly, financial institutions need to learn the demographics of their ATM users to draw the attention of merchants serving those same consumers.
"It would be great to have retailers clamoring to sell their prepaid cards through ATMs," Nuttall says.
As a broader demographic shift takes place in the U.S., ATM operators are going to see more consumers who will expect the machines to provide new services, says Scott Strumello of New York- and London-based Auriemma Consulting Group.
All consumers understand how an ATM works, but younger consumers consider it the only thing they need at their bank, Strumello says.
"As we see how prepaid plays out, there are definitely going to be some opportunities at the ATM," he says. "Prepaid hasn't become an overnight success, but with Chase creating Liquid and American Express creating Bluebird with Wal-Mart, you know it's coming."
With that kind of momentum, banks or credit unions looking to upgrade ATM fleets would be wise to consider adding prepaid-card issuing technology, Strumello says.
With Chase already telling investors that it will make Liquid prepaid cards available at its ATMs, it won't take long for other players to catch on, Strumello adds.