Visa Inc. had a few concerns about how consumers would react to three Arizona credit unions issuing prepaid gift cards carrying its brand through their ATMs.

Todd Nutall, CEO of Better ATM Services Inc., the Mesa, Ariz.-based ATM technology company providing the technology allowing thin-plastic $25 Visa gift cards to come out of an ATM much like a dollar bill, tells PaymentsSource that consumer focus-group reactions cleared all of Visa’s fears during the first two months of testing.

Better ATM Services and Visa announced the test in early January (see story).

Visa has not reported the number of gift cards purchased in the test, but it shared its findings from focus groups and individual sessions with consumers who have purchased the cards at the credit union ATMs, Nutall says.

The card brand’s initial fears focused on what consumers would think of the thinner cards and whether offering them at an ATM would cannibalize card sales at stores instead of expanding sales. Consumer focus group feedback contradicted those concerns and put Visa’s fears to rest, Nutall says.

“Visa was afraid consumers would consider the thinner card to just be worthless and something to throw away,” Nutall explains. But when consumers correlated the Visa brand to the card, it eased concerns about value, the research revealed. In addition, consumers told Visa the thinner card was easier to store in a wallet or money clip than thicker, traditional payment cards.

Consumers also indicated they purchased cards at the ATM for a specific reason, such as stores being closed at the time, allaying Visa’s fears they would convert to buying the cards at ATMs on a regular basis, Nutall notes.

With a first round of positive feedback, Better ATM Services hopes to continue its goal of making the gift card technology available to all banks and independent sales organizations that place ATMs in convenience stores and other locations.

“We have to follow an adoption cycle, starting with the credit unions first through the end of the first quarter of 2012 and into the second,” Nutall says. “After that, we move it on to banks and continue to educate people about how it works.”

After banks begin to offer the service, Better ATM Services plans to target the underbanked consumer who may use ATMs more often at retail stores or other locations, Nutall says. “That will be a huge market, so getting an ISO to set up an ATM that issues gift cards at an independent store will be an important piece of the marketing strategy,” he adds.

Better ATM Services works with banks and such ATM manufacturers as Triton Systems of Delaware LLC, Diebold Inc. and NCR Corp. to incorporate its software in their machines to accommodate prepaid gift card distribution.

Banks make significant investments in ATMs, and it makes sense they would be interested in finding other products the machines can deliver to create revenue, Patricia A. Sahm, managing director at Auriemma Consulting Group, tells PaymentsSource.

“This product is giving convenience at the ATM and convenience in your wallet by being a thinner plastic, so that all should sound good to the consumer,” Sahm suggests.

The process has mostly positive aspects, but when Better ATM Services looks to expand gift card issuing from ATMs to locations other than banks, security likely will be a key issue, Sahm says.

“An ATM in a 7-Eleven just doesn’t have the same security as one in a bank, so whether the consumer is taking cash or a physical product from the ATM, that consumer wants to be sure it is safe,” she adds.

Visa was the first brand to allow issuance of its branded gift cards using the new ATM technology, but Nutall says “many groups” are interested in the concept.

Better ATM Services plans to expand the technology to allow consumers to choose an amount for the card at the ATM, plus reload funds to the card account, Nutall says.

During the test period, consumers can purchase only a one-time $25 Visa gift card, Nutall adds.

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