MESA, Ariz.-A new pre-paid card solution offers cardholders a "closed-loop," merchant-specific card, backed by Discover that can be used exclusively at participating merchants such as Macy's and Outback Steakhouse.
Known as the "myGIFT One Card, Many Choices Discover Prepaid Card," the offering is a product of Better ATM Services, Inc., an ATM and card vendor, and is available to both members and non-members at Phoenix-based Banner FCU ATMs.
Better ATM Services CEO Todd Nuttall told Credit Union Journal that when the company launches this type of product-as it did with a similar Visa offering last year-it begins in a controlled geographic area for the first three or four months before expanding.
Participating CUs receive a portion of the fee income. There is a cost to participate, but Nuttall declined to identify the specific costs, saying it varies by institution.
The card is thinner than a traditional credit or debit card, and Nutall compared it to transit cards, which are thin and durable. The card is accepted at Macy's, Cabela's, Lowe's, Bonefish Grill, Outback Steakhouse and four other merchants, and can also be used for online purchases.
"Discover has always been the underdog that's a little more creative (than Visa or MasterCard) in some aspects," said Nuttall. "This is called multi-merchant or selective merchant, so their backend can allow us to say that it's only good at Macy's or Lowe's or at these groups. Even if you buy a gift card at the mall, it's American Express, and you can leave the mall and use that gift card outside of the mall. If I were a mall tenant, I would be very upset that the mall is selling gift cards that people can take outside the mall."
The myGIFT card, he continued, bridges that gap and drives business to specific retailers. Unlike a gift card that can only be used at one merchant, Nutall noted that the card also fills a middle ground because it can be used at a variety of businesses, most of which are nationwide chains.
Plus, he said, with the holidays already here, "It's seen as more personal to give a gift that's a specific set of places than just saying 'Here's cash.'"
Nuttall said CUs are ideal for piloting these kinds of programs as "they tend to have a very close relationship with their customers. It's very easy for them to send out e-mails to let (members) know, or to include a flyer in their statements or tellers simply having something at the counter."
The cards are currently available only in $25 increments, but other amounts will be available once myGIFT expands beyond the pilot phase. The cards carry a $1.95 fee at the time of purchase, and $3.50 monthly fee if the card is not used for 12 consecutive months. Banner FCU is not receiving any cut of the monthly fee income, as the card is being piloted, but moving forward that fee income is also shared with any participating CU.
'Massive Existing Channel'
No ATM upgrades are necessary to issue the cards, and Nuttall said that ATMs from Triton, Diebold and NCR are properly equipped.
"We see the ATM channel as a massive existing channel for all sorts of products," said Nuttall. "Every ATM at every institution has been put there for a reason. It's high traffic, it's where customers are, it could be because it's around a shopping area or a banking or business or sporting environment. ... We're opening up these multi-merchant products that fit so that credit unions and ATM owners can choose the best products for their locations."
See also: "Three CUs Test Gift Cards At ATMs"