MESA, Ariz.-A new study has found that 70% of all ATM users buy prepaid cards, but just one in 20 credit union members buy their prepaid cards from their credit union.
The survey by Steve Elliott Marketing Research, Tempe, Ariz., found convenience was the primary driver in the location of prepaid card purchases. Among the results:
* Some 56% of credit union members are ATM users who are buying prepaid cards.
* Only 5.6% of credit union members buy their prepaid cards from their credit union.
* Nearly 50% buy prepaids for birthday gifts.
* Nearly 45% buy prepaids for holiday gifts.
* 48% of prepaid buyers buy two or more prepaid cards at a time
Todd Nuttall, CEO of Better ATM Services, here, said the study validates the company's belief that prepaid cards dispensed at ATMs offer tremendous growth potential. As reported in Credit Union Journal["Test of Prepaid Cards Proves To Be A Winner," Dec. 24, 2012], the company performed a successful pilot test by dispensing prepaid cards via ATMs at three Arizona CUs in Q3 2012.
"There has been a lot of data on financial institutions and a lot of data on prepaids, but nothing that correlates the two," Nuttall told CU Journal after the Elliott Marketing study was released. "This study looked at multiple credit unions geographically dispersed around the U.S. It found 70% of all ATM users buy prepaid cards, but most of those buy prepaid cards at places other than credit unions."
Better ATM Services is "blending" ATMs and prepaids, Nuttall declared. He said prepaids are growing "all around the world" and therefore are a good match for ATMs, which are "prevalent all over."
"Both industries are looking for new things," he said. "Prepaids want delivery channels that are secure and will reach consumers. "Financial institutions want to use their ATMs to deepen their reach with their members or customers. Banks and credit unions are looking to add depth to their product offerings."
Nuttall said because so many members are going elsewhere to make their prepaid card purchases, credit unions are seeing only one out of 20 of their members buying prepaid products from credit unions. He said data in the new study show consumer preference on where to purchase their prepaid products correlates to convenience.
"We have to ask why members are buying prepaid cards elsewhere," he said. "The answer is people either did not know prepaid cards are available at their credit unions, or they do not see convenience in walking into a branch and standing in line."
How Consumers See ATMs
Consumers have a positive perception of ATMs for convenience, the study found. People rated ATMs more convenient than McDonald's, which in turn was rated more convenient than grocery stores. Nuttall said these factors add up to indicate as people become familiar with ATM-issued prepaids they will make their purchases there.
"An ATM at a credit union is more convenient than fast food," he said.
Going forward, Nuttall said the key factors are awareness and adoption. As people become aware of new financial service methods they use them, he noted, such as the shift of deposits from tellers to ATMs in recent years.
"When credit union shift prepaid purchases from inside the branch to the convenience of the ATM, there can be 500% growth," he predicted. "Nothing happens overnight in this industry, but we see big growth potential. The important factor is for credit unions to leverage the familiarity and the trust of the credit union brand."
According to Nuttall, this potential extends to all types of prepaid cards. He said ATMs serve certain demographics, as operators care who is using their ATMs, as opposed to previous years when they only counted transactions.
"Not every ATM supplies every product, the mix depends on demographics," he explained. "In the credit union world this means mostly Visa and MasterCard, because those are the types of prepaids their members are looking for. But some credit unions have a certain niche and might want to offer transit passes-whatever works best for the members."
Over the next year or two Nuttall expects to see a "good number" of institutions "enabling their fleet"-meaning allowing their machines to dispense prepaid cards in addition to cash.
Prior to his post at Better ATM Services, Nuttall was VP of Financial and Strategic Services for American Express and also served as VP and CFO of American Express World-wide Data Operations.