Corporate America Discovers Payments - Digital Transactions

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“We are talking to all major ATMmanufacturers about certifying theirmachines on our network,” addsStechow. “Our long-term aim is tobe hardware agnostic.”Ultimately, what is expected todifferentiate Select-A-Branch fromcompeting surcharge-free networks isthe customer experience it creates onits machines. Select-A-Branch’s softwareis patented, which gives it a legup on the competition.“It may be just a software application,but there is nothing quite likeit in the marketplace,” says Aite’sMonahan. “It is an application thataffords small banks and credit unionsa unique point of differentiation.”Indeed, Select-A-Branch hascarved out a space that lies in betweenthe power of proprietary branded ATMsand generic ATMs in a surcharge-freenetwork, according to Access to Money’sStern. “It’s a good space to be inand we are bullish about the potentialuptick in transaction volume,” he says.A big question facing Select-A-Branch, however, is whether it canattract multiple financial institutionswith national or super-regional brandidentities. While industry experts sayone or two large banks may join Select-A-Branch because the cost structure isattractive enough to catch their attention,they are quick to point out thatmany large banks have built their ATMstrategy in part on surcharge income.“Surcharges are a good revenuesource for banks with large ATM fleets,plus they want their customers to beusing their machines,” says Monahan.Well-PositionedThe other question facing Select-A-Branch is whether small banks andcredit unions will join for the opportunityto expand their ATM presenceinto new markets as the networkmoves beyond its base of operationsin the Northeast. Monahan says sheis uncertain whether national expansionwill be as strong a draw for thesefinancial institutions as the fee structureand branding opportunities.Still, some Select-A-Branch membersconsider a larger network footprintto be an opportunity. “Adding morehigh-traffic areas where we can serveour customers is a plus, as we do havesome members that live out of state andabroad and our aim is to deploy ATMsto better service our customers,” saysPSECU’s Ruback. “But more expansionin the areas where the bulk of ourcustomers live is always welcome.”Fidelity Bank’s Lee adds that“Select-A-Branch makes it easy tojoin, provides good monthly reportingand allows us to maintain theconsistency in our marketing messageacross the network. It’s opened a lotof opportunities to reach customersoutside our footprint.”As more financial institutions,regardless of their size, come aroundto that way of thinking, the networkcould be well-positioned to grow itsvolume. DTADVERTISER INDEXAegenis Group 888-615-3334 www.aegenis.com Page 37Allied Wallet 888-255-1137 www.alliedwallet.com Page 3ATMIA Annual 605-428-5400 www.atmiaconferences.com Inside Back CoverCarpéCharge, a Splyce Inc. Company 253-857-6411 www.carpecharge.com Page 25Digital Transactions 877-658-0418 www.digitaltransactions.net Page 33FIS 888-323-0310 www.fisglobal.com Inside Front CoverGraphite Payments 586-216-4255 www.graphiteiso.com Page 1Humboldt Merchant Services 877-635-3570 www.hbms.com Page 29Merchant Services Inc. (MSI) 800-226-5227 www.1800bankcard.com Pages 20-21NACHA payments.nacha.org Page 5North American Bancard 888-229-5229 www.gonab.com Back CoverPayvision 917-237-0900 www.payvision.com Page 19RDM Corp 800-567-6227 Ext 345 www.rdmcorp.com/ec7500i Page 7United Bank Card 800-201-0461 www.isoprogram.com Pages 16-17USAePay 866-490-0042 www.usaepay.com Page 13Western Union Payment Services 720-332-1000 payments.westernunion.com Page 2338 digitalDecember 2009
ENDPOINTThere’s theexistential threatthat wirelessproviders couldeliminate thepayment processorswith the strokeof a pen.A Bad Connectionfor Mobile PaymentsThe bill-to-carrier model makes for a fast and smooth checkout, but don’t count on itto make mobile payments go mainstream, says Conrad Sheehan.Several early entrants in the loosely definedworld of mobile payments are postingimpressive transaction numbers byenabling consumers to make small purchasescharged to their cell-phone bill. In other words,these new entrants are using the so-called billto-carriermodel.The idea of fast, easy mobile payments isappealing to merchants and consumers alike. Oncasual games sites and social networks acrossthe Internet, customers are buying virtual currencies,reward points, and digital poker chipsusing these new payment systems.What has not been addressed is that, due tofundamental differences in the needs of all othermerchants, the bill-to-carrier model’s success willbe limited to the niche world of virtual goods.ShortcomingsCompanies such as Boku, Zong, Paymo, andMobillcash have charged into the technologyand payments worlds alike, processing morethan 15 million transactions worldwide via themobile phone.Generally, it works this way. You provideyour cell-phone number to the merchant. Youwill then be provided with a text-messageresponse that requires you to reply with “Yes,”“Total,” or the actual amount of the transactionyou are authorizing. This simple process is thekey to the early impressive numbers of thispayment method.But consider the type of merchant involvedin this early success. Creating more virtualpoker chips, digital sushi, or Linden Bucks isas simple as changing a database setting, andresults in no additional expense to the companythat is selling the item.This lack of additional variable cost, coupledwith no intellectual property rights or royaltiesin the creation of additional product, putsthe social networks and casual-gaming companiesin a very narrow and unique niche. Thatallows their needs to be acceptably serviced bypayment providers that suffer from four inherentshortcomings—price, speed of receivables, successrate, and the role of wireless carriers.PriceBill-to-carrier refers to the central player in thepayment process, the mobile service providers.The mobile carriers have built and maintainmassive, multibillion-dollar infrastructures thatenable this type of payment. They spend fortunesacquiring and servicing customers in whatis a brutally competitive industry. And theyare creating all the risk-management systems,receivables-management processes, and paymentprocesses to handle these transactions.So it’s no surprise that, according to an articlein “Virtual Goods News,” U.S. carriers take 50%or more of the transaction right off the top. Numbersvary internationally, with Europe around 25%and Southeast Asia closer to the 5%-10% range.Conrad Sheehan isfounder and chiefexecutive of mPayy,Chicago.digital39
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