“ATMs have a lot of room inside. How about having them double as Coke machines? I mean, aren’t people always thirsty?”
-Terence Roche
A recent headline on ATMmarketplace.com proclaimed “ATM industry under pressure.” The article discussed the recent results of Dove Consulting’s 2004 ATM Deployer Survey. According to Dove, there are now 383,000 ATMs, which means one per every 281 U.S. households, and the machines will generate close to 11 billion transactions in 2004. Sounds like a heckuva lot of transactions. However, Dove’s stance was that there are too many ATMs chasing too few transactions – a valid remark, especially when the data indicates that the average number of transactions per ATM declined from 3,900 in 2000 to 2,400 in 2004. Ouch. For us bankers, that puts a crunch on our fee income.
ATMs have always been somewhat of a conundrum for bankers. For years we have persistently searched for that “value added” component that was going to revolutionize this little box that distributed cash. Flashback to 2002 and take a look at “Mousetrap Revisited” by our most politically correct Gonzo writer, Se ñor Hodgins. Up until a few weeks ago, I agreed with Mr. Hodgins’ statement: “Any attempt to make the ATM anything more than a box that gives consumers money and takes the odd after-hours deposit is destined to abject failure.”
Apparently the good folks at 7-Eleven weren’t paying attention and ignored my fellow GonzoBanker’s advice! 7-Eleven, the premier name and largest chain in the convenience retailing industry, thumbed its nose at us and set out to prove that the ATM could be much more than a little black box dispensing greenbacks.
It all started January 2000 in Dallas, Texas. (Wouldn’t you know it had to be Texas? Everything’s big in Texas!) 7-Eleven and American Express announced they had formed a strategic alliance to introduce interactive kiosks in more than 200 7-Eleven stores throughout the Dallas/ Fort Worth area. The companies stated that the kiosks would provide customers with convenient access to financial services products 24 hours a day, 7 days a week. 7-Eleven even went so far as to name these kiosks Vcom (trademark) which stands for virtual commerce.
I am sure most of us thought nothing about this. One, because it was a localized market (Dallas/Fort Worth), and two, kiosks fall into that bank entrepreneurial category of “been there done that.” Besides, what types of financial services could a 7-Eleven really offer that would be a threat to the banks?
Customers of the initial Vcom kiosks had the ability to cash checks, purchase money orders, send and receive wire transfer funds, and conduct traditional ATM transactions.
In March 2001, 7-Eleven announced that it had signed a national agreement with American Express to provide ATM services to its Vcom kiosks. Hmm, sounds like the initial pilot must have gone pretty well. According to 7-Eleven, it was now entering the “transactional” test phase, but this time it was expanding the distribution “pilot” into Florida. Use of the word “pilot” at this point in the deployment should have raised some eyebrows. It is a known fact in the marketing underworld that if you want to keep something under the radar of competitors, slap “pilot” in front of the word “project” and no one says a word or feels threatened.
Because 7-Eleven was continuing to use the word pilot, most of us probably didn’t notice that in April 2002 the Vcom machines were given the capability to cash tax refund checks. Never yielding, the Vcom train continued to roll down the track. In May 2002, Cyphermint, Inc. became the newest Vcom partner. Cyphermint is an e-commerce infrastructure and integration company that operates three business units: (1) An Internet Payment Systems Division, for B2C e-commerce via the Cyphermint Pay Cash System (trademark), (2) Kiosk Systems Integration Division, which happens to partner with NCR, using software from BroadVision to deliver Web-enabled self service and (3) International MoneyTransfer Systems Division.
This new alliance would allow 7-Eleven customers to pay cash for e-purchases leveraging Cyphermint’s Pay Cash System, which is a secure payment technology. But what kind of purchases can you make at a kiosk? Cyphermint enabled Vcom customers to access select e-services. Customers can buy concert tickets, view weather information, check lottery results, get travel directions, and shop online. In 7-Eleven’s press release announcing the partnership, the company stated that nearly 100 million consumers in the United States didn’t have access to credit cards, and 37 million lacked basic bank accounts. And who did 7-Eleven target? What the industry calls the “unbanked.” But did any of us notice? Probably not.
It was not until the end of 2002 when the Vcom machine surfaced again. Vcom was now going to offer a variety of automobile-related insurance services via a strategic alliance with Public Access Insurance, a subsidiary of Instant Insurance Holdings. By this time, 7-Eleven had installed nearly 700 Vcom kiosks, which handled some 100 million ATM transactions and $4.5 billion in money orders. So much for “abject failure,” Mr. Hodgins.
And more announcements were to come…
In early 2003 7-Eleven partnered with Verizon giving Verizon wireless customers the capability of paying their phone bills via (yep, you guessed it) the Vcom. Now last time I checked, the big marketing push from most financial institutions was the online bill payment thing. This wireless partnership probably caused some of us a moment of concern, but once we understood a Vcom customer could pay only Verizon wireless bills, we cancelled the emergency SWAT committee and went back to the golf course.
When oh boy! Before we could even empty the beer cans from the cooler on the 18 th green, another announcement hit the wire. The headline read: “7-Eleven: One-Stop Bill-Payment Shop.” Curses.
7-Eleven had gone and partnered with e-Money Systems, Inc. 7-Eleven customers could now pay their utility and other bills using cash, automated clearing house checking accounts, credit, ATM debit, and even 7-Eleven’s stored-value Convenience Card. Furthermore, customers were issued receipts, and many of the bills were paid in real-time.
If you are in charge of your bank’s ATM strategy, you may be feeling a little queasy right now. No worries, just buy a lottery ticket, and maybe you will win a gazillion dollars and no longer have to endure ATM strategy meetings. Did I mention that 7-Eleven also partnered with GTECH Corporation and now sells lottery tickets via Vcom?
Showing no signs of slowing, earlier this year 7-Eleven partnered with a new check cashing company, Cashworks, Inc. I must admit that the Cashworks system is pretty cool. Let me briefly explain how it works. A customer must first enroll for a Vcom membership. Once approved, the member can access the fully automated check-cashing service by inserting their Vcom membership card and their check into the Vcom kiosk. They then enter a personal identification number (PIN) and certain information about the check via the touch screen, and within seconds the check is verified and authorized. If approved, the mouth of the Vcom opens up issuing cash (minus a transaction fee, of course).
Hold onto your hats now. 7-Eleven’s most recent announcement just a couple of weeks ago is a doozey. The headline read, “Exit American Express, Enter 7-Eleven.” Would you believe 7-Eleven decided to purchase American Express’s ATM portfolio?
GonzoBankers, we are losing the cashier’s checks, check cashing, bill payment, wire transfers and even the cash dispensing business to convenience stores. Just how long will we continue to sit idly by watching more and more transactions walk out the door? The irony is that we have the most to gain from both retaining and automating these transactions. Maybe the time has come for us to change our way of thinking about these “mundane” tasks. Today most of us view check cashing, wire transfers and the like as necessary evils and costs. However, convenient stores like 7-Eleven don’t see these transactions as a cost but as a revenue opportunity. And don’t think for a moment that 7-Eleven is slowing down the Vcom juggernaut. Just last week the company indicated it is beginning to pilot smart cards.
At the end of the day, maybe banks can’t compete with a 44-oz. Slurpee (trademark) with edible straw, a chili dog and a Dale Earnhardt Jr. ball cap.
-tj