(September 19, 2007) A Phoenix-area company called Better ATM Services Inc. thinks it has a better idea for merchandising prepaid cards: sell them directly at ATMs, with cards dispensed through the same slot that dispenses cash.

Founded in 2005, the Mesa, Ariz.-based firm is now implementing its ideas at five local restaurants. Thomas E. Honey, Better ATM Services’ chief development and marketing officer, tells Digital Transactions News his company’s patented system gives merchants and ATM owners a new way to attract traffic with minimal hassle. “We’ve been getting a lot of interest from ATM ISOs as well as prepaid card processors,” he says.

In the test, Better ATM Services is the ATMs’ owner but will turn them over to an independent sales organization later. The Diebold 1064i and 1064ix cash dispensers are equipped with cassettes that hold three-panel card sheets consisting of a standard credit card-size (approximately 3 3/8 inches by 2 1/8 inches) prepaid card, an instruction/advertisement panel, and a coupon, which is an incentive for the buyer. The perforated media are only 14 mils, or 14 thousandths, of an inch thick, according to Honey, and are flexible enough to be lifted and dispensed through the ATM’s cash-dispensing slot. The sheets are about the size of a larger foreign currency such as the Danish kroner. Better ATM Services says it has tested its system with three manufacturers and says cassettes can be easily adjusted to accommodate the sheets.

The sale process works like a conventional point-of-sale debit transaction in which the customer’s ATM card account is debited after he enters his PIN. The ATM effectively becomes a POS terminal, with the card issuer earning standard network interchange on the sale, says Honey, a former prepaid and payroll card consultant and veteran of Visa and the NYCE electronic-funds transfer network. U.S. Bancorp’s Elan Financial Services unit drives the ATMs and routes the transactions to the network linked to the cardholder’s card.

According to Honey, Better ATM Services will make its money through ISO-paid licensing fees, fees for active ATMs, and fees paid by card producers. The company is waiving charges for usage of its patent to those ISOs that sign up through next June. Merchants and ISOs will set retail fees.

Honey says one selling point is less time needed by the retailer to process gift card sales. “It becomes much more convenient for the merchant, you don’t have to go through all the labor,” he says, adding that merchants themselves can easily place the card sheets in the ATMs should they choose, or have their ISOs handle that function.

One of Better ATM Services’ partners for a three-month test is Mi Amigos Mexican Grill, a three-location, family-owned chain whose East Mesa restaurant started dispensing $25 gift cards through an ATM on Monday. “So far it’s going fine,” says company president David Candland, who says he’s had five to 10 sales so far. The other two restaurants will start ATM dispensing after some initial monitoring at the first location. Candland says he decided to participate in the test because any opportunity to sell gift cards means more up-front revenue even if the customer doesn’t come in for a meal for three years. Cards at Mi Amigos for now are being sold without a retail fee because customers still can buy them without a mark-up at the bar.

Better ATM Services’ other test sites are Maycayo’s in Scottsdale and Tavern on Mill in Tempe. In a release, the company said other uses of its technology include dispensing of transit passes and event tickets.