An odd marriage brings high finance
to the corner store with Super ATMs
By Jay MacDonald • Bankrate.com

Do you, American Express, take 7-Eleven to be your lawfully wedded ...

This unusual union comes while banks are wringing  their hands at the surcharge skirmishes and diminishing returns from an overextended ATM market. Nimble American Express is jumping onto the next wave of remote financial services -- the so-called Super ATMs.

The card company and the corner store giant have announced a strategic alliance to introduce interactive, state-of-the-art Super ATMs -- which they call financial service kiosks -- at 200 Dallas/Fort Worth-area convenience stores this year.

Initially, the machines will offer check cashing, wire transfers and money orders. Future applications could include Internet account access, traveler's checks, prepaid phone cards, stored-value cards, electronic gift cards and, for entertainment, general admission and event ticketing.

Changing the players and the playing field
At first blush, the pairing of the sophisticated American Express with the world's largest convenience store chain may appear as incongruous as a Slurpee in Waterford crystal. But once you get over your surprise at their vastly different public images, this strategic partnership looks more like the harbinger of similarly disparate alliances to come in the fast-changing, fast-cash sweepstakes.

Forget about breakfast, could banking at Tiffany's be next?

American Express, and indeed any bankcard provider, serves two customers: its merchants and its card users. Nearly three years ago, Amex began buying ATMs that were already installed in retail sites as a way to add value for both groups. Today, it owns more than 4,000 traditional money machines.

The step up to financial services kiosks is the next logical value add-on, according to Eugene DeSilva, vice president, American Express New Business Ventures.

"Our strategy all along has been to deploy ATMs out into the marketplace and then evolve that ATM infrastructure or footprint into something that is more than just dispensing cash," he says. "This is our first foray into financial products and services other than dispensing cash. Our vision is that all of our ATMs would be providing these services."

In addition, the more Amex Super ATMs there are, the greater the company's visibility, an added bonus for its cardholders in general and members of its newly launched online banking service in particular. "Just like our travel offices located around the world, this is another way to service customers remotely," says DeSilva.

Bringing better banking to the "nonbanked"
Seven-Eleven stores may not be swarming with American Express cardholders yet, but they are enormously popular.

With more than 5,000 stores in the United States, and more than 19,400 worldwide, 7-Eleven is the world's largest provider of retail ATMs, prepaid phone cards and money orders.

Beginning in 1993, 7-Eleven embarked on an ambitious undertaking to provide each of these financial services at every location. "We wanted ubiquity, whether it was a Slurpee or an ATM," says Rick Updyke, vice president of planning for 7-Eleven. "At that point, a lot of the banks were not interested in deploying ATMs everywhere. We were really ahead of the curve."

The chain has long served many of the nation's estimated 40 million "nonbanked," individuals who have little or no relationship with traditional banking. "It's a huge market that's not being served today," says Updyke. "If 7-Eleven provides those services in every store, we become a much easier access for them."

Then, in 1998, when it tested Super ATMs at 37 of its Austin, Texas locations, 7-Eleven got quite a surprise: Of the 50,000 customers who signed up to cash checks and wire cash at the machines, 75 percent had traditional banking relationships.

"A lot of people in Austin were professionals who wanted the convenience of 24-7, no matter what shift they worked," says Updyke.

Titanic combo
Little wonder that these two global brands decided to take a look at the future together.

"Yes, I would say that this is a joining of the titans, which probably bodes well for the program," says Ann All, editor of the online industry publication ATM Magazine." American Express obviously wants to cast themselves as an innovative, tech-friendly company, and 7-Eleven has these very high-profile convenience stores that do a large number of transactions and get a lot of foot traffic."

Neither company would discuss specifics of the partnership, other than to say they will share in revenue and expenses.

Fees for services are likely to run slightly less than competing storefront check-cashing operations, in part to generate revenue, in part to attract customer interest that might translate into increased cross-sales of other products and services at 7-Eleven.

The Super ATMs will be installed alongside existing ATMs, so customers looking for quick cash won't be inconvenienced by someone cashing a check for the first time.

To do the latter will involve using the handset on the Super ATM to register with a customer service center that is also manned 24-7. Even first-time users can expect to have their check approved within minutes.

Both partners agree that the Super ATMs are designed as a platform or portal to the real growth market in expanded sales of products and services; getting cash in any form into the customer's hands at a 7-Eleven is just the first step. Soon, that Super ATM will also entice you to spend it there, preferably by using an Amex card or product. The potential to include third-party partners is practically limitless.

"One of the things we're pursuing is leveraging the (ATM) real estate to do advertising," says DeSilva. "We are looking with 7-Eleven at the ability to advertise a 7-Eleven product, an American Express product, or reselling that space to other potential partners or people who want to buy advertising."

Buy your Slurpee with your American Express card and receive a discount? Sacre bleu!

Texas first, then the world?
What's more, as top global brands, these partners are poised to expand a positive showing in Dallas to North America, and ultimately the world.

With its we-never-close philosophy and daily distribution infrastructure, 7-Eleven hopes to become the delivery point for goods ordered online, either through its Super ATM kiosks or from home. American Express gains valued remote traveler's service centers and increased visibility for its financial products without investing in brick and mortar.

Just how many people will go to the corner store to use kiosks to access the Internet for banking remains to be seen.

"They're interested in doing it simply because it can be done, but I don't think these kiosks are always the best place for the technology," says All.

Amex's DeSilva readily admits: "Will people use these products for Internet connection? I don't know."

But everyone agrees that these unlikely partners stand to build considerable customer loyalty from a market that banks have virtually ignored -- the nonbanked.

"The demographic for the market shows there is a large overlap with the convenience store customer, young males who either don't have a bank account or have very minimal banking relationships," says All. "With the kiosks, if you can offer a pseudo-bank in lieu of a brick-and-mortar bank, and you can tweak the technology and leverage it across all of these kiosks, it can certainly be a profitable business."

But both parties are aware that in the recent past people with bank accounts outnumbered the nonbanked when it came to conveniently placed machines.

Jay MacDonald is a freelance writer based in Florida
To comment on this story, please e-mail the Bankrate.com editors

-- Posted: Feb. 15, 2000