Phone Plus Prepaid: The Smarter Way to Vend

By Tara Seals

Posted: 6/2003

The Smarter Way to Vend

By Tara Seals

While
point-of-sale technology, online replenishment and top-up by phone strategies
are taking their toll on the prepaid card vending industry, an effort to create
intelligent vending machines is one trend keeping this distribution channel
alive.

For instance, Blackstone Calling
Card began the nationwide deployment of its patent-pending interactive kiosk
earlier this year. The product went into deployment in February and, and the
company is projecting there will be 2,500 to 5,000 kiosks deployed by year-end.

Unlike traditional vending machines,
the Blackstone kiosk does not display or store live inventory. When a customer
makes a product decision, an e-PIN is delivered and the system prints the
requested selection onto durable thermal paper stock once payment has been
received.

The benefit of e-delivery, besides
protecting from theft and fraud, is the assurance of product availability, 24
hours a day, 7 days a week. Blackstone says it continuously updates the products
and services at the kiosk, which are automatically downloaded via a dedicated
phone line.

"The kiosk offers the retailer
an entire category of prepaid products and services — prepaid cellular and long
distance calling cards, gift certificates and gift cards, home phone service,
prepaid credit cards, traffic school, loyalty programs, etc. — without worrying
about staffing, inventory, shelf space, training or theft," explains Mike
Acton, Blackstone’s general manager. "Plus, the kiosk does all the
work."

The intelligent part of the product
is a user-friendly audio and touch-screen display that guides the customer
through the entire purchasing process. It also offers "advice" on
selecting the right card by identifying the best calling card with the maximum
minutes at that point.

"The prepaid phone card
business is of course nothing new," says Gabriel Navarro, owner of Navarro
Discount Pharmacies in Miami. "[But] the kiosk offers all of the domestic
and prepaid calling cards that a customer can be looking for as opposed to only
carrying a few due to inventory/space issues. It is great for the consumer in
that they can select the country that they desire to use it for and the kiosk
then tells them the most economical card based on the rates per country."

The intelligent approach has
garnered good response overall, says the company. Blackstone conducted a series
of consumer tests, the most recent of which ran November 2002 to January, tapped
nationally recognized retail chains in the grocery, convenience and pharmacy
channels. Once these outlets were selected, kiosks were strategically placed in
stores throughout Miami and the outlying metropolitan areas.

"At one location, the kiosk
sold more in the prepaid category in one weekend than the category had done in
the entire previous year," says Acton. "Needless to say, the test has
been deemed a tremendous success by all parties and we are now in the process of
deploying the kiosks nationwide."

Opal Manufacturing Inc. is the
company that makes the Blackstone unit — Blackstone took a generic intelligent
kiosk and has added its own GUI and customer interfaces. Opal President Garnet
Rich says the kiosks "add sizzle" to the industry.

"We offer the basic kiosk and
make it unique for the customer through color and graphics, and it ties into
various back ends," he explains. "We even have a unit that vends
prepaid wireless airtime, and can deliver a handset at the bottom of the
machine. What makes these units unique is that everything is done online, in
real time — here is no product in the machine. That makes adding new services
limitless."

The ability to add new services is
an important dimension for kiosk success, say industry players. "[It’s]
convenience for the retailer who can now carry over 100 different products and
services without having to train an employee on products, rates, minutes, etc.,
and convenience for the consumer who can run in and purchase a gift card without
having to go to the mall, park, customer service, wait in line and purchase a
gift," says Blackstone spokeswoman Clare Morgan.

7-Eleven Inc. is taking the
all-in-one concept even further. It has developed its own intelligent kiosk,
called the Vcom, and is in the process of rolling it out nationally. The unit
offers ATM capabilities through American Express, Western Union money orders and
money transfers, Western Union’s Quick Collect bill payment service and Certegy
Check Services check-cashing. Public Access Insurance will offer Instant Auto
vehicle insurance. Planned enhancements for this year include touch-screen
access to online shopping and Verizon Communications Inc. prepaid/postpaid
telecom offers.

Even further down the road, the
company anticipates Vcom will offer loan and credit services, deposit
capability, event ticketing, travel directions and road maps. "Our research
tells us that customers want to do multiple financial and personal tasks at one
time, have 24-hour access to cash and a choice of convenient locations,"
says Larry Bullis, 7-Eleven market manager for Richmond, Va., one of the initial
Vcom markets.

Customers can use a simple,
menu-driven series of options available in English and Spanish to perform their
transactions. Those who need personal attention or have questions can speak with
a bilingual customer service representative through the Vcom phone attached to
the kiosk.

At the current rate of deployment,
Vcom units could be installed in 3,500 7-Eleven stores by the end of 2003, says
the company.

Another driver for the new vending
approach is the self-service aspect of the kiosk. Navarro says the savings from
being able to offer products and services without carrying inventory, and no
staff to maintain, has translated into a 40 percent increase in revenue.

PreCash Inc., which provides
electronic replenishment solutions for stored value products, is marketing its
e-PIN units to convenience retailers and high-traffic niche targets, such as
supermarkets, and plans to place the kiosk in completely unmanned environments
such as airports and malls.

"The benefits for the retailer
are labor and opportunity cost savings, a secure location for cash storage, a
potential increase in store traffic and a recurring revenue from convenience
fees," says John Chaney, CEO for PreCash.

PreCash contracted with Opal to
build the PreCash Express Kiosks, to automate the company’s refill transactions
on its e-payment cards. The machines feature a touch screen with bilingual
menus, an optional card dispenser, high-speed printer and a coin mechanism for
change.

"Self-service takes the
pressure off the retailer," says Rich. "And people get things done
quicker without having to wait in line."

Canadian vending provider DataWave
Systems Inc. markets its intelligent machines as "remote, unmanned retail
stores," because they offer point-of-sale activation, cash/credit card
acceptance, detailed reporting and sales analysis, round-the-clock
self-diagnostic troubleshooting and automatic inventory replenishment.

Unlike Opal, DataWave’s offer is
based on point-of-sale technology (PINs reside on cards and are activated via a
magnetic stripe) rather than e-PIN delivery (PINs are delivered on-demand, one
at a time). The DataWave System is a proprietary, automated direct-merchandising
distribution network, which includes freestanding intelligent vending machines
that dispense multiple prepaid products and services. The machines are connected
to the company’s communications gateway and database software through a wireless
and/or landline wide area network.

Consumers win too. "At their
own pace, consumers are able to research over 100 of the best prepaid products
and services on the market (long distance, wireless, home phone service,
international cellular service, gift cards and traffic school), review and
compare cards and rates — in real time — and purchase the best product for
their specific needs," says Blackstone’s Morgan.

That sort of information at the
consumer’s fingertips translates into convenience, which in turn, makes the
vending option more viable for all involved, bolstering customer loyalty.

To stay in the game and keep that
loyalty, vending purveyors also are continually improving the functionality and
user interfaces of their machines. DataWave placed its first machine in 1996,
but has refined it and expanded its presence since then. It has installed more
than 1,500 intelligent vending machines, and it has developed software for
remote loading, activation and dispensing of MasterCard cash cards. Future
phases and enhancements for PreCash’s kiosk include online card association and
credit card acceptance. Vcom is a cash-based machine now, but 7-Eleven plans to
roll out check, money order or credit card payment options soon.