LAS VEGAS -- "It's déjà vu all over again," said the great 20th-century philosopher Yogi Berra. Anyone who has spent enough time working within the prepaid and financial-services sectors would know the feeling. Retailers and suppliers attending CSP's Fringe Banking & Unbanked Consumer Dialogue this week, coinciding with the 2008 Prepaid Card Expo, learned that these categories are embroiled in continued, monumental and ultimately positive change.
"What's our next step?" asked Kathleen Hannigan, global category manager for Chevron Inc., San Ramon, Calif. "That's what we [image-nocss] all need to find out."
Eight years ago, at the turn of the century, a revolution was underway in which retailers shifted from carrying live inventory of long-distance telecom cards to stocking cards that were activated at the point of sale. Such evolution continues today, with retailers offering every kind of card—third-party gift cards, reloadable debit cards, music and gaming cards, etc.—as well as financial services such as money orders, transfers and short-term cash advances.
"In 1999, we were saying who in the world is going to buy a cell phone in a c-store," said Frank Squilla, senior vice president of sales for InComm, Atlanta. "Then it became simple because all the major carriers got involved.… You're going to see more rapid acceptance of all kinds of cards and services over the next couple of years."
Financial services, specifically, represent a tremendous opportunity for convenience retailers, with industry sources estimating the number of people in the United States who forgo traditional financial institutions—the unbanked—at 28 million. In addition, approximately 45 million people have relationships with banks but don't use them frequently, thus accounting for the population known as the underbanked.
Alternative banking options, such as check cashers, provide these consumers with "a financial lifeline" of sorts, according to research presented by CSP senior editor Angel Abcede. "Convenience stores can become banks for the unbanked," said Abcede, who led retailers and suppliers through his research and the ensuing discussion. "[Through c-stores] unbanked consumers can do all the things that banked customers can do, just in a different way."
Mike Polo, director of marketing for Western Refining Inc., Scottsdale, Ariz., explained how his company's proprietary money-order program, which has been in existence for about two years, has built closer bonds between his stores and the people who shop in them. "There's a lot of trust in the c-store channel," he said. "You have to have an environment that makes them feel safe."
Western Refining's stores also offer check-cashing services through Mr. Payroll. As many as 85% of customers who use the service tend to buy something else in the store, such as tobacco, a cold beverage or a six-pack of beer, according to Polo.
Talk of some services, however, because of their assumed risk or laborious nature, generated no small share of controversy. One such service was payday loan, which is a small, short-term loan intended to cover a borrower's expenses until his or her next paycheck. Typical loans are between $100 and $500, generally on a two-week term, and tend to come with excessive interest rates. Some retailers did not want to bear the risk of defaulted loans.
"At the end of the day, you want customers in your stores," said Scott Burslem, other-income manager for TravelCenters of America (TA), Westlake, Ohio. "And you do anything you can to facilitate that. But what kind of customer does it bring into your store? How do you weigh it? You want the footcount and you want the sales. You might not always get both."
TA, which caters primarily to professional drivers who spend a lot of time behind the wheel, offers customers cash advances through third-party facilitators. "It's basically for drivers in our facilities in case they need to fix something on their trucks, feed themselves or need a few hundred dollars for something else," Burslem said. "It's about getting the cash in their hands."
One of the greatest examples of a retailer succeeding in financial services came from Wal-Mart Stores Inc., Bentonville, Ark., which has a goal of installing 1,000 Wal-Mart MoneyCenters in its stores by the end of the year. The centers enable retailers to purchase money orders, cash checks and perform money transfers. Though some participants doubted the world's largest retailer would hit its store-count goal, they could not deny the power and ubiquity of the center.
As part of its still nascent financial-services endeavor, Wal-Mart created the Wal-Mart MoneyCard, which is a branded, reloadable card created in partnership with GreenDot, GE and Visa. It can be reloaded using cash, direct deposit or payroll checks and accepted as tender anywhere Visa debit cards are accepted.
"Don't underestimate this one," said Martin Trussell, senior vice president of marketing for First Horizon Msaver Inc., Overland Park, Kansas.
How can c-stores compete with the likes of Wal-Mart in these categories? The consensus among event participants was that retailers and their suppliers need to work more closely together to solve the category's many challenges. For example, retailers need suppliers to get better at building buzz outside the store and convincing the public that c-stores are the perfect place to purchase prepaid and financial services.
On the other hand, suppliers simply need retailers to execute the programs they're given. This means making sure a kiosk remains operational, ensuring that J-hooks are stocked with cards and calling the supplier or distributor if any problems arise, instead of "pulling the plug, pushing it into the corner and worrying about it later," as one retailer said.
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