DVD kiosks may not be the magic pill that saves ISOs from declining per-ATM transaction volumes and an industry bend toward surcharge-free ATM offers. But they do provide an alternative. At least that’s the way George McQuain, the chief executive of Florida-based Global Axcess Corp., sees it.
GAXC earlier this year announced plans to launch the InstaFlix DVD-rental kiosk line — a line that aims to go head-to-head with the redbox and Blockbuster Express brands, operated by Coinstar Inc. and NCR Corp., respectively.
Twenty InstaFlix kiosks have been deployed since July under GAXC subsidiary Nationwide Ntertainment Services Inc. Four more installations are expected to wrap within the next two weeks.
ATMs and DVDs seem like an odd self-service marriage. Most ATM deployers looking to kiosks are more interested in advanced financial services kiosks, a business that falls in line with what they already know.
But McQuain argues that getting into the self-service kiosk business has more nuances than most ATM deployers appreciate. Besides, self-service DVD rentals have been tried and proven. They work. Self-service financial services, such as check cashing and bill-payment, however, are still hit or miss in the market.
“The business model for DVD rental is very similar to today’s ATM-placement model, McQuain said. “You’ve got the cost of the machine and the cost of getting that machine installed. You’ve got the cost of the inventory, which corresponds to cost of cash. And then you have maintenance and the cost to conduct the transaction.”
The DVD-rental model may resemble the ATM model, but it’s not a mirrored layout. For McQuain, DVDs are just a way to get a foot in the kiosk door.
“We really see ourselves becoming a self-service company, not just an ATM or DVD-rental deployer,” McQuain said.
GAXC is working with a consultant to determine what additional or new types of self-service applications make sense, but McQuain was reluctant to divulge much more.
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But breaking into any new line of business, he says, requires a different mindset. For instance, just because an ATM pulls in 600 transactions per month at a neighborhood Circle K does not mean a DVD-rental kiosk or an advanced-function check-cashing and bill-payment kiosk will find the same success.
“A good ATM location might not necessarily be a good DVD-kiosk location,” McQuain said.
Market variations can make or break a kiosk deployment, since the transactions being offered are more focused and cater to a specific user. Deploying ATMs, on the other hand, is relatively easy, since everyone uses cash, McQuain said.
But market trends and consumer preferences also come into play with entertainment products, which means some legwork on the front end, McQuain says.
“In the DVD kiosk, each of the terminals we’re using has a capacity for 600 distinct films; so we have to look at the market and figure out what people in that market will rent,” he said. “What is the correct mix between new releases and older movies?”
The inventory request becomes more daunting than simply loading ATM cassettes with tens and twenties. And the profit margins won't be the same, at least not in DVD deployments.
“You’re not going to profit on a DVD transaction like you do on a cash transaction,” McQuain said. “With DVD rental, you pay the interchange, rather than getting a percentage of it. So, in order to make money, you do need a much higher transaction level than non-bank ATM deployers are used to seeing on ATMs.”
Getting the hardware poses another challenge, since most DVD-kiosk manufacturers are based outside the United States. GAXC, for instance, is working with Italy-based Video Systems Group SRL.
So not only do the machines cost more, but it also can take a long time to get them. A DVD or multifunctional kiosk could cost between $20,000 and $30,000, while an entry-level cash dispenser’s price point ranges from $1,500 to $3,000.
“Since they don’t have a U.S. inventory, you need to forecast to know what you might need in the future; and that means you need to have a good handle on the market before you ever start deployments.”
What are other ISOs doing?
Other ATM ISOs are taking similar steps, though not as far outside the financial sphere.
Texas-based Merchants First Choice, which owns and operates a network of about 800 ATMs, plans to place multifunctional financial kiosks in retail locations with high densities of unbanked consumers. The ISO is in placement negotiations for 170 locations with one unnamed drug store, as well as with 70 Walgreen Co. sites.
Merchants First Choice's custom-built financial kiosk, expected to deploy in the next 30 days, also offers payday cash loans — a service the ISO expects to be its bread and butter in the long term.
“We believe these multifunctional terminals are the future of the ATM industry, and we are looking at things like prepaid ATM/debit cards, billpay, check cashing, money orders,” said Jamil Adair of Merchants First Choice. “We are in a position right now where a lot of people are going from banked to unbanked because of the economy, and these are the services they want.”
The systems can integrate ATM functionality or simply offer bill payment or check cashing, Adair says, depending on what’s right for the location.
Sayed Taha, the sales manager for National Link, says finding the right fit for the market and location are key. National Link is a California-based ATM ISO with a portfolio of approximately 7,000 ATMs.
“ISOs need to offer a service that makes sense for the location,” Taha said. “If the retailer is located in a market with a lot of unbanked consumers, then a feature like billpay makes sense. If it’s just a general retail environment, maybe it would make more sense to just add a digital topper on the ATM.”
