This article originally published in Self-Service World magazine, June 2007.
 |
| Photo by Leslie Kossoff |
When multibillion-dollar ExxonMobil decided in May 2004 to dip its toes into the deep waters of self-service bill payment, it was well insulated by research and testing. The company initiated a pilot at 40 ExxonMobil Tigermarkets in Memphis, Tenn., just to see how consumers would take to the technology. The findings, said David Taylor, ExxonMobil's U.S. category manager, were enlightening.
"I was looking for a way to move some of our financial services away from the counter and over to the self-service channel," Taylor said. "Consumers raved about the convenience and took to the technology easily. We quickly expanded the test to the Nashville (Tenn.) and Charlotte (N.C.) markets."
The idea was not only to increase foot traffic in some of ExxonMobil's company stores, but also to provide a service for consumers in a way that would keep them coming back.
"We're really not focused on the revenue, per se," Taylor said. "We need the program to be profitable, but what we're focusing on is making sure we're providing a service for our customers in a convenient and safe environment."
Steve Verleye, senior vice president and general manager of e-payment services for Bellevue, Wash.-based Coinstar Inc., shares a similar perspective. Verleye said most retailers are more interested in increasing their foot traffic than they are in building revenue from self-service transactions.
"Retailers and banks are offering similar products, and there are obvious reasons for that," Verleye said. "The No. 1 reason is the foot traffic, especially in grocery stores, where traffic has been down significantly over the last 10 years because of cannibalization and competition from superstores like Wal-Mart."
Increased foot traffic and service are focal points of the ExxonMobil deployments — and the concept is working.
Since the 2004 pilot in Tennessee and North Carolina, ExxonMobil has in Texas deployed 120 financial kiosks, part of the ExxonMobil-coined "E-Wiz" line. ExxonMobil also has launched some 115 ATM hybrids, which allow consumers to withdraw cash and pay bills. The hybrids also are expected in the near future to sell prepaid products in various U.S. markets.
Through a deal with Burnaby, British Columbia-based TIO Networks Corp., ExxonMobil is placing the E-Wiz line at its On the Run and corporate-run stores. And through a deal with Houston-based independent sales organization Cardtronics LP, 45 more hybrids were slated for installation by the end of April.
Taylor said the company plans to deploy an additional 180 hybrids in the United States by August. And by the end of the year, as ExxonMobil works to replace basic cash dispensers in some of its more established locations, the company plans to have more than 700 E-Wiz hybrids deployed in the field.
Marketing challenge
 |
| Hamed Shahbazi, TIO Networks' chairman and CEO, has pioneered the use of aggregate bill payment in the financial self-service industry. |
"The convenience-store industry in the U.S. is a $430 billion-a-year business," Shahbazi said. "It's a huge industry that consumers like because of convenience. So what are small c-store retailers getting out of financial self-service transactions? On a very basic level, they depend on foot traffic, so by providing new products and services, they have something new that attracts customers in and keeps them coming back."
In the past, basic ATMs were enough. But the case is different today.
"Many retailers want to be the bank for the unbanked," Shahbazi said. "They want to target these consumers and make them loyal. You have some, like ExxonMobil, that are very savvy and really know what they want. They do a lot of research and they understand the trends and how to reach the unbanked, like the Hispanic population, through financial self-service."
Turning the unbanked consumer into a loyal customer makes sense for retailers, agrees Coinstar's Verleye.
"A lot of immigrants don't have access to banking services, and the retailer wants to start a relationship with that consumer," Verleye said. "So they start coming to your store to conduct a bill-pay or check-cashing service, and it offers the retailer a way to grow traffic."
The unbanked aren't having their needs met by financial institutions, he said, so retailers large and small see the opportunity to fill a void. But reaching unbanked consumers, such as new immigrants, requires research and strategy.
"The challenge is not on the technical side," Verleye said. "The challenge is really on the marketing side. Many of the users that you are targeting are on the unbanked side, and many of them are first-generation in the United States and may not be likely to use a self-service terminal for all types of transactions. So we always take the view, ‘Is this product really going to resonate with the customer and be something they will use?'"
What makes cents?
Coin-counting on the self-service channel makes sense, as Coinstar has proven through the 13,000 Coinstar Center coin-counting machines it has deployed in the United States, Canada and the United Kingdom. Coinstar also is exploring other services, such as mobile-phone top-ups, money-transfers and dispensing prepaid products through self-service, Verleye said.
But the company is being very strategic about the moves it makes into those product lines.
The success of most self-service deployments — whether they be financial or retail — depends on market maturity and consumer use, Verleye said.
"In the U.K., they are used to topping up their phones via self-service," he said. "The market in the U.S. is not as experienced with self-service services. So in the U.K., self-service makes sense for a range of products and services that might not work here. We found that uptake with kiosks in the U.K. is very fast. Here, it has taken a lot longer."
Similar market differences apply on a smaller scale to different regions of the United States. Areas like Texas, which have high numbers of c-stores and immigrant populations, may find financial services well accepted in retail locations — and that moving those transactions over to self-service only requires a bit of consumer and employee training.
"The thing about self service: It's not for everyone, and it's not for every store," ExxonMobil's Taylor said. "We've found that it is important to develop scale. A single store will not have much of a chance at success. It's much better for the market and users if you can say, ‘Go to any X location,' or, in our case, ‘any On the Run location,' and that seems to resonate."
Taylor said ExxonMobil has found clustered deployments to be the most successful. Agreeing with Coinstar's Verleye, Taylor said success depends a great deal on marketing.
"We've deployed one store in a market, three stores in a market, five stores in a market, and they're not as successful," he said. "Again, it depends on the market; but if you have a dozen stores within 15 to 20 miles of each other, I think you're more likely to have success."
Taylor also points out that understanding the types of services consumers in certain areas want plays a huge role in any self-service deployment, especially financial services.
"We first deploy in markets where we have the billers to support the offering, and if we have a wireless company that has a big cash-preferred market of customers for payment, then that's a market we go to first," he said. "That's where the research that TIO does is so helpful, because they can help identify the markets that have those types of needs."
Bill Lynch, vice president of self-service solutions for Charlotte, N.C.-based Source Technologies Inc., said adequate research prior to any financial self-service program is important; in fact, it can make or break a retail deployment.
"I think [retailers] are concerned about the downward spiral in ATM transactions, so they're looking for the silver bullet," he said. "We're still in the infancy of some of the new transactions, like bill payment, issuing cards, etc., so we don't really know what the best practice for these devices is. That's still being defined by the marketplace."
Lynch, whose company provides full-service kiosk programs for retailers and financial institutions, is quick to point out that customers want reliability and predictability, especially when it comes to conducting financial transactions. That can bode well for self-service, since retail clerks have a high turnover rate. Financial transactions on a self-service device are consistent and, for the most part, reliable.
Finding the best transactional fit is the hard part, Lynch said. In Source's experience on the retail side, wireless bill-payment services have seen the most success.
Source has partnered with companies like Tulsa, Okla.-based ChoicePay Inc., an electronic bill-payment provider that also works with 7-Eleven's Vcom line.
"Some of our self-service billpay kiosks located in wireless telcos are driving 100 to 150 transactions per day," Lynch said.
Finding transactions that work can be challenging, but a little common sense goes a long way, ExxonMobil's Taylor said. Retailers can do a lot of their research visually, keeping an eye on the number of check-cashing outlets located in or opening within close proximity. Also, are prepaid items, such as phone cards, big sellers from the counter? If so, then offering them at a self-service terminal probably makes sense.
"Retailers are always looking for the next big thing, and since the convenience-store industry has been moving products to self-service for the last 30 years — like the sale of coffee and fountain drinks — they're interested in moving as many [products and services] as they can," Taylor said.
"The biggest challenge with self-service, at least in the financial-products space, is figuring out how to make it work, while being able to afford the kiosk and monetize the service."
| Where Financial and Retail Meet |
| Just as the industry has watched the ATM and kiosk converge — with ATMs offering everything from bill payment to mobile-phone top-ups — so, too, have the boundaries that divide the retail and banking sectors begun to blur. "You see banks trying to be more customer-friendly, more like a retail location. They even call their branches ‘stores' now to help drive home the message," said Madhavi Mantha, a senior analyst with Boston-based consultancy Celent LLC. "Banks are trying to modify their culture, as well as their view internally. They want the customer to come in and buy something, just like they would at a retailer. It's intentional." Financial-service offerings make sense for most retailers, Mantha said. Retailers already are dealing with payments and consumers — especially in the United States — are comfortable sharing financial information with the retailers they frequent. It's quite normal for a regular customer to cash or write a check when she pays for her goods at the check-out counter. The practice might be more common at convenience or small-box locations, but it's no rare occurrence at the big-boxers, like Wal-Mart, either. The support for financial transactions in the retail space has made retailers and financial institutions (FIs) unlikely allies. While their similar interests make them obvious competitors, the two factions have found ways to work together. A natural fit Like retailers, FIs want to build and maintain relationships with their customers and members. "You see many branches completely changing the customer experience," Mantha said. "They want more opportunity to engage customers." FIs also are interested in making their branches more efficient from a cost and customer-experience standpoint. That interest in efficiency has led many of them to incorporate more self-service within their branches, said Bill Lynch, vice president of self-service solutions for Charlotte, N.C.-based Source Technologies Inc., a turnkey self-service provider to the retail and banking industries. "When we're talking to the financial institutions, they're asking how they can make their branches more efficient," he said. "We see a lot of turnover in the branch space — about 30 percent every year — and in some of your urban areas, it can be even more. So if I want to give my customers options, I can leverage self-service to let them do more." One way FIs have upped their efficiency is through the opening of so-called "in-store" branches — mini-branches located in retail outlets, such as supermarkets. In-store branches cost between 10 percent and 20 percent less to construct, and they have consistent foot traffic. Bart Narter, another Celent analyst who follows FI branch trends, said in-store branches have boomed, with the compound annual growth rate of in-store branches from 2001 to 2004 outpacing the CAGR of traditional branches by nearly 15 percent. "There are all sorts of synergies between retailers and banks for in-store branches, especially in supermarkets, which customers typically visit two or three times per week," Narter said. And the relationship works both ways. The FI gets foot traffic, a less expensive location and the potential to acquire new customers or members. The retailer builds loyalty. "There's a very strong-held belief by supermarket retailers that if a customer banks at that in-store branch, they become a more loyal customer. It's a way for them to compete in the market." But the rate of in-store-branch growth is tapering, Narter said, because prime retail spots already have been accounted for, and the majority of the remaining retail outlets where in-store branches would make sense simply can't give up the floor space. It doesn't mean the end of in-store branches, Narter said. Instead, FIs will work to shrink their in-store footprints so they consume less retail space. Self-service could play a role in the new model, Narter said, but it will be only a complementary one, since FIs like having physical presences. "The banks that are already using in-store branches are trying to figure out a way to shrink so they can fit in smaller retail locations and still have a presence within the store," Narter said. "You couldn't place a billpay kiosk, for instance, and work with multiple banks, at least not easily. The branding is difficult, and I think people have trouble getting their brains around it. People understand the ATM, but the kiosk space is more difficult." Barter and Source's Lynch agree that assisted self-service is a more viable option. "With an in-store branch you can have an ATM and a clerk who can help you open an account," Narter said. "The banks could shrink their footprint just by having an ATM and a desk." Lynch also is quick to point out that consumers cannot be expected to adopt self-service-transaction habits by themselves. "Customer acceptance proves how successful a self-service deployment is, and I think the training is something that's been missing in the retail banking environment in the past," he said. "How do you incorporate self-service without alienating the customer and pushing them off to a machine? We really need to work on a better customer experience." |
