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Coming Soon: ATMs That Dispense Prepaid Cards

Consumer Reports News

Cash may still be king, but its grip on the kingdom is increasingly threatened by payment technologies, some old and some new. Debit cards continue to gain popularity because you can use them anyplace that accepts credit cards and because they can be a good budgeting tool. And pay-by-smart-phone technology is being pushed by major players who see growth opportunity.

And now prepaid cards are opening yet a new front where paper currency has long reigned supreme: At automated teller machines. An Arizona company has developed a way to transform existing ATMs into dispensers of prepaid cards as well as cash.

So far, the card-serving ATMs have been deployed at only a handful of credit unions in Arizona and Washington, D.C. But Visa has approved these machines for national use, and some big banks (which can't be named yet) are working to modify their ATMs, says Todd Nuttall, CEO of Better ATM Services, the company behind the invention. Our cameras caught a demonstration model last month in San Francisco at the Finovate conference, where companies show off their new, tech-based financial products and services:

There's plenty in this for banks, starting with fees for issuing and activating prepaid cards. Retailers now charge $3 to $6 for that, while banks get only $2 on average per ATM cash withdrawal by other bank's customers and often nothing at all from their own customers' fee-free ATM cash withdrawals.

Banks will set their own card-issuance fees, and Nuttall expects that some banks will charge "a dollar or two less than grocery stores." But we'll believe in the kindness of bankers when we see it.

Nuttall expects that consumers in pockets around the U.S. will start seeing card-dealing bank ATMs later this year, with widespread national adoption by 2014 or 2015.

In the meantime, consumers should study up on the pros and cons of increasingly popular prepaid and gift cards at DefendYourDollars.org, a web site of Consumer's Union, the advocacy arm of Consumer Reports.

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