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Money Matters

Sometimes the bank just isn't open late enough. Wouldn't it be nice if the convenience store on the corner were able to cash a check 24 hours a day in a safe, secure environment? Fortunately, some c-store operators are beginning to add 24-hour financial services, from ATMs to check cashing to full-service kiosks, which provide a benefit to both the time-pressed customer looking for one-stop shopping as well as the retailer looking to add some incremental income.

Many retailers are finding that adding financial services in-store can attract new types of customers as well as bringing in extra revenue. The "un-banked" customer looking for a small consumer loan or a place to cash his payroll check, who might have passed by the store in days past, now has a reason to walk through the door. And the white-collar customer simply stopping to fill up the tank might appreciate an on-the-go alternative to a stop at the bank. Financial services can be a significant differentiator for a c-store brand.

7-Eleven: Kiosk Happy

In 2002, Dallas-based 7-Eleven Inc. announced plans to expand its rollout of Vcom, a proprietary self-service kiosk solution for financial and e-commerce services, to 1,000 stores in 13 states. Vcom, which stands for "virtual commerce," offers touchscreen convenience and allows customers to conduct ATM transactions, cash checks, purchase money orders and money transfers, access Verizon residential telephone services, pay bills and purchase phone and prepaid cards — all within a small footprint of the store.

As of Dec. 31, 2003, the expanded rollout had been completed with $96.3 million of cash in the Vcom kiosks to fund check cashing, ATM transactions and money transfer disbursements to customers. Much attention has been paid to the c-store chain's significant upgrade in financial services, and many other retailers have begun to perk up their ears in interest.

In April 2004, 7-Eleven partnered with Dallas-based CashWorks Inc., a provider of automated payroll check-cashing solutions, to provide check-cashing services for government and payroll checks at the retailer's Vcom sites. According to check-cashing industry publications, 30 million people cash 180 million checks (totaling more than $55 billion) each year at check-cashing establishments in the United States. "We chose CashWorks because they specialize in cashing payroll and government checks, expertly applying their risk-decisioning methodology in the convenience store channel," said Brady Giddens, 7-Eleven's managing director of Vcom. "This is an ideal fit for Vcom and should better serve our convenience customer."

Once a customer is enrolled for Vcom membership, she can access the fully automated check-cashing service by inserting her membership card and her check into the Vcom kiosk slots, then entering a PIN number and pertinent information about the check on the touchscreen. Once the check is verified and approved, the customer receives a cash payment without a transaction fee. The best part for the c-store customer? The transaction takes less than two minutes from start to finish and is entirely self-service.

CashWorks and other strategic partners are granted exclusive rights to offer their services or products on the 7-Eleven Vcom kiosks, and in exchange are required to pay placement fees, a percentage of the transaction fees and, in some cases, expense reimbursement. The company said that fee commitments for the 1,000 Vcom units currently total approximately $140 million. As of Dec. 31, 2003, the company had received $65.9 million in payments from those Vcom partners, $30.5 million of which had not yet been recognized in earnings and was included as deferred income.

Fastrip Cashes In

Bakersfield, Calif.-based Jaco Oil Co., which operates 12 of its 51 Fastrip Food Stores, is currently testing a new financial-services center concept at seven of its locations. Fastrip Financial LP (FF) is a consumer financial-services company that provides products and services including check cashing, payday loans, wire transfer services through Western Union, money orders, tax preparation services, refund anticipation loans and miscellaneous ancillary services at competitive rates.

Walking through the doors of one of the seven Fastrip test sites, customers come in contact with a small, built-in financial services booth encompassing roughly 150 square feet of space. The test stores were selected based on their demographics, synergy, high-density traffic and visibility.

"I think what we're doing is kind of unique in terms of what we're offering the consumer," said Brian Busacca, CFO. "I don't think there's a lot of retailers doing this, with the exception of 7-Eleven with their kiosk offering."

The financial center, which operates 24-7, was conceived with the customer in mind. "You might walk into a check casher and there's a big glass wall there that creates a boundary between you and your customer, and it's not very consumer-centric," Busacca said. "We're trying to differentiate ourselves and not have the image of a check casher in some sleazy corner of town. We are trying to provide a service to our customers, many of whom are truly un-banked in a lot of our locations."

The financial-services booth is operated like a separate business within a business, much like bank branches operate inside a grocery store. Each is manned by a teller (or tellers, depending on the time of day and day of the week) who has been trained to assist customers with their financial needs. Due to anecdotal evidence pointing to a large number of Hispanic customers with limited fluency in English, Busacca said that management is employing staff with fluency in Spanish.

From a security standpoint, Busacca said the financial offering has posed no problems. The booth is equipped with a check-cashing dispensing machine that the teller uses, and theft has not been an issue. "This machine, while rather expensive, certainly provides that extra safeguard and also limits the amount of error from our tellers because you have to key in the amount on the check and then it spits out the money for you," Busacca said.

The financial centers are supervised from the corporate office by an experienced manager with financial-service skills, who uses real-time digital video to remotely monitor the activity at the stores. "We believe this will mitigate the risk of making poor business decisions by tellers," Busacca said. "The weakness of any system is typically right there at the store with that teller or cashier who's making less than $10 an hour. Now you've got management looking right on top of them."

Fastrip promotes the financial offerings outside the store with highly visible signs and banners to catch consumers' attention. FF's marketing programs are designed to promote convenience, hours of operation, parking, customer service, product selection and the ability to process difficult checks.

"We look at that overall offering of what we have on that corner between the retailing of gas, the c-store operation and the fact that we have in certain stores the check cashing, small consumer loans and tax returns. It drives people into the store," Busacca said, adding that the financial services center also contributes to additional purchases once the customer inside. "We have anecdotal evidence that when the customer comes in to cash a check, he's buying that six-pack, he's buying that milk, he's buying that bread," he said.

The bottom line is that while these financial centers may not be the golden savior for convenience stores, they are a step in the right direction. "The financial-services business is providing a reasonable contribution margin to the overall operations," Busacca said. "We view these products and services as critical to the concept of being a viable financial service provider in the marketplace. However, the success of the store is not dependent upon these services. Like most good c-stores, we are looking for additional products and value-added services that complement one another, add to our distinction and identity and fold into the operations."

Vendor Varieties

Manufacturers have jumped on the bandwagon and are providing products to make retailers' implementations of these financial services as easy as possible. For the operator looking to add a small, convenient money transfer service, Western Union now offers a compact c-store model for money transfer by phone. Customers can send money anywhere in the United States and to more than 185 countries worldwide, and retailers earn commissions with every transaction.

STAR Systems, an ATM provider owned by Denver-based First Data Corp., recently announced the ability to develop and deploy advanced remote content management for ATMs. The STAR service, which is already in operation at nearly 200 ATMs at Wawa and Thorntons stores, is designed for compatibility with Windows-based machines made by any ATM manufacturer.

Based on an average dispatch cost of $250, industry costs currently average nearly $6,500 per year per ATM to dispatch technicians for services. Standard maintenance and upkeep services from graphic screen changes to software upgrades can now be managed from a remote site, saving significant dollars for retailers. "Financial institutions, retailers and other ATM deployers consistently say that they want to have more control and predictability in their ATM program," said Ronald V. Congemi, president of STAR Systems/Debit Services. "STAR's new service gives our participants unprecedented control over the content, security and operation of their ATMs."

Triton, a Long Beach, Miss.-based ATM manufacturer, offers ATMs with significant value-added services for retailers looking to install financial services. Systems from Triton WAVES, which stands for "with value-added enabled services," offer check cashing, Western Union money transfer, payroll and government check cashing and prepaid wireless and phone recharge services.

"Retailers continue to try to generate new streams of revenue," said Steve Polk, director of retail sales North America for Triton. "This is a way to do that without interrupting the normal flow of business. It is important in that it provides cash convenience for consumers looking for one-stop shopping in a secured environment."

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