Scrip Terminals Fuel Payments System Debate

By Arend, Mark | ABA Banking Journal, April 1993 | Go to article overview

Scrip Terminals Fuel Payments System Debate


Arend, Mark, ABA Banking Journal


Providers of scrip terminals and scrip transaction processing services are actively targeting banks looking for alternatives to automated teller machines (ATMs). But some electronic funds transfer (EFT) networks are equally active in trying to stunt the growth of the scrip terminal market, claiming the devices are confusing, not expanding, the retail payments system.

A fixture in convenience stores and other retail establishments for several years, scrip terminals let consumers use their ATM and debit cards to access cash from their accounts. Like ATMs, the terminals are linked to networks that transmit transaction activity to the consumer's financial institution, which debits the amount on his or her account. But unlike an ATM, the machine issues scrip, a receipt that the consumer brings to a cashier, who provides the cash to the consumer.

Typically, the scrip is used to make purchases, saving the consumer from having to stop at an ATM at another location before coming to the store. Besides convenience, some consumers have indicated that they feel safer using a cash-access device inside a retail establishment than they do using an ATM at a remote location or during nonbanking hours.

The fee factor. The benefits to the retailer include the interchange fee it can earn on scrip transactions, increased store traffic and sales, and for retailers with ATMs in some locations, lower maintenance costs.

The interchange fee is at the heart of the disagreement between scrip deployers and the national networks. In fact, there's little consensus surrounding fees charged for the use of scrip terminals. Generally, if the regional networks carrying scrip transmissions define the terminals as ATM replacements, a surcharge can be added to each transaction by the retailer. Part of the fee is paid to the acquiring bank, and part becomes added revenue for the merchant.

If scrip terminals are defined as point-of-sale (POS) debit devices, most networks do not require an interchange fee, but merchants can surcharge customers to cover their costs.

Most fee arrangements are actually agreed upon by the parties involved on an individual basis. For their part. the scrip terminal vendors, such as Triton Systems, Inc., Pass Christian, Miss., tend to position the scrip machines as devices that augment ATMs, not replace them.

"Most of the locations where you would deploy a scrip machine wouldn't work for a full-feature ATM," says Frank Wilem, vice-president, Triton. "Scrip terminals extend the ability to offer self-service banking into a lower cost category than ATMs," he adds.

Triton Systems markets a mini-ATM Scrip Terminal as well as a customer terminal that performs the noncash transactions associated with an ATM. The latter is intended to reduce customers' time spent waiting in teller lines in bank lobbies.

Retailers wanting to provide cash access to customers typically can't afford ATMs, which can cost several thousand dollars each, depending on the features included. And most banks would discourage their installation in low-traffic areas. For situations involving, say, just 30 transactions per day, the scrip machine makes sense, because the roughly $2,500 price tag can be more easily justified.

Until recently, scrip machines coexisted with ATMs peacefully in markets that could support both machines. Regional and national ATM networks handled both types of transactions. In the case of scrip terminals, merchants installing them or third-party processors that remarket the machines to merchants must be sponsored into the network by a financial institution that already belongs.

But the 1990s are shaping up to be the decade of the debit card, and national debit card programs are well under way. Visa's Interlink program and MasterCard's Maestro are gaining momentum as point-of-sale debit alternatives to cash, checks, or credit.

In this environment, scrip machines are less attractive to the national ATM networks, Visa's Plus and MasterCard's Cirrus, but not necessarily because POS debit program growth may be in jeopardy, according to officials from the two networks. …

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Scrip Terminals Fuel Payments System Debate
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