ATLANTA - With the early glitches with its Vcom check-cashing kiosks largely identified and fixed, 7-Eleven Inc. says it is putting its full force behind a program to install the terminals at its retail locations and establish itself as a national financial services brand.
Jay Giesen, a vice president and the general manager for the Vcom project, said Thursday that 7-Eleven envisions the terminals as the centerpiece of a financial services strategy that will turn the 7-Eleven and Vcom names into the leading alternative to check-cashers.
"We will make a profit on every machine we install," Mr. Giesen said. The company handles the most money orders in the country, he said, and the Vcom units should help increase that business while freeing clerks from the chore.
Mr. Giesen said that 7-Eleven, which is based in Dallas, wants to become the brand of choice for people with no banking accounts at all, and for the "underbanked," whom he described as people with perhaps a savings account, or people with checking accounts who get paid on Fridays and cannot wait until Monday to cash their paychecks.
"We think the underbanked are underserved," Mr. Giesen said, addressing an audience made up largely of bankers at the Bank Administration Institute's Retail Delivery Conference and Expo here. "There is no brand out there that stands for reliable service. That is the positioning we have been looking for - a national brand for the underbanked."
Reliability has been an issue with the Vcoms, however. "Check jams do happen," Mr. Giesen said. But now a process is in place to handle them: When a customer's check gets stuck in the machine, a repair person arrives to remove it within hours and the customer is given a packet of coupons for free or discounted products at 7-Eleven as a goodwill gesture.
Though the 7-Eleven Vcom project has undergone many changes along the way, Mr. Giesen calls that a normal part of development, and not an indication of any problems. In September, 7-Eleven's checking processor, Certegy Inc., reported that it would have lower earnings because of delays in rolling out the kiosks to the planned 3,500 convenience stores. At the time, 7-Eleven said it was still figuring out how best to market the program.
Mr. Giesen came to 7-Eleven from Western Union, and also spent time at the Citibank unit of Citigroup Inc. He has already set up a partnership with Western Union, which is a subsidiary of First Data Corp., to provide money transfer services through the Vcoms, and is talking with potential bank partners about providing such traditional bank products as deposit accounts, loans, and credit cards. Mr. Giesen even foresees a bank-run Christmas club, where customers without a bank account could deposit some money from their paycheck into an account each week.
He has already signed Verizon to offer prepaid mobile phone and residential telephone service. American Express Co. provides the ATM function. He eventually will add auto insurance and online bill payment partners.
The growth of 7-Eleven's check-cashing business is good news for banks. They currently cash about 48% of checks for lower-income households without deposit accounts, but they complain that these transactions slow down teller lines. Grocery stores get 23% of the business, check cashing businesses 17%, and convenience stores only 5%, Mr. Giesen said.
7-Eleven has been installing the Vcom terminals - which are connected to the Internet, and which 7-Eleven anticipates will perform a wide variety of banking functions - in waves since the spring, and expects to have 400 in its stores by yearend and 1,000 by March 2003. The next wave of installations will begin in July 2003, with the final group of 2,500 stores.
7-Eleven has spent nearly 10 years refining the concept of offering financial services to walk-in customers, starting with manned service centers then automating a 9-foot-wide minibank, complete with pillars. The final version - the Vcom, manufactured by NCR Corp. - is a colorful vending-machine-size kiosk complete with color screen, customer service telephone, and even a camera to take photos of check-cashing customers.
"We wanted to have some similarity to an ATM machine but to combine that with a friendly look," Mr. Giesen said. "Once a customer touches the machine and it doesn't bite back," he or she will be more inclined to try some of the services.
The Vcom kiosk on display at the BAI show drew a crowd. The colorful unit stands about 8 feet tall and plays a video explaining the services it offers. An executive from NCR was on hand to describe how banks and grocery stores could install them as slightly more expensive alternatives to automated teller machines.
Bankers at the show seemed to take to the concept, with some reservations. Tony Gorrell, an executive at $155 million-asset Sutton Bank in Attica, Ohio, said he liked the idea of partnering with local grocery stores to place the kiosks. "They could be on to something," he said. His criticism of the unit was that it needed to be able to dispense an ATM-type card that could be used to make purchases, or at other ATMs to get cash.
Felipe Del Rio, a project coordinator for the ATH debit network operated by GM Group, a San Juan, Puerto Rico-based division of Popular Inc., thought that people without bank accounts might ignore the machines. "It might not work because these customers do not use ATMs," he said.
Mr. Giesen says customers should be enthusiastic once they see the benefits of using the service. "We have the ability to set prices by market," he said, noting that 7-Eleven's fee - 2% to 3% of the check value - is low-end in check-cashing. "We want to be extremely competitive on the core products we offer the customer."
7-Eleven also makes a fee for money orders and Western Union money transfers and it expects that it will eventually earn commissions for bank services offered through the machines.
The 24-hour availability of the kiosk has also proven popular. Mr. Giesen told the story of a customer who needed to cash a paycheck and send money to a family member in an emergency who had been unable to find a check-casher open after hours. He arrived just before midnight at a 7-Eleven that had just installed a Vcom.
