unbanked and underbanked consumers in the US represent a vast
market. A focus on meeting the needs of the unbanked and
underbanked has rewarded TIO Networks handsomely, enabling it to
shrug off the impact of the US recession. Robin
Over 10 percent of US households have no formal banking account
according to an estimate by the Federal Reserve Board. This
represents almost 11 million households, a market financial
self-service kiosk firm TIO Networks has focused on with
considerable success since its establishment in 1997. Specifically,
TIO’s target market is what it terms “cash-preferred” unbanked or
underbanked consumers, who need to make expedited bill
“Unbanked consumers don’t want to part with cash to pay bills
until as close to the due date as possible,” TIO CEO Hamed Shahbazi
told EPI. “Our system offers rapid processing and reconciliation of
TIO, in which Hewlett Packard holds a 7.5 percent strategic
stake, has built a network which today it justifiably claims to be
the largest national multi-retailer network of self-service
financial service kiosks in North America. Though operating in
Canada and 29 US states, TIO’s focus is on US states with a high
concentration of Latin Americans and African Americans.
Shahbazi explained that Latin Americans and African-Americans
have a higher propensity to be unbanked or underbanked than other
US consumer segments.
“We are very strong in Arizona and Texas, where there are a lot
of Hispanics and African Americans,” he said.
Though based in Burnaby, Canada, TIO, previously known as Info
Touch Technologies, operates almost entirely in the US.
“We have 20 kiosks in Canada, all of which are in Alberta and
process transactions for one single biller,” said Shahbazi.
The US accounts for some 98 percent of TIO’s revenue.
As of 31 October 2008, TIO had 12,339 locations across the US on
its network. This figure was up by 348 percent on the 9,590
locations on TIO’s network 12 months earlier. Boosted by its
expanding network, TIO’s recurring revenues rose by 43 percent
year-on-year to C$4.7 million ($3.77 million) in the three months
to 31 October 2008, the first quarter of its 2008-09 financial
year. TIO’s revenues mainly come from its transaction service fees.
For the year to 31 July 2008, total recurring revenue rose by 16
percent compared with the previous financial year to C$14.03
million. In the final quarter of 2008, total recurring revenue of
C$4.06 million was up 21 percent compared with the comparable
quarter a year earlier.
In addition to TIO-branded self-service kiosks, the network
includes non-kiosk TIO-branded clerk-assisted over-the-counter
devices such as internet-enabled personal computers (PC), and POS
terminals and third-party devices which use TIO’s application
programming interface (API) to connect via the internet to TIO’s
processing platform. The third-party-network locations can include
PCs, web-enabled POS terminals and kiosks.
“The API allows a retailer to include a TIO button on their PC
or POS terminal,” explained Shahbazi. “For a third-party processor,
a benefit of the API is that it allows them to offer payments to
billers that they might not have links with. For example, if Dollar
Express wants to offer AT&T Wireless bill payments but hasn’t
integrated its system with AT&T Wireless, it can use our API to
offer AT&T Wireless bill payments.”
Dollar Express, a walk-in bill payments and money transfers
money transfer service provider owned by US payment processor
Global Payments, signed a deal in August 2008 to offer bill
payments through TIO at DolEx branches. Shahbazi said his company’s
TIO Express-branded over-the-counter payments programme is growing
“There is value in offering expedited bill payments not just at
kiosks but also at clerk-assisted tills,” he said.
“Over-the-counter is driving the overall growth of TIO. We get more
[profit] margin from kiosks than from over-the-counter, but
over-the-counter gives us more top-line revenue.”
In December 2008, TIO entered the cross-border money transfer
market through a deal with US-to-Latin America remittance service
provider Nexxo Financial. TIO now offers self-service, automated
money transfer services at cash-accepting kiosks it operates at 472
Circle K convenience stores and other participating retail stores
in Texas. Funds transfer recipients can pick up their cash at
21,000 agent locations and bank branches in Latin America that
belong to Nexxo’ network.
“The Nexxo deal is significant, as it means our customers can
now do one-stop-shop financial services,” Shahbazi stressed.
But not all are convinced the cross-border remittance market
represents an attractive opportunity, at least for now.
One skeptic is Dave Lott, senior vice-president at US
consultancy Speer & Associates, who warned the current US
economic climate is tough for remittance sector entrants.
“The economic challenges being faced in the US are having a big
impact on the volume of remittances, as the number of [migrant]
workers, concentrated in construction and service businesses, has
dropped substantially,” Lott said. “Western Union has a major
competitive advantage as it has hundreds of thousands of outlets,
both automated and clerk-assisted.”
However, remittances represent only one part of TIO’s
diversification strategy. Among these is the TIO reloadable Prepaid
MasterCard prepaid card launched in May 2007 in collaboration with
NetSpend. The card is distributed via Exxon and Mobil convenience
store locations across the US.
In addition to its own branded card, TIO is active in the
broader reloadable, prepaid card market and derives most of its
prepaid card revenues from reload transactions for issuers such as
NetSpend. In addition TIO handles reloading for Visa prepaid cards
through Visa’s ReadyLink load network.
At present TIO is not affiliated to MasterCard’s rival rePower
prepaid card reload network. This is because rePower has yet to
achieve significant volume, Shahbazi explained.
However, he added: “We do intend to link up with MasterCard
rePower at some point. Reloading of prepaid cards is a good margin
centre for us. We are seeing prepaid card reloading grow month
after month. In 2009, prepaid card reloading will be among our top
10 [product] margin centres. Prepaid is proving very attractive to
credit-challenged consumers in the US.”