The ATM Industry Association and Tremont Capital Group, an ATM industry consulting firm, have announced the completion of a business-impact study assessing anticipated revenue losses for independent sales organizations (ISOs) following MasterCard Worldwide's reduction in interchange, which took effect this month.
According to a news release from ATMIA, the new system, which affects the Cirrus network, includes a three-tier interchange structure that adversely impacts ISOs.
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The analysis, provided by Tremont, included data from 25 ISOs that manage or own nearly 137,000 ATMs in the United States. Tremont also conducted interviews with processors and sponsoring financial institutions to develop a quantitative and qualitative analysis of the likely impacts of the changes. The study represents about 67 percent of the nation's ISO ATMs and 34 percent of the country's total ATM base.
"The interchange rate changes recently introduced by MasterCard/Cirrus will significantly impact all ATMs in the United States," said Sam M. Ditzion, CEO of Tremont Capital Group. "In order to proactively minimize the impact, all stakeholders must first understand the scope of these changes and then accurately quantify how they will affect their individual businesses."
The study found that U.S. ISOs conduct an estimated 124.2 million MasterCard/Cirrus cash withdrawal transactions per year in the United States. On average, a U.S. ISO routes about 17 percent of its total transactions through MasterCard/Cirrus. The study found that the new interchange changes could result in a reduction of between 36 percent and 47 percent in the net interchange rate for domestic cash withdrawal transactions that are routed through MasterCard/Cirrus.
Tremont projects that the domestic ISO ATM industry could see an interchange income reduction of between $19.7 million and $25.6 million annually. The survey also identified several logistical challenges associated with the changes, such as an inability to quantify the changes to interchange and a short lead-time for implementation.
"ISOs have built up an enormous off-premise ATM infrastructure in the United States and deserve a real voice here," said Mike Lee, CEO of ATMIA. "We are keen to facilitate fruitful and intelligent industry discussions across the ATM value chain to enable positive decision-making."
