Most bank branches have at least one drive-up ATM; the exterior machines typically see the heaviest customer usage.

Some financial institutions, especially smaller ones, are showing an increased interest in off-site drive-ups.

"If you want to work with financial institutions, you have to offer a drive-through solution," said Gary Walston, senior vice president and general manager of Momentum Cash Systems, a Houston ISO that recently beefed up its turnkey ATM outsourcing program geared toward FIs.

Walston said business has picked up in the past 6 to 8 months as more FIs facing Triple DES upgrade costs decide to turn over the operation of at least some of their ATMs to a third party like Momentum. Because drive-ups tend to be among the most expensive deployments, FIs are particularly interested in outsourcing them, he said.

Momentum typically replaces existing ATMs with Triple DES-compliant new machines or, if ATMs have already been upgraded, purchases them from an FI at book value. In those cases, Walston said, Momentum may replace them with more cost effective hardware. In either case Momentum owns the machines, although they carry the FI's brand.

An attendee of the recent Retail Delivery Conference & Expo took a look inside the low-profile enclosure designed by DASH ATM that housed Tidel's new 3700d ATM.

In addition to its brand, the FI also generally provides vault cash for the machines. Momentum sometimes -- though not always -- splits transaction revenues with the FI.

Momentum evaluates telecommunications and other expenses. Depending on transaction volumes and existing infrastructure, Walston said Momentum uses dial-up, CDMA or TCP/IP.

The ISO has worked with enclosure manufacturers like DASH ATM, which provide enclosures that cost about a third less than those produced by more traditional players.

"In the past, financial institutions may not have considered products made by companies other than their usual vendors. They haven't shopped around," Walston said. "We always try to match the right ATM with the right communications in the right environment."

Mike Adams, a partner with DASH, said his business has taken off as more FIs outsource ATMs to third parties like Momentum or buy their own machines manufactured by companies like Tidel and Triton, which are making a major push to enter the banking market. Tidel, Triton and Tranax, as well as newer companies like Qualtex, have all introduced at least one new model designed to appeal to FIs in the past 18 months.

"We didn't have much demand for enclosures for NCRs or Diebolds," Adams said. "Many of those units have a Level 2 or Level 3 vault, and don't need a secure enclosure."

In contrast, Adams said, newer models produced by retail-oriented manufacturers typically feature either a UL 291 business hours safe or Level 1 vault. DASH works with a steel fabricator that also produces safes, Adams said, to essentially "knock out the back of a safe and turn it into a highly secure enclosure."

Retail-oriented manufacturers are responding quickly to FIs' needs, Adams said. Tidel, for instance, recently produced a new version of its 3700 ATM, the 3700d, which is more similar in height to popular drive-up models like NCR's Personas 90 and Diebold's 1074ix.

Many FIs prefer these "low profile" units, Adams said, because they enhance viewing lines for tellers inside a branch, permitting them to keep a close eye on exterior activity.

Tidel's 3700 and 3700d models are equipped with the popular Fujitsu 510 dispenser, which has a capacity of up to 3,000 notes. FI-friendly features such as lead-through lights and stainless steel surround and keys are standard features rather than optional upgrades, said Mark Levenick, Tidel's president and chief executive officer.

"Trying to appeal to a new market like financial institutions based on price alone is fairly easy to do," Levenick said. "Offering the kind of features they are accustomed to is quite a bit more difficult."

Momentum's Walston predicts continued growth in outsourcing business for ISOs -- especially for the larger, well-capitalized companies he said FIs prefer as partners. The sales cycle is also much longer than for most retail clients, he said -- and not all ISOs will want to take the extra time to woo FIs.

"ATMs are our core competency, so we do everything we can to drive profit," he said. "For most financial institutions, ATMs are only a small piece of what they do, and they've ended up being a cost center for them rather than a profit center."