According to Dove Consulting's latest ATM Deployer Study, large credit unions spend an average of $1,806 a month to operate their ATMs. In contrast, large ISOs spend $756 a month.
This economic reality is driving an interest in outsourcing among credit unions, which are trying to become more competitive with banks when it comes to their ATM networks.
"Even the larger credit unions are interested, because they don't operate that many ATMs when compared to a bank," said Keith Myers, executive vice president of financial services for Cardtronics, a Houston-based independent ATM owner/operator. Making the situation more critical is that also according to the Dove study, large credit unions experienced a 73 percent decrease in per-ATM transactions from 2002 to 2003, the biggest drop among ATM deployers.
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Cardtronics, which has more than 25,000 ATMs in its fleet, operates ATMs owned by financial institutions and also brands some of its own machines in retail locations with the names of FI clients.
"The trend is for financial institutions and credit unions to focus on what they do best: Serve their customers," Myers said. "And that has become more important recently because of the margins companies are working with. I think cost savings (from outsourcing ATM services and management) are usually 15 to 30 percent of what they're spending for ATM functions now."
Jim Hanisch, CO-OP Network's executive vice president and assistant to the CEO, said some credit unions are still on the fence about outsourcing management of their ATMs. The CO-OP Network includes more than 1,700 credit union members and nearly 20,000 ATMs.
Hanisch said most credit unions with less than $10 million in assets do not require outsourcing. At that size, he added, many don't offer share draft or checking accounts. Without such accounts, the ATM business model itself is suspect.
ADP Federal Credit Union, which has approximately $55 million in assets, recently outsourced the operations of its 10 ATMs in four states to Nationwide Money Services, another independent ATM operator.
Bob Colabrese, Nationwide Money's executive vice president, said credit unions need to outsource their ATMs to maintain a competitive edge - not only with banks but also with ISOs that enjoy advantages of scale with their ATM operations. "Credit unions without ATMs can't compete with an ISO that has 3,500 ATMs," he said.
Colabrese said many of the credit unions Nationwide works with still do all of their own branding; however, those credit unions find turnkey management of ATM services an attractive option because it's more efficient and less expensive.
Companies like Nationwide Money and Cardtronics can service and upgrade ATMs for about one-third of what banks generally pay, he added.
