Debit is eroding the ATM's value as a cash dispenser.
The proof is in the numbers, said Bill McCracken, chief executive of Synergistics Research. Between 1997 and 2003, debit transactions grew 271 percent; during the same period, ATM transactions declined 1.5 percent. Four in 10 debit card users obtain cash back at the point-of-sale, and almost three-quarters of them say they visit ATMs less often.
McCracken said deployers must consider introducing new transactions if ATMs are to remain relevant. The ATM "is not going to win back debit users with cash withdrawal. It's going to have to be an issue of what services the ATM can offer that debit cannot."
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Yet financial institutions are reluctant to add services to unprofitable ATM sites, said Karl Asplund, senior vice president of business development for transaction processor Genpass.
One way of turning ink from red to black, Asplund said, is partnering with independent sales/service organizations (ISOs) to manage non-branch locations. "Instead of saying 'these (ISOs) are causing us problems,' more banks are saying 'we need those guys.'"
In some cases, ISOs install and maintain bank-branded equipment for financial institutions. In others, they offer surcharge-free access at existing retail ATMs to customers of participating banks.
Asplund said some of Genpass' ISO and bank clients are considering splitting costs of the upgrades necessary to offer new services such as check imaging at ATMs, with both profiting from the higher interchange that is likely to result.
According to a 2002 study conducted by Dove Consulting, ISOs can operate ATMs for $732 to $1,068 a month. In contrast, banks' monthly operating costs for non-branch ATMs range from $1,111 to $1,624.
Gary Walston, general manager of Momentum Cash Systems, agreed that depending on the types of locations and the hardware, ISOs can operate a turnkey off-premise program at about half the cost that a bank can.
Beaumont Area Educators Federal Credit Union is one of about a dozen financial institutions participating in Momentum's Toll-Free ATM program, which offers cardholders surcharge-free access to some 750 ATMs in Texas and Louisiana.
Jimmy Lackey, BAEFCU's executive vice president, said his institution, which owns five ATMs at three branches, was looking for a cost-effective way to offer increased ATM access to 29,000 members in southeast Texas - many of them educators working in rural areas.
"It was hard to justify putting an ATM in a town of 2,000 or 3,000," Lackey said. "(Toll-Free) allowed us to increase our ATM penetration at a reasonable cost."
A downside to the program, Lackey said, is entrusting service to an outside party. Though BAEFCU has had no complaints with Momentum, "It's hard for us because we've always done all of the first-line service on our machines, and we're very committed to that."
Asplund said banks can minimize such concerns by relying on "a trusted entity" for an introduction to reputable ISOs and help managing service-level agreements.
