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When Jay Halverson, vice president of sales for Card Capture Services, addressed last October's Advanced ATM Conference in Chicago, he offered a challenge to the industry: "The Internet can eat our lunch, or be our lunch." With the announcement that it was being acquired by E-Trade Group Inc., an online brokerage, the Portland, Ore.-based ISO left no doubt as to who is at the head of the buffet line. The acquisition makes E-Trade the nation's third-largest ATM deployer, behind Bank of America and American Express. Coming on the heels of Amex's recent purchase of more than 4,000 machines from Plano, Texas based EDS, it also marks a new and unconventional shift in the business -- one that seems destined to push the ATM envelope to its limits. E-Trade, of Menlo Park, Calif., and CCS plan to upgrade some of the 8,500 machines in the network to "financial service kiosks" that will offer a variety of online banking and brokerage services to customers of E-Trade and TeleBank, a banking subsidiary E-Trade acquired in January. While few, if any, CCS ATMs currently offer functions beyond cash dispensing, CCS President and CEO Dave Grano said, "A majority have the ability to perform some limited set of Web-enabled transactions with a very low-cost upgrade." CCS worked with Triton, the manufacturer of the 9600 terminals that make up most of its network, to develop the upgrade. CCS has ATMs in 48 states, Canada and Mexico, many of them in high profile retail locations like Rite Aid drug stores and Safeway supermarkets. Grano said that CCS will examine transaction volumes and customer demographics at each site to determine how best to integrate it into the new E-Trade network. "Most sites will be leveraged in some fashion," he explained, whether it's a simple branding opportunity, a "full-blown electronic kiosk" or something in between. To minimize the likelihood that ATM users in a hurry might get in line behind someone overhauling his stock portfolio, some high-volume sites may include both a traditional ATM and a kiosk. Grano jokingly called the combination a "two-headed monster." Another option, facilitated by software that CCS developed with Triton, involves remotely tweaking a single terminal so that it performs different functions at different times. So, for example, a machine that tallies a large number of transactions during lunch hour would offer only standard ATM functions then -- but a full menu of electronic products and services at other times. CCS, which purchased sites from several other ISOs last year, will likely continue to grow the E-Trade network with acquisitions. "Our strategy of identifying and acquiring the right locations is greatly supported by this partnership," Grano said. For E-Trade, the deal marks an opportunity to give its customers a more tangible presence. The lack of a physical distribution channel is a "big barrier" for many customers when it comes to online banking, according to TeleBank spokeswoman Deborah Newman. "They want some kind of a physical presence," she said. "The idea of an ATM around the corner that is part of their financial network is very appealing to customers." In addition to its own financial products and services, E-Trade may eventually offer customers other e-commerce opportunities. Both Grano and Newman expressed interest in alliances with other like-minded companies. "These kinds of marketing agreements that generate revenue for both companies are one of the beauties of the Internet," Newman said. The size of the all-stock deal was not disclosed, but a report published in the Oregonian put the price tag at more than $200 million. The newspaper reported that CCS stockholders include Summit Partners, a venture capital firm that owns 30 percent; co-founders Jeffrey Jetton and Steven Wright; the management team; and 150 employees, all of whom hold stock options. E-Trade plans to retain Card Capture's management, staff and Portland headquarters. Grano thinks the entire ATM industry will benefit from this deal and others like it. "This partnership validates a message CCS has sent out for some time -- that an ATM network has value well beyond cash dispensing," he said.