The ATM Industry Association and Tremont Capital Group, a consulting firm specializing in the ATM industry, have announced the completion of a proprietary business impact study assessing anticipated revenue losses for Independent ATM Deployers (IADs) following Visa/Plus's reduction in interchange effective in April 2012. Visa's new system includes a three-level interchange structure.
The analysis, conducted by Tremont Capital Group CEO Sam M. Ditzion, was compiled using information from various transaction processors that collectively account for the majority of the nation's IAD ATMs. Tremont Capital Group developed a quantitative and qualitative picture of the scale of likely impacts of the changes implemented by Visa/Plus.
"The interchange rate reduction recently announced by Visa/Plus will significantly impact all ATMs in the United States," Ditzion said. "It is critical that all stakeholders understand the scope of these changes so that they can then accurately quantify how they will impact their individual businesses."
The analysis determined that the nation's IADs, which have built up a significant majority of the off-premise ATM market, conduct an estimated 153.5 million Visa/Plus domestic cash withdrawal transactions per year. On average, an IAD in the U.S. currently routes an estimated 21 percent of its total transactions through Visa/Plus.
The study found that the new interchange changes could result in a reduction of up to 43 percent in the net interchange rate that the average IAD ATM for domestic cash withdrawal transactions that are routed through Visa/Plus. Other deployers, such as some financial institutions, could experience more severe declines, up to 56 percent, according to the study.
Tremont Capital Group projected that, in one somewhat conservative scenario, the domestic IAD ATM industry could experience an interchange income reduction of up to approximately $7.8 million annually on cash withdrawal transactions; in a more aggressive scenario, the domestic IAD ATM industry could see a net decrease of approximately $11.9 million annually.
This erosion to interchange is in addition to the substantial reduction Visa/Plus introduced in October 2005 and what many other networks have announced in recent years.
"These figures produced by Tremont Capital Group, on both the conservative and aggressive scenarios, show graphically the scale of economic devastation caused by continuous and significant interchange reduction in the huge U.S. ATM market," said Mike Lee, CEO of ATMIA. "The fact that this is happening in times of a national economic crisis is simply an embarrassing and sad reflection on how the industry is currently being unfairly dominated."
For more information on this topic, visit our distributors/ISO/IAD research center.
