Article

5 ways to boost your ATM revenue

True, interchange rates are beyond an the control of IADs. But those who focus on factors that are within their control have the opportunity to grow their transaction counts — and their business.

May 14, 2015

ATM Marketplace is pleased to present our newest blogger, Bryan Bauer, president of Kahuna ATM Solutions. In his blog posts, Brian will be contributing his thoughts and expertise on topics of particular interest to independent ATM owner-operators.

by Bryan Bauer, President, Kahuna ATM Solutions

The 2015 Independent ATM Deployer Survey sponsored by Kahuna ATM Solutions and the ATM Industry Association, found that ATM upgrades such as EMV and declining interchange rates are still top concerns for IADs. This information might not come as much of a surprise. EMV upgrades are yet another cost to bear and net interchange rates paid to IADs have trended downward in recent years.

In both cases, an IAD may feel totally out of control, without any way to mitigate the challenges of EMV costs and a revenue stream largely controlled by the EFT networks.

EMV is a harsh reality of life for an IAD: Invest in the upgrade or assume the liability for fraudulent activity at your ATM. But interchange as a concern is different.

True, most IADs are subject to the interchange and network access fee-setting whims of EFT networks. However, IADs who can increase the number of transactions conducted on their ATMs — and the corresponding transaction fees they accrue — can effectively hedge against erosion of revenue and profit, even if net interchange rates should drop again.

Add operational cost control to increased transaction volume and it becomes clear that IADs are far from defenseless against marketplace challenges. Here are five moves that ATM owners and operators can make to help take back control of the top and bottom line:

1. Streamline operations

Most IADs have standard procedures they follow, but whether these processes are planned, documented and carefully implemented or simply are "the way we've always done it" can make all the difference.

Careful evaluation of ATM and operations performance often reveals better options for maintenance schedules, cash handling and other procedures.

Taking the time to streamline these operations can trim some costs on insurance, gas, maintenance and more. It can also refocus the most valuable organizational resources toward current company initiatives.

2. Grow your ATM portfolio

Per-transaction net interchange fees received may be beyond an IAD's control, but not so the total number of transactions occurring at that operator's ATMs. One way to bump up the transaction count: Add more ATMs.

An enterprising IAD should investigate options for installing, acquiring and operating more devices. In addition to generating more transaction fees, a larger ATM portfolio can create efficiencies of scale in operating costs.

3. Review surcharge fees

Appropriate surcharge fees can vary widely based on the location of an ATM and the competitive landscape, so it is incumbent upon an IAD to know the market.

What are local banks and credit unions charging for noncustomer access to their ATMs? As financial institutions increase surcharge rates within a given market, IADs can do likewise.

IADs who lose track of what the market will bear may well be shortchanging a revenue stream that lies within their control. 

4. Go surcharge-free

Assuming that the profitability of a particular ATM location is driven by a combination of transaction volume, cost control, and surcharge and interchange fees — and it is — then an IAD's business plan is incomplete without a surcharge-free access strategy.

It might be bank-branding of ATMs or, perhaps, participation in a surcharge-free network. Whatever the case, surcharge-free arrangements historically have resulted in an increase in transaction levels because cardholders at eligible banks and credit unions are attracted by the service. 

However, keep in mind that providing surcharge-free access through ATM branding or network affiliation does not mean that every transaction is performed without a surcharge; only cardholders of participating financial institutions will be able to make surcharge-free withdrawals.

Analysis by an IAD's transaction processor or ISO can forecast the percentage of surcharged transactions that would be cannibalized by surcharge-free access, as well as the transaction volume "lift" from additional ATM users.

An IAD moving forward on this strategy should take care to model a surcharge-free access agreement carefully with the retailer in order to avoid absorbing the lost surcharge, since the retailer is receiving the benefit of additional foot traffic.

5. Update products and services

The 2015 IAD Survey found that the majority of IADs provide only ATM equipment and processing. Of those providing other services, most offer credit card processing (24 percent) with ATM branding and advertising a close second (23 percent).

With so few IADs branching out into other products and services, there is room for business expansion. An IAD might consider adding advanced ATM functionalities such as charity donations, lottery tickets, dynamic currency conversion, bill pay, cell phone top-up and more.

Control of net interchange rates by EFT networks rather than the IAD community is a fact of life and a continuing headwind for IADs. However, prudent IADs needn't get bogged down by this challenge.

The fact is that the profitability of an ATM portfolio is driven by a combination of factors beyond net interchange rates. IADs who focus on those factors within their control have the opportunity to grow their transaction counts and, with them, their business.

photo istock