Article

A trip to the Advanced ATM Conference

Are all the good sites gone? How many ATMs will ultimately be deployed? How can I get my own piece of the advertising pie? The conference answered these questions and more. by Tom Harper, publisher

March 10, 2002

The calm bay waters touch the road in front of the hotel.

Sun and 70 degrees greeted me when I landed in San Diego last Wednesday. The pool-blue sky and palm trees reminded me how close I was to the ocean, and the hills of red-roofed houses rising on all sides bespoke a pseudo-Mexican landscape. A quick shuttle ride to the Sheraton Hotel and Marina took me past two aircraft carriers parked in the bay. A military helicopter conducted exercises over the water. Scores of joggers strode past on an oceanfront sidewalk. On the shuttle I saw two acquaintances who, like me, came for Faulkner & Gray's Advanced ATM Conference. We were all dressed casually and looked forward to this short working vacation. I'll have to go back and do the vacation part later. The Sheraton hotel overlooks its own private marina. What the conference was about The theme of the intense two-day immersion into the ATM industry was "turning high-tech innovation into real-world profits." The show hammered a quick education into my head which was well worth the time and money. Richard Garman, president and CEO of EPS, delivered a keynote speech about "the next wave" overtaking the ATM industry. He explained that baby boomers use ATMs the most. He said there have been more ATMs deployed in the last five years than in the last 15. He predicted 15% ATM deployment growth through 2003; there will be one ATM per 1,000 people by 2000. Before I could grasp the implications of that last number, Mr. Garman said, "The number of ATMs will double over the next five years." Double? Hadn't I read somewhere that we were already approaching saturation? "There is high consumer comfort with self service," Mr. Garman continued. "Consumers are ready to embrace new uses and locations." New locations like zoos, mobile vans, hospitals, airplanes, churches, cruise ships and prisons. (Prisons have that captive audience all deployers crave.) New uses like the sale of movie tickets, ski lift tickets, airline boarding passes, reservation confirmations, deposited check copies and electronic benefits. ATMs as automated marketing machines One of the new trends banks and other ATM owners hope to profit from is onscreen video and audio advertising. Don Jarecki, vice president of retail terminal services for EDS, spoke about the high-level targetability possible with ATM marketing. "In the future we will merge database marketing with video," said Mr. Jarecki. "Banks already have the targeting data. This allows direct marketing to meet electronic delivery at the point of purchase." Jarecki explained that a fully-configured machine can run 20-30 ads triggered by different users depending on the information stored in their customer files. For example, a transaction by a man who recently took out a million-dollar home loan might call up an ad for a Lincoln Town Car, while a college student using the ATM could trigger an ad for a long distance calling card. The real reasons, Jarecki said, for the proliferation of this new technology are the "staggering revenue possibilities" as advertisers take advantage of one of the most targetable advertising vehicles available in the marketplace. Jarecki said advertisers will be forced to consider the value and power of ATM marketing. Picture it: a consumer is inside a store. He withdraws a handful of cash and with it a coupon for Coke, and turns to his left to see a stack of 12-pack Cokes ready for quick and easy removal from the store. How much closer can Coke get to the purchase decision than that? Attendees pounce on the exhibit hall between sessions. Cruising the exhibit hall Sprinkled in between the sessions were excursions to the exhibit hall, where 47 companies displayed their wares to the couple hundred attendees. What the trade show part of the conference lacked in quantity it made up for in quality. I knew any booth I walked up to had to do directly with the ATM industry, a welcome change from the numerous monster-sized shows with a small percentage of ATM-only exhibitors. I visited the Sensar booth and let their biometrics system read my iris and grant me clearance into the computer. I tested Cross International's new recycling ATM, which takes cash deposits and reuses the money for ATM withdrawals. I gathered millions of trinkets and brochures like a kid on a trick-or-treat mission. Cross International displays its machines. I met companies I'd only read about in magazines. The stack of business cards never stopped accumulating in my pocket, and I ended up running out of my own. Then the light flickered, signaling us to take our seats for the next speaker. Riding the waves Back in the session hall we heard a continuation of the wave theme started by EPS's Garman. Jeff Stillwagon, financial industry manager for NCR, spoke about his own view of the three waves of the ATM industry. The first wave, he said, which began in the 70s, gave a competitive advantage to banks who offered their customers the convenience of ATMs seven days a week, 24 hours a day. It also lowered banks' transaction costs from about $1.07 to $.27. The second wave, which we're still experiencing, has been fueled by the surcharge ban lifted by Cirrus and Plus in April of '96. This cut the break-even point of many bank ATMs nearly in half. The obvious result was an immediate increase in deployment and the rise of the non-bank ATM owners. On the horizon looms the third wave, which Mr. Stillwagon described as the next step in the industry's natural maturing process. He said differentiation will go beyond just location and branding. The real factor in establishing competitive advantage will be increased revenue from increased functionality. Stillwagon said that according to an Ernst & Young study, 27% of banks plan to cross-sell non-bank products through their ATMs. Stamps and calling cards have been popular dispense items, and many ATM owners are also investigating gift certificates, lottery tickets, traveler's checks, prepaid buying cards and loan agreements. Cross-selling allows banks to capitalize on the limited space they rent for their ATM in a retail store. Why not capture the consumer while he's in the buying mood? Are there any sites left? Kurt Schusterman, senior vp of sales and marketing for XtraCash ATM in San Diego, presented the challenge of off-premise deployment from an independent sales organization (ISO) perspective. "Are all the good sites really gone?" he asked at the beginning of his talk. He answered his own question with a quote from Donald Trump: "You don't necessarily need the best location. What you need is the best deal." Mr. Schusterman outlined what kind of deal an off-premise deployer needs to be successful. He urged the audience to look at the ROI of a site while considering the cost of signage and other operating costs versus transaction revenue. His "metrics" for determining the profit potential of an ATM site include the location's square footage, the size of the market, whether cash-back debit is accepted, the surcharge amount, where the nearest ATMs are located, and the ability to promote the machine with signage and point of purchase (POP) materials. It's just getting started Looking into the ATM industry's crystal ball, consultant Alanna Kellogg spoke about her vision of change as machines age or require upgraded functionality. "Replacement business will be critical in the next 1-5 years," she said. "It could even exceed new deployment." Ms. Kellogg also sees continued downward pressure on surcharging. But the surcharge war among the large deployers will be like Coke and Pepsi lowering their prices to minuscule margins in order to move large volume. "We're all using basically the same hardware, uptime and convenience fees," she said. She urged ISOs to try to set themselves apart from their competition. Kellogg advised ISOs to differentiate in one of several ways: by overall profit strategy (such as only seeking foreign income versus trying to dispense other items), by ownership costs (cash replenishment, equipment and service), or by revenue (couponing and onscreen advertising). Where we go from here I left the conference with a binder about three inches thick and a bag full of pens, mouse pads, miniature footballs, golf tees, can huggers, and reams of company literature. I came away with a head full of knowledge and a new fire for the industry. I realized that even when we hit saturation, the game's not over. That the federal surcharge ban has little chance of success. That banks and ISOs can work together. And that we're all plunging toward incredible profit with ATM advertising. I also realized I have a lot to learn. I guess that's why I'll be going to next year's conference, too.