Article

Cardtronics CEO offers candid perspective on EMV, interchange fees, cash outlook

Rathgaber tells ATM, Debit & Prepaid Forum audience he has no intention of implementing EMV.

November 2, 2011 by Kim Williams — Reporter, NetWorld Alliance

In an ATM, Debit & Prepaid Forum session titled "Convenience, Cash and Commerce: The Role and Future of the Retail ATM," Cardtronics CEO Steve Rathgaber offered an audience member a frank response to a question about the company's plans to implement EMV.

The audience member asked Rathgaber to speak a bit about Cardtronics' migration to EMV chip-based technology, to which he replied, "Yes, I can speak very little about it because, at the present time, I have no intention of doing it."

Rathgaber called EMV another technological solution in search of a purpose that is being fostered and thrust upon the industry, just like Triple DES, by parties that have "incredibly conflicted self-interests."

"Take a close look. There are things that could go on with EMV, under the unintended consequences page, that may startle you," Rathgaber said.

He cited things he is hearing within the industry, such as difficulty rerouting the way in which the chip card transaction is processed, as issues that could cause major complications from a business operations perspective.

"I don't know if that is true yet, but I know there are some industry groups that are investigating that," he said. "If I face every technological goblin that pops up its head, I would be exhausted."

Another audience member asked him to discuss network acquirer fees and what is happening on the ATM side. By way of definition, he told the audience that network fees involve two things: the interchange fee and the fee that is charged by the network for the privilege of being included in the network.

"As you all know, there are some changes going on there in which fees are being reallocated from party A to party B, which is sort of known as spending the other guy's money. It's moving it from folks that, for example, used to a pay nickel and are all of the sudden getting charged 15 cents," Rathgaber said.

He likened the changes to the recent implementation of the Durbin Amendment, saying that while those changes were made to protect against anti-trust violations on the point of sale side, the ATM side was overlooked. The audience was left to assume that the changes that Rathgaber was referring to were the Visa/Plus interchange rate reduction structure changes.

Retail ATM and cash outlook

To illustrate the continued importance of cash, Rathgaber cited a statistic from MasterCard stating that 85 percent of the world's transactions were performed using cash and checks.

"Even if cash doesn't grow market share, actual volume should continue to grow because the transaction base continues to grow," he said. "This cash thing? Pretty good invention; I think it's going to make it."

Rathgaber said that while even in a recession, cash use grew 27 percent since 2008 as other payment methods declined. He illustrated his point by using United Kingdom convenience stores in which Cardtronics ATMs are deployed as an example. In his example, store operators gave testimonials about the amount of cash in their drawers at the end of the day, contributing the high volume to ATMs dispensing only £5 notes located within the store.

He also attributed the positive cash outlook to consumers' ongoing desire for convenience through the self-service channel.

"The kinds of things we're doing, and what banks are also doing as well on their own, are great for the consumer," Rathgaber said.

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