Article
Dialing for deals
The phones haven't stopped ringing since E*TRADE announced it was buying the ATM contracts of Card Capture Services. According to the two companies, plenty of former naysayers are now interested in the CCS model of the ATM as an Internet access point.by Ann All, editor
June 13, 2000
For Dave Grano, CEO of Card Capture Services, and Mitch Caplan, chief banking officer of E*TRADE, the sweetest sound in the world is a ringing telephone. The two men say their phones haven't stopped ringing since E*TRADE, an online brokerage based in Menlo Park, Calif., announced it was buying Card Capture's 8,500 ATM contracts. E*TRADE intends to use some of the ATMs to establish a physical presence for customers of its newly-launched E*Trade Bank. Caplan claims that the number of calls and emails was so overwhelming that a full-time assistant screened his messages for two weeks following the March 13 announcement. Among the callers are vendors eager to court the two companies. "A lot of players we historically have not worked closely with are working very hard to earn that opportunity now," Grano said. "Some folks weren't really sure that the strategy that CCS was pushing was executable. This (deal) was a big validation. A lot of skeptics are now anxious to be a part of it, and a lot of folks who helped us along the way are even more enthusiastic." New players Ken Paull, vice president of sales and marketing for Triton, a manufacturer that has a long-time relationship with CCS, sees the E*TRADE/CCS deal, along with his own company's recent acquisition by Dover Corporation, as a sign of the ATM industry's continuing health. "It's showing support for our industry that companies like Dover and E*TRADE are seeing value in Triton and value in CCS," Paull said. "These companies are buying into the positive outlook of this business." Investment by new players "keeps an industry moving forward," Paull added. E*TRADE is nothing if not a player. The Wall Street Journal reported in mid-March that both American Express and Goldman Sachs had been in takeover talks with E*Trade. While the company made only a small profit in its second quarter ended March 31, that puts it ahead of many other Internet businesses. It attracted 603,000 new accounts in the quarter, bringing its total active accounts to 2.6 million. E*TRADE is the number-two Internet brokerage after Charles Schwab Corp., and recent figures indicate the company processes 229,000 of the more than one million stock trades made daily online. Brand awareness The first step in E*TRADE's plans is re-branding some of the 8,500 ATMs. The company will look at a machine's location and its proximity to existing E*TRADE customers. Based on that evaluation, some machines will be marked with a simple decal while others will receive flashier toppers, signage and surrounds. According to Grano, many of Card Capture's merchant customers -- convinced that the E*TRADE brand will help build foot traffic -- are already lobbying for the more extensive branding. Caplan said that E*TRADE will concentrate its efforts on "sites where we think we'll get the greatest bang for the buck in respect to marketing." The ownership issue Unlike American Express, which has purchased some 8,500 ATMs in the past two years, E*Trade does not own the hardware. While E*TRADE eventually plans to own some of its machines, Caplan said the company is in no hurry. "We'll own, we'll not own -- we'll do whatever makes intuitive sense and is the best value in terms of dealing with the merchant," he said. One deployer who said it is "absolutely preferable" to own the machines is Ed Bourgeois, senior vice president of Atlanta-based ebank.com's points-of-presence network. The online E*TRADE competitor last summer announced plans to deploy Internet-enabled ATMs that will be connected to ebank's Web site. "If I don't own and control the machine, then I have to jump through more hoops," said Bourgeois, former president and COO of the New Orleans based ISO Automated Technology Machines, Inc. "If I want to do something with a terminal other than what I'm doing today, which is dispensing cash, I have to go to the merchant and maybe even the owner of the machine and convince them that it's a good idea." Grano said that Card Capture's agreements offer far more latitude than a typical ISO/merchant contract. "As recently as two-and-a-half years ago, all of our agreements started taking into account the additional services we wanted to layer in and, maybe more importantly, we began executing that as a key element of our selling process," Grano said. "The customers signing up with CCS were, in part, selecting CCS as their provider because of our position to provide these services over time." Triton's Paull sees non-ownership as an advantage. Noting that E*TRADE's initial investment would have been much greater if the company bought the ATMs outright, he said, "They can take those dollars and invest them in distributing more machines." At high-profile retail locations, even machine owners rarely have the freedom to do whatever they want with an ATM, Paull added. "In a lot of cases, it's not all that different. You're still required to have the retailer sign off on certain things." Merchants won't lose any revenue, even if the number of surcharge-paying customers drops along with an increase in E*TRADE business. Caplan said E*TRADE plans to track the number of E*TRADE transactions at each location, then reimburse the retailers accordingly. "We're not going to change the economics in any way. The revenue the merchants receive on a monthly basis will be identical to the revenue they would have received if those customers were charged," he said. Deposit dynamics One of E*TRADE's major interests is offering its customers the ability to make deposits -- something they obviously cannot do at their PCs. "We found that one of the last thresholds in terms of aggressively adopting online banking was the ability to take deposits and to withdraw cash without fees," Caplan said. "We understood and recognized early on that there was a huge demand for a physical, branded presence." That presence didn't need to be brick-and-mortar, Caplan stressed. "The vast majority of customers interested in banking online don't ever walk into a branch." He said the ATM network managed by CCS, with its size and scope, offered "the perfect solution." Bruce Brittain, president of the Atlanta-based research firm Brittain Associates, said that consumers have generally resisted making deposits at ATMs. "Nobody has been successful in getting customers to do it in a big way," he said. A malfunctioning ATM is far more meaningful for a customer making a deposit, Brittain added. "It's one thing to go to an ATM and not get your money. It's another thing entirely to put your money into the ATM and not have any proof that you've done so." None of the CCS machines -- almost all of which are Triton 9600s -- are currently able to accept deposits, although Triton is reportedly working on a sidecar depository. Though Paull declined to elaborate on what upgrades Triton is working on for E*TRADE, he said, "The whole design of the 9600 is modular so we can add sidecars, toppers... It opens up a lot of possibilities." Bob Cannon, president of Momentum Cash Systems, a Houston ISO that is seeking a bank charter with the intent of establishing an Internet bank, said that accepting deposits at remote locations is sure to drive up the costs of running a network. Momentum Cash manages more than 2,000 machines. "Bank of America's off-premise program Is cash dispensers," Cannon pointed out. "If BofA can't afford to take deposits at those locations, then how is Bob Cannon's Internet bank going to afford it and how is E*TRADE going to afford it?" But Caplan said that accepting deposits is "a marketing expense we are willing to assume in an effort to extend the brand." It's "not that significant of a cost" when calculated as part of the overall cost of running E*TRADE and serving its customer base, he said. Grano said that armored car runs are part of the normal routine for many of Card Capture's merchants. "Within that retail environment, there are a lot of opportunities to leverage the visits that take place in those locations already. The cost of adding an ATM pickup is nominal." Spinning the Web While E*TRADE has indicated it will offer a fuller set of Internet-based transactions at some of its ATMs, that's not likely to happen immediately. Only a few deployers, most notably Wells Fargo and American Express, are beginning to introduce Web-enabled machines -- and only in small numbers. E*TRADE will evaluate "which are the appropriate machines to put in which locations for the correct partners," Caplan said. New hardware may make more sense than field upgrades, particularly at retail locations. "Plenty of equipment out there is starting to come off a lease. I think you'll see the replacement market start to grow, and there will be certain key locations where increased functionality is desired," Paull said. "Most of the hundreds of thousands of terminals out there are 'dumb' terminals," agreed Momentum Cash's Cannon. "I'm not a believer that you can upgrade those in the field and gain any advantage by doing that." In any discussion of Web-enabled ATMs, the question of wait time inevitably is raised. For certain locations, Grano doesn't rule out "a traditional ATM terminal combined with a kiosk that allows a customer to perform longer transactions without disrupting traditional ATM transactions." Installing such terminals is "the craziest thing I've ever heard," Cannon said. "Everyone keeps talking about the lines at ATMs. What I wouldn't give to have lines at my ATMs -- if I do, then I'll put another machine in." While some pundits question the specifics of E*TRADE's ATM strategy, there is no doubt that the company is part of a new wave of deployment that seems destined to reshape the ATM industry. "Everybody understands that the high bar has gone up," Grano said.
Included In This Story
Triton Systems
Triton FI based products • NO Windows 10™ Upgrade • Secured locked down system that is virus/malware resistant • Flexible configurations - Drive-up and Walk-up • Triton's high security standards • NFC, anti-skim card reader, IP camera and level 1 vaults are all options • Triton Connect monitoring • Lower cost
