Article

Flite plan: Launching a new ATM business model (part I)

The founder of an ATM industry startup talks about what it takes to get the business off the ground.

August 20, 2013 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

When the subject of a Houston-based IAD comes up, one particular company comes to mind. And reasonably so — with more than 80,000 machines to its name, Cardtronics is the largest independent ATM owner-operator-processor on the globe.

This, however, is the story of another Houston-based IAD — miniscule by comparison, but with a business plan, a brand, and a belief that, even in a mature market, there's still room for a new ATM business with innovative ideas.

That ATM business, Flite Banking Centers LLC, was founded by Houston entrepreneur Michael Villarreal, who is also president of the company.

Having spent his professional life as an equity research analyst and investment banker covering the oil and gas industry, Villarreal knew absolutely nothing about the ATM business, much less of the use of ATMs with regard to retail banking strategies. But as he sees it, that was something of an advantage.

"Fortunately, my lack of knowledge allowed me to approach the business with extreme openness and a strong desire to understand and question every aspect of the business from the outside in," Villarreal told ATM Marketplace.

"In fact, up until our acquisition [in January] of ATM Ventures, all my key executives were recruited from professions completely unrelated to the ATM or banking industries. I believe this has made our Flite experience thus far interesting, fun and exciting. And, equally as important, our diverse backgrounds have allowed us to apply past experiences to advance the success of Flite."

In a two-part Q&A interview, Villeareal discussed his vision for Flite and the process of building an up-and-coming IAD challenger brand.

Q: How and why did you (pardon the pun) launch Flite?

A: In early 2009, we started Flite as a real estate development company with the goal of providing financial institutions with a cost-effective solution for offsite ATM deployments. Another key goal for us was to provide mobile banking customers with a better ATM experience.

We viewed, and continue to view, the ATM customer as our ultimate client. With these two primary goals we set out to form Flite.

With the advancements in ATM technologies, particularly deposit automation, and the high-cost of branch expansion, we figured that strategic ATM placements would be a key channel for convenient market coverage for retail banking.

And, while an ATM away from the branch, particularly a drive-up, is substantially less expensive to deploy than a full branch, in many cases it is a more difficult deployment. Therefore, we established a very simple and economic ATM placement program where Flite builds and manages the ATM facility and the financial institution simply installs and manages their ATM.

Flite's ATM placement program was specifically designed to solve the location and infrastructure challenges of off-site ATM deployments. However, we wanted to be something more than just an "ATM real estate company." So we created Flite Digital Media with the intention to develop and manage our version of a digital-out-of-home media network anchored by the ATM.

Our media network allows financial institutions and advertisers a way to promote their products and services to ATM customers without interfering with or disturbing the customer's ATM transaction. Our media screen is completely separated from the ATM terminal screen and viewable by the [drive-through] ATM user and their passengers.

Since our inception in March 2009, we have successfully built and managed our flagship six-lane drive-up ATM facility and developed our first retail environment walk-up ATM vestibule.

On January 1, we acquired ATM Ventures, a privately-held company that focused on ATM sales, services and processing primarily for small financial institutions. Coupled with our core real estate and digital media business, Flite now has a complete platform to help financial institutions expand, manage and brand their ATM footprint.

Q: Tell me something about your business model.

A: We have a very dynamic business model that has evolved substantially over the past year. I suspect our business will continue to grow in the direction of our clients' needs.

Our real estate, digital media, ATM sales and service, ATM processing as well as our ATM cash management services are all very important components of Flite's overall business platform.

While we operate four divisions, each is tightly integrated with the others. In fact, our managers and staff all contribute and collaborate as one unit.

Our newest creation is the Nectar ATM Surcharge-free Network for member financial institutions. We are in the process of deploying Nectar-branded ATMs throughout the Texas market, primarily drive-up ATMs.

Our network of ATMs will allow financial institutions to strategically select the Nectar ATM locations that specifically serve their target markets.

Q: What differentiates your business model from the model of that other little Houston-based company, Cardtronics?

A: While we serve the same industry, I believe our business models are completely different.

Cardtronics has built a massive inventory of ATMs worldwide through dozens of acquisitions since their inception. Along the way, they have successfully reinvested their cash flow by acquiring ancillary businesses, like Allpoint, to enhance the value of their fleet and diversify away from a pure surcharge/interchange fee revenue model.

Because of their expansive ATM footprint in almost every major market in the U.S. and abroad, they are able to offer financial institutions the largest ATM network, market penetration and branding opportunities. Clearly, Cardtronics is the industry's 800-pound gorilla. Relatively speaking, that would make Flite the industry's 8-gram hummingbird.

Our fundamental business model centers on value-added solutions for both financial institutions and ATM customers. Flite developed as an ATM real estate and infrastructure provider and our ATM managed solutions are designed to economically facilitate off-site ATM deployments.

Our digital media business is also a differentiating factor and revenue generator for the company. And, because our fleet of Nectar ATMs will be mostly ultra-convenient drive-up island units and upgradeable to check-imaging capability, our network will eventually be superior to any other ATM network in the marketplace.

Q: It's interesting that you've targeting drive-up as a market — Why drive-up?

A: Given that an off-site drive-up ATM is the most costly for FIs to deploy, we determined that a multi-bank drive-thru ATM facility would have the greatest market impact, particularly in a "driving" city like Houston.

From a consumer standpoint, our regional market analysis indicated substantially higher use of drive-up ATMs than less convenient walk-up ATMs. Therefore, we were confident that our convenient locations and key design elements would attract ATM customers and, ultimately, our financial clients would be satisfied with the performance and usage of their ATM at a Flite managed facility.

Q: How do you choose drive-up locations?

A: We evaluate many factors before selecting an ATM location. For both our multi-bank ATM facilities and our Nectar placements, we look at general demographic information, traffic count and direction, customer visibility and access, ATM market competition as well as existing customer draws such as retail, residential and commercial anchors.

In part II, Villarreal explains the role of the Nectar surcharge-free network in the future of Flite, the importance of brand identity, and what it takes to start up a new ATM business in today's marketplace — besides plenty of intestinal fortitude.

Read more about ATM innovation.

About Suzanne Cluckey

Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.