Article

Getting more money out of the ATM

A new report looks at what works, what doesn't, and ?what consumers want from secondary ATM revenue strategies.

March 4, 2014

The following excerpts are from the new ATM Marketplace report, "Getting more money out of the ATM." The 61-page report provides a comprehensive and detailed review of strategies now being used by the most successful fleet operators in order to extract maximum ROI from their machines while offering maximum value and convenience to consumers.

Additionally, the report includes complete results from two proprietary studies conducted by ATM Marketplace between December 2013 and January 2014. The studies were designed to gauge deployer and consumer interest and attitudes in respect to ancillary services at the ATM. 

ATM deployers' costs have risen recently, as they have been forced to comply with a number of regulatory and industry requirements. These include upgrading their ATMs to meet the Americans with Disabilities Act requirements, migrating to Windows 7 from Windows XP, complying with PCI DSS and upgrading to EMV chip-and-pin card technology.

"A lot of U.S. retailers are getting out of the ATM business because having to comply with EMV and PCI and migrate to Windows 7 is too much of a headache," said Adam Hobelmann, senior vice president at Chesterfield, Mo.-based ISO Welch ATM.

"IADs are seeing either flat or decreasing cash withdrawal transactions at their ATMs, because consumers are increasingly using their own bank's ATMs," said Steve Hensley, KAL ATM Software's executive vice president of global sales. "KAL's bank customers are telling us they're seeing increasing ATM transactions by their customers, because they have improved their customers' ATM experience and because customers are attracted to not having to pay surcharges."

An additional burden on ATM operators is a significant decline in revenues from interchange, combined with higher card network acquiring costs. David Tente, executive director of ATMIA USA, says most interchange fees paid by debit card issuers to U.S. ATM deployers range from 20 to 30 cents, which is around half of what they were five years ago. ATM interchange is likely to continue declining.

Visa, MasterCard and regional U.S. debit networks such as STAR and Pulse have been reducing their ATM interchange rates so they can win more market share among debit card issuers.

In addition, the card networks have significantly increased the fees that they charge ATM operators for providing access to their networks. Visa raised its ATM acquiring fee in April 2012 from five cents to 15 cents per transaction, while MasterCard's network fee rose from 5 cents to 17 cents in April 2010.

While ATM deployers could increase their surcharges to cover their rising costs, doing so may make them uncompetitive with other ATM deployers and deter cardholders from using their ATMs.

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Revenue streams

For years, ATM deployers have been seeking new ways to generate revenue from ATMs apart from surcharges and interchange. But the recent decline in interchange, combined with the requirement to upgrade ATMs to Windows 7 and EMV, has added new urgency to this search.

Speaking at the 2013 ATM, Debit & Prepaid Forum in Las Vegas, ATMIA's Tente said that ATM deployers will have to be innovative and look for any revenue sources they can find.

"The consensus is that everyone has almost resigned themselves to the fact that interchange is going to continue to erode and they'll have to find other sources of revenue to take its place," Tente said. "It's going to help drive and motivate some folks on the technology side and on the ATM deployer side to look at new applications that can be handled on ATMs."

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New technologies

Technological developments are making it easier for ATM deployers to generate new revenue streams from their ATMs.

A key benefit of migrating to Windows 7 is that it offers greater support for innovative applications than Windows XP does. Windows 7 will enable ATM deployers to offer more personalized services and additional ways of interacting with ATMs, such as videoconferencing, tablet-style touchscreen and gesture recognition, voice-response and speech recognition and multimedia capabilities.

As it is able to address more memory on an ATM than XP can, Windows 7 will allow ATMs to better support more demanding ATM functions such as video, check imaging and text-to-speech.

"The new technologies that are available now mean ATM operators can sell a wider range of products at their ATMs," said KAL's Hensley. "For example, touchscreen ATMs selling event tickets could offer seating plans so people can select their seats at a concert. Also, Better ATM Services has developed technology that allows ATMs to dispense prepaid cards."

Historically, ATMs couldn't accept cash payments for product purchases or for bill payments. "Now, with cash acceptors, ATMs can take cash payments for purchases, which will be important for cash-preferred, underbanked consumers," Hensley said. "Dispensing prepaid cards at ATMs will be very important, but ATM operators will need to be able to accept cash payments for prepaid card purchases. This is because prepaid cards particularly appeal to underbanked consumers."

One challenge is that U.S. IADs aren't deploying ATMs that accept cash deposits, while banks have cash-accepting ATMs. "If IADs want to offer additional products and services at their ATMs, they'll need to deploy cash acceptors," Hensley said.