Article

Location, location, location.

Does Cardtronics know something about ATM siting that Bank of America doesn’t?

August 16, 2012

Maxim no. 1 of marketing is, "When your company's fortunes are down, the last thing to cut is the budget for advertising — the connection to your customers."

If the ATM world has a counterpart to this rule, then Bank of America probably would rather not hear about it. The bank, which is seeking to cut $8 billion in costs, has been shutting off ATMs and shuttering branches — an FI's no.1 and no. 2 customer touchpoints— at a brisk rate through the past year.

In fact, just in the first half of 2012 BofA pulled 9 percent of its ATM fleet from locations that include malls, grocers and convenience stores. The pullback reduced the bank's ATM fleet from about 18,000 machines nationwide to 16,220.

Additionally, BofA closed a net total of 157 branches between June 2011 and June 2012, SNL Financial reported. That's 60 more than the FI with the second-highest number, IBC.

'Hey, somebody took my ATM!'

"The problem that I see is once you extend  — and let's just call it in a loose sense, a benefit — once you extend a benefit, then when you begin to withdraw it there's always going to be some negative backlash," said Mansel Guerry, executive vice president for EFT network Credit Union 24. "How big that backlash is is anybody's guess."

Which brings up Maxim no. 2 of marketing, "A happy customer will tell three people; an angry customer will tell 3,000." (It used to be 10, but that was before social networking.)

"The key to it is exactly how they manage it," Guerry said. "What do they offset it with? And quite frankly, sometimes the business you lose when you make a decision like that is business you didn't really want in the first place. It could be high-cost, low-income business."

Bank of America CEO Bryan T. Moynihan has made no secret of wanting to shed customers who cost more to serve than they contribute to the bottom line. But the problem is, ATMs can't tell the difference between the two.

(i.e., 'They weren't making money')

The explanation most frequently offered for the fleet reductions is that Bank of America was seeking to serve its customers better; abandoned locations were in malls or stores that didn't offer 24/7 access.

"It's about convenience and access, that's what the customers are looking for," Bank of America spokeswoman Anne Pace said. "People aren't banking 9 to 5, they are banking when it's convenient for them."

Fair enough, but missing from all the news coverage about the removals was any indication that Bank of America has plans to redeploy the ATMs it pulled. Now in addition to being unable to bank "when it's convenient for them," customers who used those ATMs can't bank where it's convenient for them, either.

But Guerry said that Bank of America knew what it was doing when it opted out of contract renewals with name-brand merchants such as Valero Convenience Stores, Harris Teeter grocers and Simon Management Group (the largest mall management company in the U.S.)

"I can understand to an extent why they're doing this," he said. "I mean, obviously an ATM is an expense item when it comes to deploying it. And they're making those financial statement decisions of where they think they should be and where they think they should not be."

IADs rush in where banks fear to tread

The curious thing about the Bank of America pullback is that as willing as they are to bail out of real estate, Cardtronics is just as eager to snap it up. The company has signed a contract with Valero for 950 ATMs, which it has made available for FI branding, and a contract with Harris Teeter for 191 PNC Bank-branded ATMs.

For its part, Cardtronics declined to say why it believes it will succeed in locations where Bank of America apparently could not. Instead, the company offered a statement provided by director of PR, Nick Pappathopoulos.

"As a direct result of Cardtronics carefully selecting well-regarded locations such as Valero Corner Stores, banks, credit unions and prepaid card program managers have contracted with us to place their brands on more than 16,500 Cardtronics' ATMs," Pappathopoulos said.

"Underscoring the highly-desirable nature of Valero Corner Stores as retail ATM locations, within months of Cardtronics securing those sites, Frost Bank elected to brand all 615 ATMs at Valero Corner Stores in Texas, greatly expanding free-of-charge ATM access for Frost customers," he said.

Frost Bank branding is also helping Cardtronics to defray the cost of operating those ATMs, of course.

It may all come down to a difference in business models, Guerry said. "It could be that Bank of America has determined that … they're not capturing enough market share to warrant leaving that terminal out there, whereas Cardtronics comes in behind and says, 'Based on our model and what we need to do to be profitable, we can make it a more viable proposition and therefore we want those locations.'"

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photo: Flickr/Fortyseven