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A business case for branding

February 14, 2006

This article appeared in the ATM & Financial Self-Service Executive Summary, Winter 2006.

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When Hyattsville, Md.-based Library of Congress Federal Credit Union wanted to offer greater surcharge-free ATM access to its members, it quickly learned that securing off-premise locations can be costly.

Beyond upfront investments beginning at $1,800, off-premise ATMs can cost a financial institution an additional $1,000 or so in monthly maintenance and service. Doling out that kind of cash wasn't a viable option for LCFCU.

Gary Mandelkorn, LCFCU's vice president, said in 2004 his credit union began investigating nontraditional placement options in an effort to balance membership benefits with cost.

LCFCU's membership comprises Library of Congress (LOC) employees and their families. Most of the FI's 9,600 members live and work within the District of Columbia area.

"LCFCU wanted to be able to offer more to the membership base that was not located within the Library of Congress campus," where the credit union operates one full-service branch, Mandelkorn said.

In summer 2004, LCFCU signed an ATM branding deal with Nationwide Money Services Inc., a Ponte Vedra Beach, Fla.-based independent sales organization, to place LCFCU-branded ATMs in select Food Lion grocery stores in Maryland and Virginia.

LCFCU now supports a network of 16 ATMs in the D.C. area, 14 of which are branded through the deal with Nationwide.

"(Nationwide) presented a listing of potential locations for us to review," Mandelkorn said. "We were able to consider general location as well as our membership's geographic density in selecting locations. … And while all of these ATMs are successful for us, the amount of surcharge-free transactions for our members at these locations continues to rise."

Mandelkorn said convenience for existing members and the ability to attract new members through ATM branding have made the business case for working through a third-party ATM provider.

"All ATMs have a topper displaying our brand logo, and most locations have a window decal identifying us."

A business case

The branding concept recently has garnered a lot of attention in the FI space, said Bob Colabrese, Nationwide's executive vice president, namely because FIs are trying to make their brands stand out in an increasingly competitive market.

For credit unions and community banks, which don't typically have the deep pockets their gargantuan counterparts do, promoting services and brands isn't easy.

"We usually work with the under $500-million guys - the mid- to small-sized banks and credit unions. And what we've heard over the years is that our bank partners want to place an ATM with a small business or retailer but they aren't confident they can make the commitment or the capital expenditure to put an ATM there."

Branding takes the risk out of the equation, Colabrese said. "We can get their brand out there for less than $100 to $150 a month, and if a location isn't performing, we can move it somewhere else or take it out."