News

ATM deposits -- to share or not to share?

Despite networks' efforts to support shared ATM deposits -- including the go-ahead to charge customers for the service, in some cases -- it still seem to be a tough sell for many deployers.

August 6, 2003

Reprinted with permission from ATM&Debit News, a weekly electronic newsletter based in Chicago. To subscribe, call 212-631-9780 or go to thisWeb site.

ATM networks hope to make shared-deposit transactions more appealing by lifting surcharge bans and, in the case of Visa USA's Plus network, by adding the function itself. And federal legislation is expected to make it easier and cheaper for banks to take ATM deposits.

But some of the largest owners of deposit-taking ATMs are shutting down deposit access to competitors' debit cardholders. Chicago-based Bank One Corp., for example, recently announced it will stop taking deposits from other banks' customers at its 465 Chicago-area deposit-taking ATMs on Oct. 1. And late last year, Minneapolis-based TCF National Bank also stopped allowing noncustomers to make deposits at its machines.

(See related story Bank One changes ATM deposit policy)

Sharing for a fee

Some networks allow ATM owners to assess fees for shared deposits. On Jan. 1, the Montvale, N.J.-based NYCE network ended a shared-deposit surcharge ban. The Houston-based Pulse network also recently lifted its ban on shared-deposit surcharges.

But historically, bank-ATM owners have had little financial incentive to support shared deposits. Maitland, Fla.-based Starand MasterCard International's Cirrus networks, for example, currently ban surcharging the transactions. So does the nation's largest ATM network, Visa USA's Plus, which will begin a full rollout of the shared-deposit function by September.

John Brinnon, Visa vice president, says Visa is trying to make its Plus network more appealing as an exclusive network switch for its financial-institution owners. He says the shared-deposit function needs to be in place to make that possible. "Some of our members are saying they want to use Plus as their only network," says Brinnon.

The NYCE network dropped its surcharge ban on shared deposits primarily to encourage members not to drop shared depositing. "It is more about retaining the ones (that take shared deposits) we have," says Susan Zawodniak, NYCE executive director.

Zawodniak says only a few small ATM owners currently are surcharging noncustomers for making shared deposits. NYCE's shared-deposit rules set no limit on surcharge amounts, and they allow ATM owners flexibility on which ATMs take shared deposits. While Bank One supports NYCE as a network brand on its ATMs, the bank uses the Star network to switch shared deposits, says Zawodniak.

It is unlikely even surcharging noncustomers for ATM deposits would make up for the cost of shared deposits, says an ATM official at a major NYCE-member bank who requests anonymity. "You've got fraud to deal with and transaction adjustments and settlement issues that come up with shared deposits," says the executive.

Competitive edge

Also, banks that have market concentration, such as Bank One's in Chicago, are using convenient access to ATM deposits to gain depositors. By not offering noncustomers deposit access at Bank One ATMs, bank officials hope those individuals become customers of Bank One to continue benefiting from the convenience.

"I am sure the noncustomers would love it, being able to make a deposit anywhere they want to," says the NYCE-member official. "But from a big-bank perspective, we have a lot of money invested in our networks, so why would we open it up to other card issuers?"

A Bank One spokesperson says the policy change was prompted by delays in settling deposits with other banks, cost and fraud risks. The number of shared deposits is relatively small compared with customer deposits at Bank One ATMs, he says.

Historically, such large ATM owners as Charlotte, N.C.-based Bank of America and San Francisco-based Wells Fargo & Co. have not participated in shared depositing, or they have done so on a limited basis. They own many deposit-taking ATMs, however, and seem to be closing off that function except in isolated regions under grandfathered contracts or where shared depositing is still required by state regulation. Most states over the years have lifted that requirement.

A bank survey conducted by Salisbury, Md.-based ESP Consulting Inc. concluded that, as of the end of 2002, there were 192,452 ATMs owned by financial institutions. Of those machines, 72 percent had deposit-taking functions, while 28 percent were simple cash dispensers. That means 39 percent of the nation's 352,000 ATMs, or about 138,000 machines, as of last fall took deposits. Yet for most of those ATMs, the deposit-taking feature appears to be available only to a bank's own cardholders.

PFPC, the mutual fund-management firm subsidiary of PNC Financial Services Group Inc. that manages 793,000 debit cards, recently began offering clients the ability to have their cardholding customers make shared deposits at ATMs. PFPC secured the deposit service through Star and NYCE. (See related story New program allows ATM deposits into brokerage accounts)

Star is connected to 244,000 ATMs and NYCE to 104,000. Yet only 16,000 ATMs are available through NYCE and Star for PFPC's shared deposit program. Jeff Sander, PFPC vice president, says he hopes more shared-deposit ATMs will become available through the Plus network.

But, say industry observers, that is unlikely, as network surcharge bans continue, and the electronic imaging, posting and presenting of paper checks deposited at ATMs remains in its infancy.

Leon Majors, ESP president, says general bank investment in check-imaging technology is years away, despite a measure pending in Congress that would give the same legal status to imaged checks as paper checks today.