News

Branded ATMs put banks everywhere

July 13, 2004

Independent ATM operators are partnering with banks to help expand geographic reach by rebranding ATMs in retail locations. The banks gain marketing muscle and increase the availability of surcharge-free ATM access for their customers  - all at a fraction of the cost of investing in their own machines.

Branding programs are an especially effective strategy for banks looking to enter new markets, said Keith Myers, executive vice president of Cardtronics' Financial Services division. One Cardtronics client, a major bank based in the Northeast, used this strategy when it decided to expand into the burgeoning Texas market.

"We own, operate and manage the machines for them," Myers said. "We give their customers an experience that looks, feels and acts just like a bank ATM."

Myers said branding inquiries have increased as banks jockey for position in strong banking markets like California, Texas and Florida. During mergers and acquisitions, buyers often want to supplement the ATMs in an acquired portfolio. Other banks never had many non-branch ATM locations and want to correct what they perceive as a shortcoming.

Expansion is a tough proposition for banks as ATM real estate dwindles, Myers said. "There are only so many good retail sites out there."

Houston-based Cardtronics, which in March filed its intent to raise as much as $115 million in an initial public offering, operates 12,000 ATMs in retail locations, many of them at high-profile sites like Barnes & Noble, ExxonMobil, Rite Aid, Sears, Sunoco and Walgreens.

Banks typically pay ATM operators like Cardtronics either a flat upfront fee - often based on the number of cardholders or other criteria; a small per-transaction fee to make up for the loss of surcharges on the "on-us" transactions; or sometimes both.

Independent ATM providers can generally operate turnkey off-premise ATM programs for less than banks can. Large providers like Cardtronics enjoy the advantages of scale with service companies and other vendors, Myers said.

Gary Walston, vice president of Momentum Cash Systems, another Houston-based ATM operator that offers branding programs to banks, said branding benefits all parties involved: the ATM operator offering the service, banks using it, retailers who place branded ATMs, and ATM cardholders.

"The financial-institution cardholder saves money (on surcharges) and gains convenience. The financial institution expands its ATM network for very little cost. We get added revenue and drive new transactions to our ATMs, which makes our merchants happy," Walston said.