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Buyer's market

Neil Randel of First American Payment Systems says there are plenty of good ATM sites out there -- and some of them are available at the right price. First American recently bought more than 160 machines from American Express.by Ann All, editor

March 20, 2002

One ATM deployer's trash is another one's treasure.

Neil Randel, president and CEO of First American Payment Systems, thinks he got some real gems when he purchased 168 ATMs from American Express. The sites, including 93 at Crown Central Petroleum gas stations/convenience stores, brought his Fort Worth, Texas-based company's total portfolio to 250 machines.

He believes the Crown Central sites, in particular, have potential. "They have 200 more locations without ATMs."

The key to making a good deal, Randel said, is to purchase sites with well documented track records. "If you have a history of the numbers they're running, you know what to pay for them."

While the Amex sites were not big money-makers, he felt the margins would increase with a simple change in hardware. The machines, which Amex inherited from original owner EDS, were legacy Diebold ATMs running on leased-line communications. Randel is selling them and installing Triton 9600s.

"When you put in dial-up terminals which cost a lot less to work on and a lot less to service, you can make the numbers work real well," he said.

First American's primary business is credit card processing and acquiring. The company also has check guarantee, electronic commerce and equipment leasing divisions. Randel said he decided to enter the ATM business after about two years of research.

"We needed to understand the business before we committed the staff and the capital," he said. "We wanted to know exactly what was going to happen from point A to point Z."

While a small number of its machines are leased by merchants, First American prefers to own them. "Our goal is to own the ATM from start to finish, and to provide cash servicing for the right locations," Randel said.

Supplying the right amount of cash to machines is probably the biggest challenge for First American -- or any off-site deployer. Records indicate that half of the Amex ATMs the company has converted had been out of cash at least once in the previous month.

Downtime is expensive, Randel said. "If you lose 50 transactions a month, with a $1.50 surcharge and 50 cents in interchange, you're looking at $100 worth of lost income. If you multiply that by 200 machines, that's a lot of money."

Noting that First American dials into its ATMs daily to check on their status, Randel said running an effective program all comes down to a hands-on management style. "You can't macro-manage these things. You have to micro-manage them."

Randel believes the industry will continue to consolidate, as companies with the capital and the desire to buy machines take over locations. First American plans to acquire more ATM locations "as long as it makes financial sense and we can reach a financial agreement with the current owner," he said.

Noting that he received lots of calls from ATM owners wanting to sell after news of First American's deal with Amex was announced, he said, "The industry is still somewhat fractured. You've got a lot of small operators out there that have kind of maxed out."

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