News

Getting Started Right with ATMs

A simple guide to entering the world of ATM profitability, and living happily ever after. Provided by ATM Exchange

January 7, 2002

There are three basic ways you benefit from running ATMs. The first, and most important, is customer (member) gain and retention. Customers have come to expect - make that "demand" - 24/7 access to their money. The financial institutions that provide what they want will attract and retain customers. The ones who refuse to provide what is demanded will lose ground to those who provide it. Every ATM you deploy (on and off your premises) is an effective recruiter (with the help of your brochures, etc.) that can sign up customers of institutions who do not have nearby ATMs to service the market.

The second reason is cost control and profitability. An ATM performs teller and customer service work 24/7 for no salary. It helps you avoid adding personnel, who require ongoing salaries, payroll taxes, benefits, sick days, vacations, supervision, etc. You can also defer the addition of teller stations, drive-through lanes and other expenses, because the ATMs are shouldering a big load for you, boosting profits. Or, you can add capacity, on and off-site, without adding personnel.

The final reason is credibility. When even convenience stores, bowling alleys and bars are offering the convenience of an ATM, how is a financial institution that cannot provide this modern convenience perceived? With so many choices available, no one will settle for second class. And, if the institution lacking ATMs decides to issue cards to their customers that are accepted by someone else's ATMs, how long is it before they lose customers to the fully equipped financial institution? To gain perspective, suppose your grocery store carried almost everything except laundry detergent. As a "convenience" for you, they will sell you a voucher for detergent good at another grocery store down the street. It won't take long before you decide that you need only the one grocery that provides the detergent, and the same is true with banking customers. They will gravitate to the organizations that have ATMs. Or, as James Santoro noted in the 11/6/00 issue of The Credit Union Journal, the most likely reason a prospect does not sign up with a given provider is convenience. Likewise, it's the reason why the prospects do select one that offers it.

Determine where ATMs will help you service your customers, and attract prospective customers. You have a choice of full function machines, or those that simply dispense cash (over 90% of ATM transactions are cash withdrawals, with the trend being driven by increasing direct deposit payrolls). Then, you can select model types. There are freestanding interior machines, through-the-wall configurations for exterior (drive-up or walk-up) or interior (hallways, vestibules, etc.) applications and freestanding exterior ATMs (some requiring kiosks, some not). Your connection can either be a lease line (on-line) or a dial-up. The higher your volume and the closer you are to the line, the more likely a lease line is your best choice. It also provides customers with immediate connection, and enables you to continuously monitor the machine. Dial-ups are cheaper, but you can experience more disconnects. And, you can monitor the machines only when a connection is made.

Since you probably already issue cards, you probably have a network. The network provides you with a choice of processors. Make sure you select a processor who can support the type of connection and machines you intend to use. The processor's scope may dictate the brand of ATM you can operate, so be sure to obtain the parameters.

The source you select may be as important, if not more important than the machines, because a good vendor can provide and inform you about many alternatives. Does the source carry more than one brand? Can the source provide new, refurbished and used machines? One of these categories is not the best choice for every application. Does the vendor possess the experience, expertise, resources and inclination to advise you about your ATM strategy, now and into the future?

There is no free lunch here. A machine that appears to be cheapest up front may cost you more in service and downtime. It's another good reason to work with a vendor whom you trust.

Bear in mind not only how your customers will use the machine, but also how it will be serviced for cash replenishment, deposits (if any) and maintenance. These factors can influence your choice of model, kiosks, and other variables.

Once you've selected machines, it's up to you to prepare the site, get the machine installed and make it operational. Again, a good ATM vendor will help guide you.

Site preparation may be quite simple, or a matter of construction (example: the hole in the wall for a through-the-wall machine). Your ATM vendor will supply you with the necessary specifications.

A rigger physically installs the machine. The rigger does not wire up the machine or bring it live. Your ATM vendor should be able to recommend a competent rigger if you do not have one in mind. The cost is usually $1,000-$1,500.

Then, the machine must be hooked up and brought live. This is usually done by your service company, which is a good thing, since it will be their responsibility to keep it up and running.

In selecting a service company, you want to find a good mutual match for your type of operation. You also want to ensure that the service company has a verifiable track record of satisfaction with your type of operation in your market (quality of service can vary from office to office with national and regional providers).

Do you prefer to be to be charged for time and materials or a flat contract rate? It's kind of like car insurance. Time and materials might appear cheaper, but just one major incident can cost you a lot (contract rates cover components as well as labor). Be sure to incorporate semi-annual preventive maintenance into the contract. It lessens the chances of that big breakdown. Annual contract rates range from $750 to about $3,500, depending upon the condition and complexity of the ATM. You will decide how to take care of first-line service (supplies, clearing jams, etc.) and cash replenishment. Your choice is using your own personnel or an outside service.