News

ISO Feedback Drives New Services for Off-Premise ATMs

Because they work so closely with customers in the field, ISOs provide valuable feedback to manufacturers. This feedback often results in new service capabilities in ATMs

January 7, 2002

Demand for new products and services is keeping ATM manufacturers busy, either developing fresh ideas for delivery of new services or designing ATMs to fit a variety of applications. The source of the demand, in many cases, is the ISO (independent sales or service organization).

"The ISOs are the front line, dealing with the public," said Mike Hudson, executive vice president of Carrollton, Texas-based Tidel, one of the first ATM manufacturers to specialize in the O-P (off-premise) market. "They talk to the end users about what they want and what technology is available to support that."

Tidel, along with other ATM manufacturers, depends on ISOs to communicate trends and customer needs in the marketplace. When ISOs indicate a product or service they'd like to see developed, manufacturers must figure out a way to deliver.

"In a lot of respects, the ISOs are out driving these elements, so all of them come together at the same time to support whatever product or service they are looking for to satisfy their customers," he said.

ISO feedback from the field

Tidel markets and sells ATMs exclusively through ISOs. Hudson said his company depends on ISOs to provide new ideas, such as selling tickets and stamps, or for customer reaction to innovations.

"Our machines have the capability of supporting them," Hudson said, "but it comes down to what the market wants and what the market is prepared to support -- typically two different things. You'll have a lot of end users that are looking for many features, benefits and additional services."

Hudson said it then becomes the responsibility of the manufacturer to develop machines capable of delivering those services.

Gaining ground in the marketplace

ISOs, especially the largest operators, have generated much of the recent growth in ATM deployment, primarily through off-premise applications. And their sheer numbers give them power to influence. The top ten ISOs operate more than 20 percent of the 273,000 ATMs in the United States, according to Bank Network News.

The top 10 ISOs, ranked by number of ATMs placed:

1. Credit Card Center

2. E*TRADE Access

3. American Express

4. Access Cash

5. Hanco

6. Xtra Cash

7. McLane FSP

8. International Merchant Services

9. Momentum Cash

10. Financial Technologies Inc.

Serving all sizes

Smaller ATM owners realize benefits in dealing with ISOs. Jerry Jeffers, who owns 14 ATMs, has purchased machines through two ISOs, Access Cash and E*TRADE Access.

Jeffers, of Augusta, Ga., did plenty of homework. He discovered his price for purchasing ATMs is less using ISOs than it would be buying direct from manufacturers.

He said E*Trade Access provides transaction information and connects him to the networks without charging a hefty fee.

"Our ISO is in the middle between our company and the processor, taking the reports from the processor and putting them in a friendly format on a Web site that I can go into daily," Jeffers said.

ISOs, which buy ATMs in bulk to get favorable pricing, also provide supplies and processing to ATM owners at a discount.

Money for ISOs

ISOs may save money for owners, but by managing the ATMs they give operators like Jeffers the time to focus on expanding their businesses, instead of focusing on day-to-day operations.

ISOs make a portion of their profit through transaction fees charged to ATM owners, so it's in the best interest of ISOs to keep their ATMs running efficiently.

Bob Cannon, president of Houston-based Momentum Cash, said his company gives owners a valuable turnkey service.

"After the ATM is sold and put into the ground, all the services on the back end that are required to really keep the machine up and running and compliant with all the regulations cost a certain amount of money," Cannon said.

"The merchants don't have time; they don't have the connections," he added. "They aren't joining the networks. There is a certain price for those services in the marketplace."

Many merchants are content to let the ISO handle everything, including ownership of the machines, in order to give customers an ATM inside.

Study shows ISO costs lower

A 1999 study of off-premise ATMs showed how much the average cost of operating an ATM was affected by the presence of an ISO. The study, by Boston-based Dove Consulting Group Inc., found that the average monthly maintenance cost for off-premise ATMs operated by ISOs was $703, compared to $1,090 for other ATM deployments.

The study was funded by NYCE, PULSE and STAR, three leading electronic funds transfer (ET) networks.

Supermarkets, gas stations/convenience stores and malls are the most popular retail ATM locations, according to the study.

The numbers show that ISOs do save money for operators, and in many cases help owners operate their ATM machines more efficiently.

The advantages of using ISOs go far beyond simply saving money on maintenance, and the economic benefits are driving the growth of off-premise deployments. According to recent statistics from Bank Network News, the number of O-P deployments now makes up 57 percent of the 273,000 ATMs in the United States. As ISOs develop new strategies for a growing number of outlets, that percentage is sure to climb.