STRATEGIC PARTNERS
While there have traditionally been few takers for ATM deposit sharing, several EFT networks are upping the amount of interchange that can be collected for such transactions. One network, NYCE, also plans to make it possible to surcharge for deposit sharing.
March 31, 2002
While the ability for banks to accept deposits for non-card holders has been around practically since the inception of ATMs, few banks choose to accept deposits from anyone other than their own customers.
The Woodcliff, N.J.-based NYCEnetwork, which makes deposit sharing available to its member institutions, reports only a small percentage of its ATMs are even capable of accepting cardholder deposits -- let alone deposits for other institutions.
"We have 2,233 banks and credit unions in the NYCE network, with over 82,000 ATMs domestically," said William Peirce, director of Network Services for NYCE. "Of them, only 6,000 ATMs can accept deposits, and a much smaller percentage than that participate in deposit sharing."
The rest are cash dispensing machines, Peirce added, noting that these ATMs seem to be what consumers want, and they are much less expensive to install.
Deposit sharing is an optional service offered to NYCE's member institutions in the Northeast service area, including New York, Pennsylvania, Delaware and New Jersey. By state law, all deposit-taking ATMs in Michigan, Indiana and Illinois -- Midwestern states served by NYCE -- must offer deposit sharing, Peirce said.
It's a similar story at Star Systems, where only about 11,000 of 209,000 ATMs participate in shared deposit taking. "Historically, (deposit taking has) not been a very fast-growing service," said Barbara Span, Star's vice president of public relations and manager of the company's industry research and white paper projects.
"Having deposit sharing seems to make sense more for the smaller institutions and credit unions, as a way of extending service and availability in markets where they don't have good ATM coverage," Span said. "But the larger institutions may resist sharing deposits, because their good ATM coverage already gives them a competitive edge they don't want to share with other banks."
Cost and convenience
While ATM owners who accept deposits for other financial institutions receive interchange fees for every transaction, the disadvantages to participating banks and to consumers continue to make deposit sharing a low-growth venture, according to Les Riedl, senior vice president of Atlanta-based consultancy Speer & Associates.
"Research has shown time and time again that consumers just don't like making deposits into an ATM...they don't feel good that their deposit envelope is going to the right place, and would rather drive through a teller window," Riedl said.
In addition, he said, deposits made by non-card holders can take up to five days to clear. "Most consumers find this very inconvenient."
The financial barriers to deposit sharing are even more significant for the banks involved, Riedl said. "If you have a cash-only machine, you fill it up with money and refill about every week. If you operate an ATM that takes deposits, you must empty it every day, and that ups operating costs a lot," he said.
In a shared deposit environment, Riedl said, most banks go a step further and employ two people at the ATM to verify that the amount of money listed by the customer on the envelope is the same amount actually in the envelope.
Fee adjustment
To help offset some of those costs, Peirce said the NYCE network will begin allowing terminal owners to charge ATM users a surcharge for deposit sharing in September 2002.
"We don't have any jurisdiction over how much they can charge, and as an organization, we're not necessarily trying to promote it," Peirce said. "But considering the cost of processing keeps going up due to inflation, it seemed appropriate to give our member institutions the option to surcharge."
Just two other networks, MoneyMaker and Money Belt, which are both owned by Genpass, allow ATM owners to collect surcharges on shared deposits.
However, Riedl believes that few banks will choose to surcharge on shared deposits. "People don't mind paying a surcharge when they are taking money out of a machine, but are very resistant to paying to put their money in," he said.
NYCE also is increasing its interchange rate, from $1 to $2 for on-premise shared deposits and from $1 to $2.25 for off-premise shared deposits.
Other networks are also making changes to their price structures for shared deposit taking.
Last year Star was acquired by Concord EFS, which also owns the MAC and Cash Station networks -- each with different policies on deposit sharing. Span said the fully-integrated Star will offer deposit sharing as an optional service for all of its member institutions.
Though Star historically has left surcharging to the discretion of its deposit-sharing institutions, Span said the network will ban surcharging on shared deposits when it standardizes its practices under the Concord EFS umbrella.
Like NYCE, Star's interchange rate for shared deposits will be $2 at bank branch ATMs and $2.25 at off-site ATMs. That's a boost from the current rates in Star ($1.60), Cash Station ($1.11) and MAC ($1).
The Houston-based PULSE network did not support shared deposits until its recent acquisitions of the Money Station and TYME networks. PULSE rolled out optional deposit sharing in February since members of the two acquired networks, TYME in particular, participated in deposit sharing.
PULSE's interchange rate for deposit sharing is $2, an increase from $1.10 in TYME and 55 cents in Money Station.
Mary Brown, PULSE senior vice president, urged all financial institutions interested in offering deposits to pay close attention to any applicable state laws. For instance, in Wisconsin, TYME's primary service area, all deployers who offer deposit taking must also agree to offer deposit sharing.
Both sides of the coin
While some banks have driven deposit traffic to their ATMs by charging fees to see a teller, or by offering no-fee accounts to customers who use the Internet and ATMs exclusively, Riedl said that the need for ATM deposits will go down as internet-based, person-to-person payments and direct deposits increase.
"You really must question whether ATM deposits, and deposit sharing in particular, will ever be important products," he said.
Chris Klein, executive vice president for Mosaic Software in Deerfield Beach, Fla., doesn't share that bleak view. He has been watching the deposit sharing issue since his early days as an NCR ATM salesman and installer, to his job overseeing the ATM program for BankAtlantic, to his current position at Mosaic, which creates software applications for ATMs.
He said improving check imaging technology and the Check Truncation Act, a regulatory change sponsored by the Federal Reserve Board which would allow digital images of checks to be substituted for the actual checks, may take some of the inconvenience and liability issues out of the process.
"The main issue for deposit sharing is having to use an envelope," Klein said. "Check truncation and deposit automation allow a customer to scan a check at an ATM, then receive it back. The scanned image is automatically forwarded to that user's home bank, verified, and credited to his account."
As the technology gets cheaper and easier to use, banks may see significant advantages to offering the service, he said. "I believe that banks with a big presence in retail settings, like grocery stores and discount stores, will be the first to adopt the strategy. Consumers would be able to make deposits while they are at the checkout line - which could be a real competitive advantage."
