STRATEGIC PARTNERS
February 21, 2002
HOUSTON -- Three leading shared electronic funds transfer (EFT) networks today announced publication of the 1999 ATM Deployer Study, prepared by Dove Associates Inc., an international management consulting firm.
Based on a survey of the nation's leading ATM deployers, the new study describes the evolution of the ATM industry to date and predicts that the next three years will be characterized by slower ATM deployment, declining revenue and profitability for ATM owners, and more intense competition for all industry participants.
The "1999 ATM Deployer Study" follows 1997's "The Future Use of ATMs" study which presented a comprehensive look at the potential growth of ATMs, the role of networks, the impact of new payment products and key factors affecting deployment such as ATM convenience fees and legislative initiatives.
The 1999 study was sponsored by three leading EFT networks -- NYCE, PULSE and STAR -- as part of their continued commitment to advancing an understanding of the EFT industry.
"The 1999 study is rich in content and thought provoking," said Stan Paur, PULSE president and CEO. "The report offers timely insights into an evolving industry marked by new players, changing technologies and diverse business strategies that have emerged in different environments."
"This work confirms our view that the ATM market is nearing the end of the transition phase marked by the introduction of nationwide surcharging," added Tony Hayes, senior associate and project manager for the study at Dove Associates. "We believe that the inclusion of non-bank deployers in the analysis helps highlight the impact that new industry entrants are having on the market."
Among the study's many strategic findings are:
-- The average monthly operating cost for an off-premise ATM is $1,090, with depreciation and first line maintenance the largest components (see table).
Typical Monthly Operating Cost for an Off-Premise ATM
Depreciation $300
First Line Maintenance $270
Second Line Maintenance $150
Cost of Funds $97
Telecommunications $123
Terminal Driving & Processing Fee $100
Other $50
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Total $1,090
-- Major cost differences exist by type of deployer, with Independent Sales Organizations (ISOs) averaging a monthly cost of $703 per ATM.
-- 76% of ATM deployers currently surcharge, with an average convenience fee of $1.36 per foreign cash withdrawal. Similarly,
different deployers have significantly different surcharging
strategies, with only 20% of credit unions currently assessing a
direct ATM fee.
-- Deployers' goals for placing ATMs have evolved over the last few
years, with an increasing emphasis on "fee income" opportunities.
-- Growth in the placement of ATMs is expected to decline. Deployers
plan to grow their ATM bases by 29% over the next three years, versus an actual expansion of 126% between 1996 and 1998 (see chart).
-- Average transactions per ATM vary significantly by deployer type,
with ISOs averaging fewer than 1,000 transactions per month.
-- The transaction cut-offs for removal of poor-performing ATMs
reported by financial institutions are higher than the actual
transaction volumes reported by all ISO respondents.
-- Supermarkets, gas stations/convenience stores, and malls are the
most popular retail ATM locations.
-- Respondents predict that the average surcharge sharing percentage
and the average monthly rent payment to merchants to compensate them for retail locations will increase by 2001.
The study findings are based on the survey responses of a range of
banks, thrifts, credit unions and third-party ATM deployers across the
nation. The survey respondent pool accounts for 29% of the entire
installed base of ATMs in the U.S. Supplementing the survey data are in-depth interviews with various leading deployers and secondary market research.
"The business case for the deployment of ATMs is affected by many
factors," noted Ronald V. Congemi, president and CEO of Star System Inc. "This study analyzes how various factors have and will affect the current and future evolution of ATM programs."
