News
No bricks, no mortar, no problem
Mitchell Caplan of E*TRADE, speaking at the ATM 2000 Conference in Orlando, Fla., asserts that ATMs can do the work of a bank branch, and then some.
April 15, 2002
Mitchell Caplan, chief banking officer of E*TRADE Group and chairman, president and CEO of E*TRADE Bank, knows that a boffo brand name only goes so far.
While acknowledging that E*TRADE has built its business largely on a strong brand and aggressive marketing, he said, "A brand is only as successful as the products that support it and the latest access channels to deliver it."
One of E*TRADE's most strategic "access channels" is ATMs. E*TRADE gained control of more than 8,000 retail ATM sites with its May purchase of Portland, Ore.-based Card Capture Services, one of the nation's biggest ISOs. Caplan called the acquisition "an incredibly strategic deal."
Caplan, who described his role with the company as "20 percent master of the universe strategist and 80 percent shoe salesman," helped engineer the CCS acquisition. He was previously president and CEO of Arlington, Va.-based Telebanc Financial Corp., which operated the online Telebank before E*TRADE purchased it last January.
Adding CCS, newly renamed E*TRADE Access, to its business is part of E*TRADE's plan to penetrate the mainstream banking market. That kind of penetration doesn't require branches, Caplan said, noting that while just 33 percent of bank transactions were conducted via electronic delivery channels in 1994, that number has risen to 60 percent today.
And, he added, "If you really look at the behavior patterns of those banking and investing online, they use ATMs almost exclusively."
Several prominent Internet banks are wrestling with the question of how to offer ATM access, with most opting not to charge their customers for using others' ATMs and to refund at least a portion of the fees customers pay to use those machines. E*TRADE opted to buy an existing network because it wanted to give its customers "a branded point of presence," Caplan said.
"We have not adopted branches, and we have been able to grow at a rate far in excess of what is seen in the industry," he stressed, noting that E*TRADE can operate 9,600 ATMs for roughly the same cost it would take to run five traditional brick-and-mortar branches.
The cost effectiveness of ATMs is especially important in a changing market in which Internet companies are expected to show more financial accountability. Noting that Wall Street analysts are adopting a less indulgent attitude toward dot-coms, he said, "We returned to profitability at exactly the right time." E*TRADE achieved break-even results from operations in the second quarter of this year.
The idea is to let banking and brokerage customers access their accounts using PCs and wireless devices such as PDAs, in addition to electronic kiosks and ATMs. "We have to deliver products across any and every device to create a truly ubiquitous financial hub," Caplan said. While the other devices are beginning to grow in popularity, ATMs are already liked and trusted by consumers, he added.
E*TRADE Access (the former CCS) has added 1,700 machines in the past five months. The network will continue to grow, both organically and through acquisitions of other ISOs' portfolios, according to Caplan.
The company recently added an ATM locator to its Web site. Caplan said average transaction volume has increased about 15 percent, with 60 to 70 percent of those transactions "on-us" (conducted by E*TRADE customers, so no interchange or surcharge is involved).
Free ATM access is "a great marketing device," Caplan said. "If you become an E*TRADE customer, you don't have to pay $1.50 anymore."
E*TRADE has slowly begun incorporating new ATM services, adding a machine with deposit-taking capabilities at a Super Target department store in Roswell, Ga. While Caplan said the company is interested in helping evolve the ATM into a multi-function financial service kiosk with features such as Internet content and full-motion video, those changes won't happen overnight.
He is excited about another of the company's strategies, deploying ATMs at the offices of companies like Oracle Corporation, for whom E*TRADE manages employee benefits. The ATMs will serve as "virtual credit unions" for these companies, Caplan said, and help "build affinity with high-value customers."
