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December 2, 2004

Installing drive-up ATMs is not an inexpensive proposition - especially in a non-branch environment.

But an investment of tens or even hundreds of thousands of dollars appears downright frugal when compared to the millions required to build a full branch.

"It's far cheaper to put up ATMs and operate them than it is to open a branch on every corner," said Michael Armbruster, senior vice president and CIO of $2.7 billion ESL Federal Credit Union, which has installed 14 drive-up ATMs in just more than a year and has plans for one more before year's end.

Non-branch drive-ups are used most often by smaller banks, said Al Tiley, CEO of enclosure manufacturer Companion Systems.

"Larger banks have a more extensive branch network. But smaller banks can use them to extend their brand beyond the confines of the branch and to offer more convenience for their clients," Tiley said.

Some new customers have cited the drive-up ATMs, most of which have depositories, as a reason they opened accounts with ESL, said Joseph Piendel, a product manager.

Most banks will spend $15,000 to $25,000 for enclosures to house drive-ups, Tiley said. While they can cut costs at branches by piggybacking electrical and communications lines on existing systems, that option generally does not exist at non-branch sites.

Transactions on us

ESL selected sites carefully, evaluating members' foreign ATM transactions to determine where they used ATMs most - and ended up paying foreign ATM fees. After installing the drive-ups, ESL's percentage of "on-us" transactions rose from roughly 45 percent in 2002 to 60 percent today.

About 40 percent of ESL's total ATM transactions are performed at the non-branch drive-ups, with ESL's busiest machines generating more than 15,000 transactions a month. The drive-ups are especially popular in ESL's home of upstate New York because of the inclement weather.

Setting up the sites

ESL's original plan was to deploy 20 non-branch drive-ups in a year. Armbruster said it took nearly two years to install 14 ATMs, largely because of difficulties in obtaining approval from each municipality. "They all had a different pet peeve or issue, and it seemed like it was a different one each time."

In a few instances, ESL encountered environmental issues. At the site of a former gas station, ESL was assured that toxins had been removed from the area. But that proved not the case when digging began. "We ended up hauling off a lot of contaminated soil," Piendel said.

Piendel and Armbruster agreed that the occasional travails were worth it.

"It was a lot of work, but now that we have them out there, it feels really good," Armbruster said.