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Retail ATMs becoming affordable for merchants
New options and new technologies can drive up pricing of ATMs. But manufacturers and ISOs have begun offering merchants less expensive machines and creative financing options to get more ATMs in their stores.
January 7, 2002
Many convenience store operators now consider an ATM as essential to doing business as installing a drink machine, and they're not the only retailers getting into the act. ATMs are being placed in every retail environment imaginable.
That demand has driven manufacturers to come up with innovative ways for storeowners to operate ATMs in their stores at a low cost. That can mean less-expensive machines or creative financing and leasing plans.
Tidel developed the is2000, a lower-cost machine that can be upgraded as needed. Diebold joined the fray in May 2000, introducing an ATM franchise program designed to help merchants provide an ATM at a monthly cost of $84.
Diebold's program includes an installed Cash Source Plus 200 or Cash Source Plus 200P machine, plus service, status monitoring, transaction processing and monthly reports. If the machine generates 150 transactions per month, the company waives the fee.
Diebold's Cash Source Plus 200P features a cash provisory module that allows a merchant to load his own cash without opening the chest.
"The provisory allows him to recycle his own cash through the ATM, and hopefully get some of it back at his business, while minimizing any theft or security issues," said Deb Allman, retail program manager for Diebold.
Lowering costs of entry
Programs like Diebold's make it easier for merchants to place ATMs in their stores, without using an ISO, even when they don't anticipate a high transaction volume. Mike Hudson, executive vice president of Tidel, said the ISO costs can be higher.
"If you are an ISO putting the machine into the location, providing a full turn-key service; if you are bearing the cost of the machine, the operating expense of cash replenishment and first-line maintenance," he said. "It may be that you need 500 or even 600 transactions a month to break even."
Hudson said the transaction numbers for off-premise machines are often low.
"There aren't that many off-premise ATMs running 1,000 or 1,500 transactions a month," he said. "There are a huge number of them running under 600 transactions and probably an even surprisingly high number running under 500 or 350 transactions a month."
With those low numbers, merchants are taking advantage of lease programs provided by manufacturers at a low cost, Hudson said. In those situations, the merchant does more of the maintenance, but can keep a machine going without substantial losses.
Operating at a loss
Many retailers feel they need an ATM in their store, even if they have to pay for the privilege.
"Five years ago, the merchants were looking for a way to differentiate themselves from their competitors and offering a service that nobody else offered," Hudson said. "Those were the innovative 20 percent to 25 percent who said, 'Let me be different from my competitors. Give me something that they don't have. I'll take the risk. I'll invest.' "
Now, he said, those early adopters have been proven right, because their customers consider it an essential.
"Now we're at the point where some are saying, 'Well, I've got to have one too. I've got to get one of these machines. Actually, I can't not have one.' "
Hudson said merchants aren't necessarily seeking profits with their ATMs, or even breakeven in some cases, but hoping to recover some of their costs. Merchants believe the ATM helps sales, so they operate the ATM at a loss in order to keep up with their competition.
One-stop shopping
Regardless of whether merchants obtain machines through ISOs or direct from manufacturers, they are seeking the same benefits - that the money withdrawn in the store is spent in the store.
"To me, the whole purpose of having an ATM machine in your store is one-stop shopping," said Cathi Charlton, ATM coordinator for Arrow Communications, a small ISO based in Quincy, Mass.
She credits customer response for the quick inundation of machines, especially in convenience stores.
"A lot of these mom and pop stores with lottery machines have a captive audience," she said. "So, the customer can hit the corner store on the way home from work, get milk, bread, lottery tickets, cigarettes, whatever. It's one-stop shopping."
There's often a need for cash in the stores. That's money that goes right back into merchants' cash registers. "We have actually marked bills to see how many the merchant gets back out of how many came of the machine, and it's a good proportion, up to 40 percent," Charlton said.
NCR's Bill Koch, senior consultant, convenience banking for retail locations, said a merchant's profit from in-store sales generated from the cash received at the ATM is considerable. In this chart, using data from NACS (the National Association of Convenience Stores), Koch estimates that the net profit per month a C-store with an ATM may anticipate is about 8 percent.
Charlton said Arrow makes it attractive, and inexpensive, for retailers to have an ATM. She said that in high traffic areas, such as bowling alleys, Arrow retains ownership, performs maintenance and pays the merchant a percentage of surcharge income.
Legal issues
The legal landscape for the leasing of ATMs is changing, Charlton said. In fact, she said recent changes in Massachusetts law made it possible to sub-lease ATMs to merchants. She said Arrow worked with the state banking commission to develop the legislation.
"We work with the state as much as we work with the customer," said Charlton, who has worked in government and consumer positions. She said that since she began working at Arrow, she has done lobbying work in state government to help prevent a ban on surcharges.
State laws governing ATMs change often. Charlton advises ISOs to check with the state banking commission before setting up operations in a new state.
Without doubt, manufacturers and ISOs will continue to work with merchants to offer more options on machines, and more of a range in pricing. That will assure that the number of installations continues to grow.
Included In This Story
Diebold Nixdorf
As a global technology leader and innovative services provider, Diebold Nixdorf delivers the solutions that enable financial institutions to improve efficiencies, protect assets and better serve consumers.
