BOSTON — The latest ATM deployer study, conducted by Dove Consulting, a division of Hitachi Consulting, and sponsored by CO-OP Financial Services along with the NYCE, PULSE and STAR ATM networks, has further documented a trend toward stratification in the ATM/EFT industry that industry observers had already said was occurring.
"It's a little bit obvious, in that it documented a trend we have been seeing for some time," said Jim Hanisch, senior vice president with CO-OP Financial Services, the cooperative owner of the CO-OP Network. "Where the last biannual report discussed and revealed an industry at a crossroads, this year's study showed a bit more of what is down each of those roads."
Hanisch noted that the study found the ATM/EFT industry broadly split between the independent service organization deployers that have generally put into place cash dispensing machines in retail locations and the financial institution deployers that have their ATMs generally in locations thought to be most convenient to their depositors.
Recommended For You
The ISO segment of the industry is suffering financially, Hanisch said, due to steadily eroding use numbers, which may be dropping because of competition from debit cards at the point of sale. Financial institution deployers, by contrast, have also seen a decline in per machine use, but have generally reacted by tailoring their ATM strategy to meet their own institution.
"I think it is safe to say that no two banks or credit unions are going to have exactly the same ATM strategy any longer," said Cindy Ballard, executive vice president for PULSE, the ATM/Debit arm of Discover. "Everyone is going to do things a little bit differently to try to augment or supplement their other marketing or service plans."
This may be why a number of banks have hit the airwaves with offers of fee-free ATM use, or even to wave the ATM charges from other financial institutions. In those situations it may be that those institutions have decided that it is worth it to them to lose ATM income in favor of getting a new account that might make more money over the longer term, Ballard explained. "Many [deployers] are now coming full circle and returning to the historical roots of the ATM as a customer service channel, looking at the ATM not as a stand-alone profit center but as a critical customer touch point," the study said. "At the same time, rising costs, compliance requirements, and technology advancements have compelled deployers to begin making decisions–either explicitly or implicitly–regarding their ATM placements, technology investments and operations infrastructure."
One thing that the study found is that while the number of transactions per ATM is continuing to decline, CUs still post significantly more, than do banks.
Large credit unions reported 5,601 transactions per month on their ATMs in branches and 2,409 per month on their off premises ATMs. Small credit unions reported 5,088 transactions per month on their in-branch machines and 2,266 transactions per month on machines away from the CU.
By contrast, large banks only reported 4,500 in branch transactions per month and 1,996 off premise transactions. Smaller banks reported 1,910 transactions per month through their in-branch ATMs and only 1,235 per month through their off premises ATMs.
"As per-ATM transaction levels decline and the percentage of foreign acquired transactions stagnates, the number of foreign acquired transactions per ATM–the number of transactions that produce revenue for deployers in the form of surcharge fees and interchange fees–is decreasing," Dove wrote. "This trend means that, in the absence of a surcharge rate increase, deployers' direct revenues per ATM are declining–and by extension, deployers' profit margins are being increasingly squeezed."
Some of the higher figure is likely due to credit unions, overall, deploying fewer ATMs than banks, but some likely has to do with the overall lower ATM fees that are generally found at credit union ATMs.
But while the study found that CU ATMs have more transactions per ATM, they also have higher costs per machine.
The study found that on-premise ATMs at large banks have the lowest monthly expenses per ATM, averaging $1,131 per ATM. In comparison, large credit unions incur the highest costs, averaging $1,976 per ATM per month. The study found that off-premise ATMs deployed by ISOs have by far the lowest operating costs, with large ISOs spending $680 per month to operate an ATM, and smaller ISOs spending $522. Smaller banks, which have the lowest operating expenses across FI deployer segments, pay around twice that, the study said. –[email protected]
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
