DENVER — Credit unions seeking to diversify and tailor their ATM strategies were offered yet another possible alternative last week as two industry players announced a new surcharge free initiative.

First Data Corp, the powerful payments processing firm, has inked a deal with Allpoint, a leading provider of surcharge free ATM access that will allow participants in First Data's subsidiary STAR Network to offer their cardholders surcharge-free access to Allpoint's surcharge-free ATMs nationwide.

Allpoint, a subsidiary of Cardtronics, the largest independent ATM deployer in the country, has 32,000 ATMs nationwide available for surcharge-free access, mostly in convenience stores, gas stations and other retail locations. The STAR Network says it has 5,400 participating financial institutions and industry analysts estimated that roughly half of those are credit unions.

The arrangement will immediately impact the relatively few financial institutions that are already members of STARsf, the STAR Network's surcharge-free option, but First Data hopes the move will attract far more institutions to join the surcharge-free network. STAR would not comment on exactly how many financial institutions belong to STARsf now, but did say that the network looked to the arrangement as a vehicle for expanding STARsf, particularly among credit unions and smaller community banks.

“We had been looking for some time for an appropriate national partner that would help us expand STARsf beyond its long-term roots in the regional networks which have merged with STAR over time,” explained Kirk Ergang, a senior vice president with First Data who has a responsibility for STAR's Administration.

Ergang explained that STARsf had been linked together out of some of the regional networks that joined the STAR brand during the period of network consolidations and mergers. This had effectively given STARsf a more patchwork sort of impact when looked at nationwide–stronger in some areas and not very available in others. The widespread Allpoint network offered a way to nationalize the network, he added.

Currently STARsf is a fee-based option within STAR and Ergang said this would continue with the pricing system changed to reflect the additional Allpoint machines. He would not go into the details of what the pricing might be, but said that he expected it would be done in a way that would entice more credit union participation than discourage it.

“Obviously from our point of view we want as many of STAR's participants as possible to be able to use the network, so it's in our interest to price it in ways which further participation,” Ergang added.

Ben Psillas, president of Allpoint said, he expected the move would sharply change some local markets for ATM access as community banks and credit unions in those markets suddenly found they had a much more open road to providing their cardholders surcharge-free ATM access.

In particular, Psillas noted that the deal makes STARsf more attractive as financial institutions question their policies of offering their cardholders surcharge-free ATM access simply by rebating them the fees they incur for using foreign ATMs.

“In light of what Bank of America's announcement signals, the notion of open ended rebating of cardholder fees makes our option look pretty good by comparison,” Psillas argued, pointing out that going with STARsf and Allpoint offers financial institutions a way they can fix the cost of providing surcharge-free access while rebating fees could leave with a steadily rising cost.

Bank of America announced early this summer that it will start charging non-depositors $3.00 to make withdrawals from its ATMs in most of the larger U.S. markets. Some industry analysts have seen the move as signaling a rise in ATM surcharges around the country as other financial institutions move their rates higher as well.

CO-OP Financial Services, the parent CUSO for the CO-OP network, the largest credit union-owned surcharge-free network in the U.S., didn't comment officially on the move, but CO-OP Executive Vice President Jim Hanisch said CO-OP wasn't too concerned about the move.

“The fact is that when we look at the business models, we are really talking about apples and oranges here,” Hanisch said. “One is a cooperative effort where credit unions are seeking to help other credit unions offer better access for their members at a very competitive and attractive price,” Hanisch explained. “And the other is a means of offering surcharge-free access but in a very go-it-alone sort of way.”

Hanisch noted that CO-OP already has participating financial institutions that also participate in Allpoint and said that the cooperative had seen for some time that each credit union was going to have to craft the strategy that best served its members and its own financial circumstances.

He noted for example that transaction volumes indicate that most credit union members feel more comfortable approaching an ATM that is located in a credit union branch, even when it is not their own, over approaching an ATM in a retail location. And the growing accessibility of Check 21 eligibility, he noted, would make CO-OP Network's deposit taking ability an even more important factor.

He also observed that CUs, which sign up with CO-OP Network, are able to offer their members nationwide surcharge-free ATM access without having to give up all their other ATM surcharge income.

Almost all CO-OP Network participating institutions still receive surcharge income from their ATMs, he said, but they are simply to forsake the surcharge income from the smaller number of transactions from other CO-OP CU members in exchange for their own members getting the same treatment. “It's just a different model,” Hanisch said.

–dmorrison@cutimes.com

Instant Insights /

Another Surcharge-Free Alternative: STAR Signs with Allpoint for Surcharge Free Option; Aims for Nationwide Network

Related Stories

Recommended For You