The ATM is a familiar part of the business model for most credit unions, but after years of dealing with never-ending compliance hurdles and constantly evolving technology, some credit unions are doing what was once considered unthinkable – giving up the titles to their ATMs.

Instead, they're leasing their ATMs, effectively going from owners to renters of cash-dispensing terminals across the United States. And in turn, those credit unions said they're getting better ATMs that still bear their names, but with less headache, lower cost – and less control, too.

The Pride of Disownership

Some, like the Chattanooga, Tenn.-based Blue Cross Blue Shield of Tennessee Employees Credit Union, which has $10 million in assets and about 2,800 members, simply got tired of managing its ATMs. In January, it announced it had quit the effort altogether and partnered with an ATM management company instead.

“It was just a good time for us to make a change,” Manager Channon Hamilton said in a press release about the deal. “We had been having more problems than we expected with our ATMs, and we were planning to add an ATM across the state in Memphis to serve members there.”

The credit union said the move added that ATM in Memphis and eliminated staff time spent on ATM maintenance.

For other credit unions, ditching ATM ownership has provided a way to overcome the constant capital drain of upgrades for things like Americans with Disabilities Act requirements, Windows issues, EMV implementation, cardless access, biometrics and anti-skimming technology.

“I had been thinking about it off and on, but not seriously enough to really take that step until a lot of the new rules and regulations started coming down the pike as it relates to ATM encryption and keypad encryption and all those sort of things,” Tom Rogers, president/CEO of Memorial Credit Union in Houston, said.

About three years ago, the credit union, which today has about $75 million in assets and 10,200 members, partnered with ATM management company Dolphin Debit and started leasing terminals instead.

Naturally, equipment costs are a big driver in the decision. At the time, Memorial's 16 ATMs, for example, were at least seven years old when it made its switch. Most had to be replaced to become compliant with various regulations, Rogers said.

“I just didn't want to spend $150,000 to $200,000 replacing all my ATMs when I needed that money for other operational items within the credit union,” he explained. That six-figure tab excluded all the staff time spent monitoring the machines on a daily basis, reconciling cash, ordering cash, working with cash delivery companies and troubleshooting, he added.

“That really accumulated to about anywhere between one and a half and two days a week, literally. I had an accounting specialist who literally would spend probably up to two days a week just dealing with ATM issues, good or bad,” he said.

Jim Minge, president/CEO at the Arlington, Texas-based Texas Trust Credit Union, which has $1 billion in assets and about 85,000 members, also decided to turn over the keys to his credit union's ATMs. The credit union leases them instead.

“ADA was the straw that broke the camel's back for us,” he said. “There were a lot of people getting sued … it turned into a very long, drawn-out, complicated project for us. And so when we heard of the opportunity to kind of offload some of that, we were pretty excited about doing so.”

Minge said he was able to save between half and one full-time equivalent in labor costs at all of his branches.

Upping the Ante

Credit unions may be able to avoid owning ATMs, but they can't avoid ATMs altogether, Rogers stressed.

“It's kind of like the cost of doing business. You want to have an ATM out there and you want to have them serving your customers or your members, but you don't want it to be time-consuming on your part. You want to just put it out there, leave it alone and go about your business. Then hopefully make a few dollars off the transaction if you can,” he said. “That's what I would recommend. You have to look at your own internal operation first and see how much time running your own ATM network is costing you, and then kind of go from there.”

ATM outsourcing has been around for a while, but companies like Dolphin Debit, one of several that manage ATMs, said it's getting more clients with every new regulation that comes down the pike.

“We have seen an absolute uptick because of EMV specifically, and the cost to upgrade or replace,” Dolphin Debit EVP and Co-Founder Gary Walston said. The company works with about 175 financial institutions and added about 30 new ones last year, he noted.

Typically, clients sign five-year leases on their ATMs, and they often can swap out ATMs for ones with newer features if they like, Walston said.

Credit unions thinking about outsourcing their ATMs have to prepare to give up some control, however, execs warned.

“Even though that machine is part of your branch and it's out there, if there is an issue with that machine – say, something's broken and you need to have that machine serviced – you turn that over to a third party. So, you're not as intimately involved with when that's going to be repaired and how long it's going to take,” Minge said.

Having a communications plan for members is important, he said.

“It's sometimes a little harder for us to explain that, 'Hey, you know, we have a third party that's coming to take care of this for us and I can't give you a certain answer of when it's going to be fixed, but it's in process and it's going to be fixed,'” he said. “I think it took us a little while to figure that out. You know, because the members, they don't care. It's your machine as far as they're concerned.”

Nonetheless, having someone else deal with the day-to-day has been a load off – at least for Minge, who said he recently crossed paths with people from his ATM management company at a conference.

“I shook both their hands and said, 'I'm so glad you guys are the ones spending the money for all that EMV stuff!'” he chuckled.