How US Bank’s Genpass Deal Could Expand No-Surcharge Networks

U.S. Bancorp's acquisition earlier this week of Genpass Inc., operator of MoneyPass, a surcharge-free ATM network, is expected to dramatically expand the reach of ATMs that don't levy surcharges to cardholders. Elan Financial Services, a subsidiary of U.S. Bancorp, already operates a network of 4,000 surcharge-free ATMs called FastBank Free, and now will add 12,000 machines from Genpass to its burgeoning surcharge-free network. Janet Estep, executive vice president for U.S. Bank's Transactions Services unit and manager of Elan Financial Services, says Elan intends to combine the best features, which include cardholder pricing, from each of the five ATM networks now operated by Elan. In addition to MoneyPass, Elan acquires the MoneyBelt and MoneyMaker ATM networks as part of the Genpass deal. Elan also operates the FastBank ATM network which has 10,000 machines. At least some of these machines are now candidates to forgo surcharges that typically run from $1 to $2 per transaction. “It is our hope to grow our surcharge-free network,” says Estep. The opportunity for Elan to acquire MoneyPass is thought to be a major driver behind U.S. Bank's decision to acquire Genpass, according to Tony Hayes, managing director for Boston-based Dove Consulting. “Surcharge-free ATMs represent the next big thing in the ATM business, and MoneyPass is the crown jewel in the Genpass portfolio,” he says. Competition, however, is springing up on a variety of fronts. The Bethesda, Md.-based Allpoint network, the country's largest no-surcharge system, has about 32,000 ATMs. Somerset N.J.-based Commerce Bank recently began refunding surcharges levied on its cardholders that make transactions at ATMs owned by other banks, and PNC Bank is doing the same thing for its cardholders in the Washington D.C. area, where the bank reportedly has only 60 ATMs. Growth opportunities for surcharge-free networks are expected to come in two areas. The first is expected to be increased volume from consumers issued electronic benefits transfer, child-support, brokerage-access, or payroll cards. The second is with small and mid-sized financial institutions, such as credit unions, that want to expand their ATM cardholder base, but which do not own many ATMs. In the case of the former group, consumers are increasingly demanding ATMs where they can access the value on their benefits, payroll, or brokerage cards without paying a surcharge, says Estep. Genpass, for example, currently runs a payroll card program. “Payroll cards in particular have been growing in appeal for employers that want to reduce the expense associated with issuing checks and for workers that don't have bank accounts,” says Estep. Small financial institutions that want to expand their debit card base, but which own only a handful of ATMs, represent another prime expansion opportunity. “With ATM surcharges rising, consumers are becoming more wary of paying fees. One way for financial institutions that want to take a more consumer-friendly approach to the ATM card business is to join a surcharge-fee network,” explains Hayes. Anecdotal evidence indicates that after an installed ATM is added to a surcharge-free network, the machine's volume increases substantially, driving up interchange income for the deployer. “There is a clear connection here and consumers are voting with their feet,” adds Hayes. Large ATM deployers such as Chase and Bank of America are not expected to eliminate surcharges for non-customer cardholders that use their machines or begin refunding surcharges any time soon. That's because their ATM networks and cardholder bases are so large, it would create a huge loss of revenue. Instead, Hayes predicts large banks will consider eliminating surcharges or refunding them in select markets, a la PNC Bank.