ATM King Cardtronics Sees Further Expansion Via Bank Deals in ’06

After rapid growth that has propelled it to the top of the ranking of U.S. ATM owners, Houston-based Cardtronics Inc. looks toward another year of major expansion in 2006, company officials tell Digital Transactions. In a story appearing in the January-February 2006 issue of the magazine, the company says it will press ahead aggressively with its cobranding strategy, under which banks brand store-based machines deployed by Cardtronics. “We have a very strong pipeline in terms of bank branding,” Keith Myers, executive vice president of the financial-services division at Cardtronics, told Digital Transactions. He says chains with which the company works to install ATMs have between 8,000 and 10,000 stores still available for machine deployment. Founded in 1989 by a former oil executive, Cardtronics last year more than doubled its ATM base to more than 26,000 machines, more than any other deployer. Acquisitions of smaller independent sales organizations specializing in ATMs helped drive this growth, but so did the company's decision to strike deals with banks under which it would slap the banks' names on retail machines it installs, maintains, and drives. Transactions performed by customers of the banks are free of surcharge fees normally imposed by deployers. These usually run about $1.70 per transaction. Banks pay Cardtronics a so-called branding fee, part of which the company shares with the merchants. Details of these arrangements are not available, but some experts conjecture they involve banks paying a fixed fee per ATM each month. Banks are increasingly turning to these deals as a way of quickly providing more electronic access points to their customers, particularly in high-traffic stores where people routinely shop. “What we're seeing among financial institutions, particularly credit unions, is there is a it of a reversion to more of a service model,” said James Hanisch, executive vice president of network operations and corporate development at CO-OP Network, Ontario, Calif., an electronic funds transfer network linking some 25,000 ATMs for 2,000 credit unions. Cardtronics' first bank deal came in October 2003 when JPMorgan Chase & Co. put the Chase logo on Cardtronics ATMs in ExxonMobil Corp. gas stations and convenience stores in Texas. Others followed, including PNC Financial Services Group Inc., Huntington Bancshares Inc., Commerce Bancorp. Another pact with Chase last year covered 246 ATMs in Duane Reade Inc. drugstores in New York City and suburbs. Chains with Cardtronics ATMs include Walgreen Co., CVS Corp., Target Corp., and Costco Wholesale Corp. The Target and CVS machines came to Cardtronics in 2004 when the company paid $106 million in cash to buy E*Trade Financial Corp.'s network of 12,000-plus ATMs (Digital Transactions News, June 3, 2004).