EFunds Bails out of ATM Deployment, Continuing an Industry Trend

The parade of major ATM deployers out of the business of owning and managing ATM networks continues with the announcement that eFunds Corp., Scottsdale, Ariz., is selling its fleet of 17,200 machines, which are under merchant contracts in the U.S. and Canada, to Portland, Ore.-based TRM Corp. for $150 million in cash, excluding fees and expenses. The deal, which had been rumored for a while and is expected to close by the end of the year, follows the decision in June by E*Trade Financial Corp. to sell its 15,000 ATMs to Cardtronics Inc., which paid $106 million. Experts in ATM portfolio deals and in off-premise ATM management say it's not surprising to see such sales, given the fact that transaction volumes per machine are steadily declining as installations ramp up, making it harder for deployers to make money on locations that might have produced handsome returns only a year or two ago. Margin compression has been further exacerbated for ATM owners, they say, by the added costs stemming from the need to comply with new rules and guidelines surrounding transaction security, accessibility for the handicapped, and new and pending state legislation. And some speculate eFunds, an electronic funds transfer processor and software company that built its network through portfolio acquisitions it made in the past three years, may have underestimated the costs of maintaining and servicing a widespread fleet of ATMs, particularly in off-premise locations. Of the 17,200 machines in the eFunds network, 2.200 are full placements, with the balance belonging to retailers. “There's all the headaches,” says an executive with a payment software company who once managed a bank's merchant-based machines. “You have to answer to all the retailers, and there are a lot of 24/7 issues. Before, [as a processor], eFunds was totally insulated from that.” For its part, eFunds said in a statement released last night that the decision to sell is “part of eFunds' strategy to focus on higher growth, higher margin opportunities.” The acquisition of the eFunds machines will make TRM, well-known as a supplier of photocopying equipment to retail locations, a major player in ATM deployment, building its network up to 21,800 machines. In a press release, the company claims the deal will leave the company the largest international ATM deployer, with machines in the U.S., Canada, and the U.K. As part of the deal, the companies have agreed that eFunds will provide ATM-driving services for the combined TRM fleet for five years.