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ATM network changes and legislation rank as the top worries of ATM independent sales organizations, while declining transaction volumes also keep many ATM ISO executives up at night, according to newly released survey results.
Kahuna ATM Solutions, a Bloomington, Ill.-based ATM ISO that services smaller ISOs, commissioned the survey, which was done by a marketing and public-relations firm. While the survey garnered 53 responses at most to its questions, not enough to be statistically representative, the results likely show which way the wind is blowing among executives regarding major industry issues.
Eighty-two percent of respondents cited what the survey termed “network changes and increasing costs” as one of their top three worries. More specifically, ATM ISOs fear that lower interchange will spread to more networks, which would cut their revenues, according to Bryan Bauer, Kahuna ATM Solutions president. “Operators are having a very difficult time,” he says.
Last year, MasterCard Inc. significantly lowered interchange on ATM withdrawal transactions in its Cirrus ATM network, according to a study by Boston-based Tremont Capital Group Inc. . In contrast to point-of-sale debit, where interchange flows from merchant acquirer to card issuer, ATM interchange flows from the issuer to the ATM owner, or acquirer. Thus, a cut in interchange reduces issuers’ expenses but cuts income to ATM owners.
While the Star and Pulse electronic funds transfer networks have tweaked their pricing, MasterCard is the only network that has made major changes recently, according to Tremont chief executive Sam M. Ditzion. But other networks might lower interchange in order to compete with MasterCard for issuers’ business, and that would hurt ATM ISOs’ bottom lines, according to Bauer. Adds Ditzion: “That’s the fear, that other networks will mimic MasterCard’s interchange pricing strategy.”
ATM ISOs also are keeping a close eye on the legal front, with 76% of respondents citing legislation as one of their top three fears. According to Bauer, the top concern in this area is planned updates to rules implementing the Americans With Disabilities Act, particularly a requirement that all ATMs be speech-enabled. “If the proposed rules stand, it’s a really heavy burden to our industry,” he says.
The new ADA standards could cause ATM owners to remove some machines, even machines many disabled people can already use, to avoid the upgrade expense, he adds. That means consumers will be inconvenienced. “If that ATM goes away, that same disabled person may have to go several blocks or a mile because the machine they were using has gone away,” he says.
A summary of the U.S. Department of Justice’s new requirements by processor First Data Corp. says the rules become effective this month but that speech upgrades are to be completed by March 15, 2012. The ADA has an “undue burden” standard, but First Data recommended that companies contact their lawyers to determine if it applies to them.
Another legal concern is the network-affiliation provisions of the Durbin Amendment in the Dodd-Frank financial reform bill that is the subject of pending Federal Reserve Board rules. Those are mainly aimed at giving merchants more transaction-routing freedom, thereby lowering costs, on point-of-sale debit transactions. Still, there could be spillover effects into the ATM sphere. “There is some concern that Dodd Frank is open-ended as far as the ATM industry is concerned,” says Bauer. “We could be on the receiving end of benefits, or, on the other hand, it could be detrimental. It just all depends on how certain things are interpreted and what the final ruling is.”
The survey also found that 45% of respondents cited declining transactions as a top-three fear. That’s been a long-term issue as banks and non-bank ATM owners deployed tens of thousands of ATMs over the past 15 years. Despite that, 74% of respondents said they plan to grow their businesses in the next 12 months.
