Multiple Waves of Upgrades Keep ATM ISO Dolphin Debit Busy As Growth Sizzles

The expense of managing multiple upgrades to fleets of ATMs has small banks and credit unions turning to companies like Houston-based Dolphin Debit for help.

Dolphin Debit, which manages more than 1,000 ATMs for more than 200 financial institutions and at several Murphy USA locations in 10 states, says its portfolio increased by 21% in 2014 from 2013, and the number of transactions made on machines it manages increased 38% last year.

Dolphin Debit expanded into four states, with operations now in 14, and added credit unions likes Randolph Brooks Federal Credit and Manatee Community Federal Credit Union, as clients. Dolphin Debit typically handles all management of a client’s ATM equipment, software, and cash management.

A few factors are behind this growth, says Gary Walston, Dolphin Debit chief executive. About two years ago ATMs had to be updated to meet Americans with Disabilities Act requirements. Then Microsoft Corp. withdrew support for its Windows XP operating system that had been popular on ATMs. Now, ATM operators face a 2016 deadline to upgrade their machines to accept chip cards bearing the Europay-MasterCard-Visa (EMV) standard lest they assume the liability for fraudulent transactions.

“The reason we had a great 2014 and a great 2013—we have that pace going in 2015—is because small financial institutions are having a difficult time with challenges of compliance and keeping ATMs up to date,” Walston tells Digital Transactions News.

These small community banks and credit unions face two choices in regards to their ATM operations, he says. One is they can hire staff to manage them, but they often can’t afford to do that, Walston says. The other option is to hire a firm like Dolphin Debit. “When they factor in the capital costs, they throw up their hands and hand over the keys,” he says.

He expects that trend to continue this year. “For our business, it thrives when there is a catalyst,” Walston says. Indeed, EMV is one such catalyst. “The EMV migration has been front and center with a lot of regulators talking to the institutions about what their plans are,” he says. The banks and credit unions have to contend with EMV as an issuer and from the acquiring side with their ATMs, he says.

ATMs installed by Dolphin Debit in the past 10 months are EMV-ready and just need to be updated once the EMV debit software is ready, Walston says.

Dolphin Debit also has had success working with Murphy USA Inc., an El Dorado, Ark.-based convenience-store chain. In 2014, Dolphin Debit placed its ATMs at exclusive locations in 10 states. Some of the locations have shared branding, meaning customers of multiple financial institutions can use the ATMs without surcharges, and some are exclusive, Walston says.

Dolphin Debit’s strategy makes sense, says Sam Ditzion, president and chief executive at Boston-based Tremont Capital. “Having any type of a niche is always an edge when going after this style of customer,” Ditzion says. “In the example of Dolphin Debit, if they’re going after small credit unions and they have significant credibility and expertise with similar-size institutions, that’s going to give them an edge.”

Walston says in addition to traditional advertising and trade-show exhibitions, referrals accounts for a large portion of the company’s 2014 growth.

Any financial institution outsourcing its ATM operations should choose wisely, Ditzion says. “The real question of risk is if the ATMs don’t work or are down frequently,” he says. “The bank is the one going to be blamed by the customers. There’s some reputational risk if you don’t choose wisely. But, if you do choose wisely, you can save money and outsource all of your headaches.”