Study Says ATM Deployers Are Changing Tactics As Profits Fall

How much money financial institutions are making on their ATMs depends very much on where the machines are deployed, but in any case machine margins for banks and independent sales organizations alike are under pressure, forcing deployers to change how they view the technology. That's among findings contained in a study sponsored by four of the largest electronic-funds-transfer networks and released Tuesday. ATMs on bank premises earn $1,104 per machine each month, and off-premise devices?often deployed in retail locations?rake in slightly less, or $1,013. Meanwhile, the fee ATM deployers charge non-customers to use their machines now averages $1.74 per on-premise machine, compared with $1.79 per off-premise ATM. These so-called surcharges stood at $1.45 and $1.48, respectively, in 2001, according to the study. Despite a steady rise in these so-called surcharges, ATM profitability is dwindling. “Deployers continue to face challenging ATM economics, as measured on a direct basis,” says Dove Consulting, a Boston-based unit of Hitachi Consulting, in a statement. The thin margins on ATMs are driving banks to view the devices more as customer-service technologies than as revenue generators, says the study, which was based on survey work conducted by Dove and sponsored by the Co-op Financial Services, NYCE, Pulse, and Star networks. Advanced marketing and customer-relationship-management capabilities are also likely to be introduced on ATMs, the survey says, a trend some processors are already beginning to exploit (Digital Transactions News, Aug. 18). In a related trend, the increasing popularity of remote deposit capture is being felt in ATM networks, as well, as deployers start to equip their machines to image checks for clearing as electronic files. “After three years of testing and pilots, it appears as though imaging ATMs are ready to hit the mainstream,” says Dove. “Image-enabled ATMs currently represent a very small portion of deployers' ATMs, but this dynamic is set to change.” Indeed, large banks that have deployed image-capable machines told the survey such devices will account for 31% of their ATMs by 2008. For large credit unions, the number is 45%. Among other results of the study is the finding that ATMs running on Microsoft Corp.'s Windows operating system account for slightly more than one-quarter of all machines. But this proportion is growing fast and will hit 63% by 2008, since IBM Corp. is no longer selling its OS/2 program, on which ATMs once commonly ran. OS/2 deployments will account for 22% of machines in two years, down from 58% today. Also, the study reveals that U.S. ATMs are generating 8 billion transactions annually, with machines controlled by ISOs accounting for just 10% of this activity, despite the fact that ISOs account for 49% of ATMs. Per-machine traffic for ISOs stands at just 329 transactions per month, while on-premise bank machines take in 3,651 transactions, or more than 10 times as much monthly traffic. Dove's 2006 ATM Deployer Study follows a similar survey it conducted two years ago.