Archive for the ‘Research’ Category

In midst of recession, ATM use surged

Monday, May 3rd, 2010

The ATM business is sometimes described as “recession proof”, and stories like this are one reason why.

U.S. consumers are withdrawing more money from ATMs, likely the result of the economic recession, industry insiders say. In September 2008, when the recession was official, consumers started relying more heavily on cash and debit, and less on credit.

Gary Faulkner, the executive vice president and chief marketing officer of Morphis Cash Forecasting Software of Dallas, says it was around that time that U.S. ATM withdrawals started going up. He said many of his ATM customers started complaining that the Morphis forecasting tool was not meeting targets, and ATMs were often low on cash because of increased withdrawal amounts. Faulkner says ATMs that had been effectively managed by Morphis’ system for years were suddenly running out of cash.

“Starting in September 2008, customers were complaining that the forecasting was not right,” he said. “Nearly universally, our customers saw an increase in transactions and an increase in cash withdrawals per transaction.”

Faulkner says the volume of transactions increased as well. In fact, Faulkner estimates that the overall cash withdrawals from each transaction increased from roughly $65 to $75 a transaction to about $100 a transaction.

We’ve written before about the practice of using cash accounting to manage tight budgets — withdrawing a certain amount of money for holiday shopping or a weekly budget, and when the cash is gone, stop spending. We’ve also noted why a recession can be good for ATM usage.

Now the numbers are in. ATMs really *are* recession proof.

Tags: ATM, ATM machine, ATM machines, ATM Network, ATMs, Cash machine
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Banks raise surcharge fees 12.6%

Thursday, October 1st, 2009

Here’s something you might not expect: it’s now cheaper for people to get money from non-bank ATMs than it is to withdraw cash from banks they aren’t customers of.

That’s according to Bankrate.com, whose annual survey of bank fees and charges came out today. Here’s what they have to say about bank ATM surcharges:

Slapping a fee on your tab every time you use an ATM that doesn’t belong to your bank is another way banks generate fee income. According to our 2009 Checking Study, this year the average fee leapt 12.6 percent to $2.22. Nearly 99 percent of banks impose a surcharge.

So banks now charge noncustomers an average surcharge of $2.22 for using their ATMs.

Nationally, the average surcharge for non-bank ATMs (the kind you find in gas stations and convenience stores) is about $2.00.

That means if customers can’t find an ATM owned by their bank, they’re better off finding a gas station with an ATM than going to a competing bank. If this trend continues — and there’s every indication it will, as banks continue their longstanding practice of using increased fees as a way to boost revenue — people will get used to seeking out nonbank ATMs as a first resort.

That could end up having an interesting effect on the ATM industry. If people avoid bank ATMs in favor of private ones, banks will start to lose out on surcharge revenue. Which means they’ll have less incentive to expand their ATM networks. Which could lead to a creeping democratization of the ATM industry, as bank networks stagnate and nonbank ATMs make up a larger and larger share of the available machines.

Banks might eventually decide that it makes more economic sense to reimburse customers for using nonbank ATMs than it does to maintain their own fleet of ATMs — a strategy already used by small banks (who can’t afford a big network of machines) and online banks (who don’t have any branches to put ATMs into). With third-party machines increasingly able to handle traditional bank functions like accepting deposits, that scenario gets more feasible with each passing year.

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The advantages of wireless ATMs

Wednesday, September 23rd, 2009

Take your ATM anywhere with a wireless adapter from ATM Network.

Modern ATMs require only three basic things from their owners: Someone to refill them with cash and receipt paper, a power supply, and either a phone line or a Internet cable so they can contact the transaction processing network.

That’s not very demanding. But the last two requirements mean most machines are tethered to the spot, unable to go very far from a wall outlet.

Efforts to go off the power grid are still in the prototype stage. But wireless ATMs — machines that use either WiFi or cellular phone networks to process transactions — are a different matter. They’re available today, and at suprisingly reasonable prices.

Going wireless has three components: the wireless router, the installation, and the monthly service fee (using a cellular network is like sticking a cellphone inside your ATM. Just like with a cellphone or a phone line, there’s a monthly charge for service).

Wireless routers aren’t cheap. The industry standard, a JBM C201, costs between $400 and $500. Look for special deals, like a discounted router when you sign a wireless-service agreement.

Installation charges can vary widely. It’s usually worth it to have the router professionally installed, but be sure to check prices. It’s also usually cheaper to have the router installed at the time you purchase the ATM; adding it later will be more expensive.

A JBM C201 wireless router.

ATM Network, for instance, can retrofit just about any ATM to be wireless. Installation is just $99, we have one of the lowest cellular subscription fees in the business, and the router is *free* with a two-year service agreement. The only place you might find it cheaper (and if it is cheaper, it isn’t by much) is at companies where “service after the sale” is a dirty word.

There are some obvious advantages to going wireless: No need to install a second phone line or wire a new Internet connection, for instance. The ability to move the ATM among multiple stores or try out different locations within a store. The ability to take the ATM to temporary locations like festivals, fairs, conventions, trade shows, farmer’s markets and so on.

But a recent study found a whole bunch of other reasons. For instance:

It’s the future. In large parts of the world (and remote parts of the United States), traditional land-line communication infrastructure simply doesn’t exist. And with cell phones filling the void, it’s unlikely such infrastructure will ever be installed. In those areas, an ATM has to be wireless in order to function.

“In Africa, it’s all cellular technology,” Gamon said. “It’s a big continent, and they’re just rolling out mobile services at a huge rate with a huge uptake. But cabled services are very minimal. Much the same is true in China and India. It’s the only cost-effective way to provide communications services.”

Easier and quicker to install. No need to have electricians or technicians run outlets to the machine’s location. No waiting for the telephone company to activate a phone line. Just wheel the machine in and turn it on.

“We have several wireless units at department store chains that do not want a phone line run through their store,” said Chuck Hayes, a product manager for Long Beach, Miss.-based Triton Systems. “We see them at sports stadiums where there are difﬁculties in getting phone lines run to certain locations.”

Easier maintenance. For companies with multiple ATMs, having all their machines on a single cellular network makes it easier to monitor them for problems. And because the connection is always on, they’ll know instantly when something goes wrong. With a traditional dial-up machine, it takes a lot longer to notice problems because a machine might go several days without dialing in even if it’s working perfectly.

“Uptime is important, and when you have a monitored solution, you quickly know that the ATM isn’t online or isn’t communicating,” Gamon said. “You can’t get that with a dial-up connection.”

More secure. ATM thefts are rare, but they happen. With a traditional landline, once the machine is unplugged it goes off the network. But a cellular machine remains connected, making it easier to trace.

With the cost of wireless service now comparable to that of a phone line or Internet connection, perhaps the real question to ask is, “why NOT make it wireless?” The advantages in flexibility and ease of installation more than make up for the modest installation cost.

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ATMs crucial for convenience store growth

Friday, September 18th, 2009

From Canada comes a case study of what ATMs mean to convenience stores.

It’s the story of Alimentation Couche-Tard, the largest convenience-store chain in Canada with 2,000 stores (it also operates the Circle K chain in the United States). They decided that ATMs are a key to their continued growth. Here’s why:

The technology is part of Couche-Tard’s strategy of transforming the typical trip to the c-store from an impulse stop to a destination.

Competition from groceries has increased in recent years, blurring the line between quick-stop and full-service retail establishments. Grocery stores are opening earlier and closing later, and they offer more pre-packaged food and more one-stop shopping services, such as prepaid phone cards and lottery tickets, than they have in the past. An ATM has become de rigueur for a convenience
store, from a customer-service standpoint as well as a proﬁtability perspective.

“First and foremost, ATMs are for the convenience of our customers,” said Steve Lévesque, product category manager, whose job includes oversight of Couche-Tard’s Eastern Canada ATM network.

That convenience draws what Lévesque calls “new money” into the stores.

“ATMs serve as a destination for us, and customers who would not otherwise come into our stores use the ATMs. So we generate revenue there as well as some impulse sales,” he said.

It makes sense: ATMs embody the “convenience” aspect of convenience stores. And by drawing in new customers and increasing sales (not to mention surcharge revenue on transactions and the ability to sell on-screen ads), they add immediately to the bottom line. And with ATMs cheaper than ever before (ATM prices have fallen 75% in the last decade), it’s never been easier to harness that profit.

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Expanding ATM usage in a credit crunch

Monday, September 14th, 2009

Investing in new technology during a recession might seem counterintuitive. Isn’t this a time to hunker down and wait for the storm to pass?

Well, that’s one way to look at it. It’s little more than a survival strategy that accepts reduced sales as the new status quo, but if the recession doesn’t last too long it’ll see you through.

But there’s another way to look at it. Recessions change consumer spending habits, and successful stores figure out how to adapt to those changing habits. Doing so gives you the chance to not just survive the recession, but thrive during it.

In the current recession, for example, access to credit has been sharply curtailed. Whether because of bankruptcy, changes in eligibility rules by lenders or a desire to avoid the temptation of credit-card debt, many consumers either won’t or can’t use credit cards like they once did.

Meanwhile, merchants are even more wary of bad checks, credit-card fraud and high credit-card processing fees.

Put it all together, and it means that merchants who go out of their way to be cash-friendly are likely to see increased sales and fewer fraud-related headaches.

Those are some of the conclusions of a market analysis that draws on interviews with bankers, industry figures and Tremont Capital Group, a strategic consulting and acquisition firm based in Boston.

“Green is the new platinum. Cash-dispensing ATM transaction volume will benefit from the credit squeeze in the current economy,” said Sam Ditzion, CEO of Boston-based Tremont Capital Group, a strategic consulting and acquisition advisory firm that specializes in the ATM industry. “In addition, recent historically low interest rates and normalized fuel prices have made vault cash and armored services less expensive, which help increase profits for ATM operators.”

Cash is the most dominant payment method in the United States, and it’s expected to retain its popularity. “The deterioration of consumer credit has transformed cash into a tangible and stable form of payment that people always can rely upon,” said Ditzion.

And it’s never been more affordable to own an ATM:

Previously, many locations could not support an ATM through transaction volume because of the price of a retail ATM. However, as the prices for retail ATMs dropped from the $10,000 range in the mid-1990s to the cur-
rent level of between $2,500 and $3,500, more locations can afford an ATM.

If your goal in this recession is not just to survive, but to thrive, installing an ATM could be one of the smartest investments you make.

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ATM users spend 65% more in convenience stores

Friday, September 11th, 2009

One of the benefits of having an ATM in your store — besides surcharge income, reduced credit-card fees and increased customer traffic — is increased sales. That’s because ATM users tend to spend more in your store than customers who don’t use the ATM.

The big question, of course, is “how much more?”

At ATM Network, we try to be conservative with our estimates. So in conversations and in our online profit calculator, we use 20% — as in, “ATM users spend 20% more in your store than non-ATM users.”

But a new study out of England suggests that the sales boost from installing an ATM could be much, much higher.

According to research conducted by HIM, a
European research firm, convenience-store retailers who install ATMs see an average
spending increase of 65 percent soon after the machines are installed.

The survey, conducted during spring 2006, was carried out as part of Link Interchange
Network Ltd.’s Convenience Store Tracking Programme, which is carried out several
times a year.

That first paragraph is a little confusing: do they mean overall, or ATM users vs. those who don’t use the ATM? Turns out, it’s the latter:

According to the survey’s findings, c-store shoppers spend an average of £5.64 per visit;
a cash machine user at the store will spend 65 percent more, an average of £8.99.

Translated into dollars, the average convenience-store customer spends $9.40 per visit, while an ATM users spends $15.

And speaking of customer traffic:

The research also found that the removal of a cash machine could have a
detrimental effect on business, as one in 10 people stated they would shop elsewhere if an
ATM was removed from their local c-store.

Cash machines also had a positive impact on footfall numbers as it was found that the
cash machine attracts more customer visits to a store than, for example, the sale of
magazines or sandwiches.

The study also noted that two-thirds of consumers expect to find ATMs in convenience stores, and are disappointed when one isn’t there.

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Graphics increase ATM allure

Tuesday, September 8th, 2009

wrapped

ATMs are compact technological marvels, but they all have one drawback: they tend to be nondescript. In most cases, they’re beige or black or gray. In some cases, they were clearly designed for functionality, not looks.

Basic marketing tells you that making something more eye-catching and appealing increases usage. Especially something like an ATM, where getting customers to trust it with their bank card is part of the sales process.

That’s why ATM Network offers complete graphic services for the ATMs we sell. We can paint it or wrap it in any design or color you want for just a few hundred dollars.

Still, you might be wondering if it really works. The answer is yes.

In the off-premise market, placement of a machine within a location can mean the difference between profit or failure. A tired-looking machine might be relegated to the far corner of a convenience store, leaving many potential users unaware of its presence. And a machine adorned with only the required notices can leave consumers feeling wary.

High-quality visual branding helps overcome consumer distrust of generic-looking ATMs tucked away in the corner of a convenience store.

Well, okay. That’s the pitch, and it’s classic marketing logic. But we ask again: does it work?

Steve Burns, director of operations for E-Cash Inc., an Indiana-based ISO, said that a store manager is more likely to place a branded ATM in a prominent place. “When you’re competing with sunglasses and potato chips, when you put the store name on the ATM, all of the sudden you have a nice spot near the front door,” he said.

So it gets merchants to display machines better. But does it increase customer usage?

Branding pulls in users. For a group of five bank ATMs in January 2007, the total transactions totaled 928. The five machines then were upgraded with the bank’s brand on the front and at least one side of each machine. In January 2008, the same five machines in the same locations completed 1,487 transactions — a 60 percent increase.

Of course, every location is different: whether wrapping or painting is worth the money depends on the traffic at an individual site. But let’s do the math on the example above.

Take the monthly transaction numbers (928 before, 1,487 after) and divide them by five (because there were five ATMs). That gives you 185 transactions per month per machine before wrapping, and 297 transactions per month afterward.
Assume a $300 wrap job per machine and a typical $2 surcharge.
Each machine generated $224 more revenue per month after wrapping.
That means the wrapping paid for itself in about six weeks through surcharge revenue alone — never mind the profits generated by increased customer traffic.

Even if you assume more modest numbers — 100 transactions a month, increasing to 140 after wrapping — the wrap still pays for itself in under four months.

That’s a cost-effective way to boost revenue without sacrificing additional retail space.

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ATMs boost sales for flea market

Wednesday, August 19th, 2009

A recent case study by Triton Systems highlights how an ATM can boost sales for local merchants.

The Waldo, Fla., Farmers and Flea Market bills itself as north central Florida’s largest flea market, with 1,000 booths covering 50 acres that attract 35,000 visitors per weekend.

Most of the booths are run by part-time merchants that don’t accept credit cards. Many of them don’t even take checks. So making it easy for customers to have cash on hand is crucial to the market’s success.

Steve Blakewood, the market’s owner, makes that happen with two ATM machines. The machines are kept very busy, typically dispensing $25,000 per weekend.

Blakewood notes that the machines boost sales in several ways.

“It’s a real convenience for our dealers because the customer can get
cash and go back to the booth,” Blakewood said. “A lot of people don’t
intend to spend money but they end up seeing something they want, and
come back two or three times to the machine.”

Merchants use the machine, too, often paying their booth-rental fees in cash. Blakewood sets the transaction fee at a relatively low $2.00, both as a convenience and to encourage repeat use.

It seems to be working.

Blakewood estimates that about 50 percent of the money flows to the flea market dealers and the revenue generated by the transaction fees supplements the flea market income. By way of comparison, experts estimate that about 30 percent of the cash withdrawn in a convenience store ATM is spent in the store.

Blakewoods experience demonstrates the three main ways ATMs help merchants: transaction fees, increased sales and avoiding credit-card processing fees.

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ATM software trends, or ‘Hello, Windows’

Friday, August 14th, 2009

The cover of the 2009 Software Trends report

A few things you might not know about ATMs:

They used to run on IBM’s OS/2 or proprietary platforms.
Newer ATMs have incorporated much more robust operating systems, notably Linux and Windows
Most ATMs on the market today run either Windows CE or the full-fledged Windows XP

That information and more is contained in the 2009 ATM Software Trends survey from KAL, an independent maker of ATM software. While the report is largely aimed at large financial institutions like banks and credit unions, it still contains a lot of information for independent ATM owners.

For instance, why are ATM owners switching to machines that run on modern operating systems? Multiple reasons:

The biggest driver is increased security. A more powerful OS can handle more complex security features like biometrics and remote keys.
Added functionality. With a reasonably powerful computer inside the ATM, owners can offer additional products (such as cash-value cards, digital downloads and mobile-phone minutes) additional on-screen information (such as maps, advertising and web-browsing) and interactive features like transaction personalization. In particular, modern ATMs can display ordinary HTML pages on screen, letting owners design their own interactive screens or easily modify existing ones.
Reliability. Modern systems are both more stable and better-supported than older systems.
Cost control. This mostly applies to companies that own multiple machines. But having an off-the-shelf OS means the ability to use off-the-shelf software instead of expensive proprietary solutions, and the more powerful OS makes it easier to manage multiple machines (or a network of machines) from a central point.
Future compatibility. A modern OS means the ATM can take advantage of as-yet-unseen advances in technology, products and services, extending the useful lifespan of existing machines.

The full report is available as a pdf from the link above, and goes into a lot more detail, as well as breaking trends down by regions of the world.

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The future of ATMs

Monday, August 10th, 2009

Recently, ATM Marketplace and the ATM Industry Association (ATMIA) published the 2009 ATM Future Trends Report, an update of a similar report issued back in 2004. It examines two linked trends: how the use of cash is changing worldwide, and what that means for ATMs.

One big hurdle: buying the report will set you back $800.

But ATMIA hosted a webinar to introduce the report, and it contains a lot of useful information. Here are the highlights.

Mike Lee, the president of ATMIA, began with a discussion on the future of cash. There’s been a lot of talk about the demise of cash, thanks to the rise of cashless transactions. Why carry around a lot of cash when you can just carry around a debit card?

But reality has confounded the predictions. “Cash will be with us for at least another generation,” Lee said, and he backed it up with statistics and logic.

Cash is used for about 65% of global payment transactions, a total of 360 billion cash transactions each year.
According to the Federal Reserve Bank of Boston, cash dominates consumer retail payments: The total value of cash payments is nearly four times higher than the value of card-based payments.

Why is cash so popular? Several reasons:

Informal. There’s no need for record-keeping, security checks or processing. It’s immediate, easy to use, fee-free and anonymous.
Vending machines. They’re a $20 billion industry in the United States, and 90 percent of the 6 million installed machines are cash-operated. They’re used most heavily in urban environments.
Familiar. It’s tangible, universal and popular, so there is a lot of consumer resistance to getting rid of it.

Then Tracy Kitten, editor of ATM Marketplace, presented the results of their 2009 survey on ATM trends and usage. They identified two big trends:

Increased use of advertising on ATM screens
Huge growth in “underbanked” people — those who never had much need for banking services but now do. ATMs are the most efficient way to deal with that growth.

That second one is a biggie, and driven by the growing urbanization of our planet. City dwellers use both cash and ATMs more frequently than rural residents. The Center for Financial Services Innovation estimates there are 106 million underbanked people in the United States, and that number will only grow as urbanization increases.

The recession favors cash and ATMs, too. In an op-ed piece in the Boston Herald, payments expert Sam Ditzion had this to say:

Tighter credit means fewer people with access to credit cards. And recession means more maxed-out cards that aren’t available for use.

“More and more people simply do not trust themselves with any type of plastic, credit or debit cards, and are removing them from their wallets altogether. Some families are starting to budget by withdrawing a finite amount of cash from the ATM each week to pay for all of that week’s expenses. Other families are reverting to the Depression-era monthly envelope system, placing cash in envelopes labeled rent, groceries, clothing, and so on. When it’s gone it’s gone.”

All told, it looks like both cash and ATMs have a strong role to play in the banking system for the foreseeable future. And when you consider the ever-improving features on ATMs — advertising, issuing coupons, selling stamps, etc. — it’s obvious that they will be able to thrive even if the use of cash eventually declines.

If you want to learn even more, visit the links above or the ATMIA’s Future of Cash page.

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