The November/December issue of Bar Business magazine examined the value that ATMs bring to bars. They talked to bar owners, industry observers … and us.

Kyle Radzyminski, co-owner of three Manhattan bars including Billy Hurricane’s, Thunder Jackson’s and Point Break, said that his bars have ATMs because, “You make a couple of bucks, but it’s mainly about keeping people within the confines of the place. It does work.”

Customers are more likely to spend more money if their cash flow never runs out. Instead of ending the night when they spend that last $20, they can opt to stay at the bar and drink more after taking some money out of the ATM.

Additionally, many bars and restaurants have been trending towards the elimination of credit cards as an accepted payment form on-premise. With the economy still slow, some bars prefer to not pay the credit company fees associated with each transaction, and instead force patrons to pay cash. And the risk/benefit ratio—not paying fees vs. possibly losing patrons who prefer credit—would seem to be weighted in favor of cash-only transactions if you have an ATM on-premise.

We show up a little further down in the article, where Kurt Duhn and Steve Ray discuss both specific machines and the general economics of ATMs in bars as well as things many people don’t consider — like their marketing potential.

Every major ATM runs on a Windows operating system, so they now can do much more than simply dispense cash. “Any current model ATM provides room for marketing on the screen,” said Kurt Duhn, General Manager of ATM Network. “With Windows custom graphics system, a bar owner can have coupons or promotions printed on the back of receipts and have other promotions running across the screen.”

Look below most ATM screens and you’ll find more marketing space. Many now offer the option of placing a custom design on the outside of the machine, providing the chance to remind customers which bar they’re currently enjoying, all while taking out more money to buy the next round of shots. And since ATMs often are not naturally sleek machines, adding a design can make the hardware fit more seamlessly into a bar’s decor.

That last point can be important, since the article cites a bar owner who doesn’t have an ATM because he doesn’t like how they look. Covering the ATM in custom graphics easily addresses that.

Anyway, have a look. You can read the article online in our article archive, or download the pdf to get the full magazine experience.

For a recent installation at an Asian restaurant in downtown Minneapolis, the owner wanted his ATM to look like part of the decor. We came up with a design that had a dragon wrapping itself around the sides, front and top of the ATM.

Our designs last for years, thanks to durable materials and our detailed installation process. Use it to help your ATM blend in — or use it to help your ATM stand out, either as a marketing tool or even a piece of art.

As we noted recently, the previous rules prevented merchants from treating higher-cost cards differently. They couldn’t refuse to take high-fee cards (they either had to accept all Visa cards or none, for example). They couldn’t encourage customers to use low-fee cards. They couldn’t charge more for purchases made with high-fee cards. They couldn’t even charge less for purchases made with low-fee cards.

ATM owners face a similar situation: Visa, Mastercard and American Express pay a small fee when their cardholders use an ATM. (They also sometimes charge a fee as well). But rules imposed by the card-issuers prevented merchants from charging a lower surcharge for withdrawals made with lower-fee cards. That left merchants with only bad choices when a card-issuer raised their fees: Absorb the expense, raise the surcharge for all users, or shut down the machine.

It’s unclear how the settlement will affect ATM transactions. And there will be a technological hurdle: most ATMs in use today are not equipped to charge different surcharges for different cards. But this is clearly a step in the right direction, and a victory for consumers and small businesses.

Want to win a real ATM filled with cash?

You can…. if you play the Win For Life game run by the Georgia Lottery.

Nonwinning tickets can be entered in a second-chance drawing. On July 31 a grand-prize drawing will be held. The top prize? A real Tranax 1700W ATM, provided by ATM Network and filled with $52,000 in cash.

The ATM itself is worth a couple of thousand dollars, so it’s really a $54,000 payoff. And if you find a location to install it (with free processing from ATM Network), it could be the start of a business.

The promotion is being advertised with full-size cardboard displays (that’s what the picture’s of) in more than 8,000 stores statewide, with the ATM Network logo right in the center.

Who says ATMs can’t be fun?

Tranax Technologies Inc., an ATM manufacturer that sells machines to independent sales organizations, has filed for Chapter 7 voluntary bankruptcy, citing debts of $1 million to $10 million. Tranax said its assets equal its estimated liabilities.

The Hayward, Calif.-based company filed June 11 in United States Bankruptcy Court for the Northern District of California in Oakland. In its bankruptcy filing, obtained by ATMmarketplace.com, Tranax listed 13 creditors, including Hyosung Corp. of America.

Tranax’s bankruptcy filing occurred less than a month after U.S. District Court Judge Vaughn R. Walker entered a judgment May 25, ordering Tranax to pay Hyosung America Inc. and its parent company, Nautilus Hyosung Inc., $5.01 million plus daily interest of $1,742.52 until Tranax pays its debt. Nautilus Hyosung had to wait 14 days from that date before taking action to seize property to satisfy Walker’s ruling. Walker issued his ruling May 6.

As noted in our earlier post, there may be more to the bankruptcy than first appears:

In 2008 Tranax was acquired by Hantle USA. This year, the company announced that Hantle would take over ATM marketing, while Tranax would focus on kiosks, scanners and ATM components. Hyosung is now suing Hantle USA, alleging that Hantle USA has taken over many of Tranax’s assets, making it difficult for Hyosung to collect the judgment.

Chapter 7 means Tranax will be shut down and its remaining assets sold off to satisfy creditors, including Nautilus Hyosung. But while the Tranax name will go away, Tranax’s line of ATMs and ATM products will continue to be sold and developed under the Hantle brand.

However, if Nautilus Hyosung persuades a court that Hantle improperly transferred assets out of Tranax in order to avoid paying Nautilus the $5 million court award, then Hantle USA or its parent could be on the hook for the money.

In any event, a name associated with the explosive growth of the non-bank ATM industry is going down in a lawsuit-inspired bankruptcy.

Editor’s note: ATM Network technicians have the experience to solve even the thorniest problems, and routinely go above and beyond to do so. This is one such story.

One day the ATM Network service department got a call from a bar and grill in southern Minnesota. Their ATM had suddenly stopped contacting the transaction processor, rendering it useless. When it printed receipts, they said “System unavailable.”

The technician had the owner print out the machine’s electronic journal, which showed that the the ATM was running into “protocol errors”. That usually meant that transactions were getting interrupted in the middle of processing. The most common causes all involve the phone line: too much static, interference from a DSL connection, a shared phone line or (for technical reasons), phone service provided by cable companies.

Further questioning, however, revealed that the bar didn’t have cable TV, much less cable phone service. It didn’t have an Internet connection of any sort, so there wouldn’t be any DSL interference. And the ATM had its own dedicated phone line.

That left static on the line. The tech called the local phone company, which checked its lines and said they were fine. But just in case, they installed a DSL filter to block DSL interference.

A couple of days passed, and the customer called back: the ATM still wasn’t working. In the meantime, the techs had gotten another call from a customer in a neighboring town. He had two machines: One was on an Internet connection, and it was working fine. The other used a phone line, and it was having exactly the same problem as the first customer.

The tech asked which phone company owned the line. It was the same company that served the first customer. This wasn’t unusual: the company serves a large swath of southern Minnesota. The tech called the company and told them a second machine was down. The company checked that line, too: it was fine.

Then a third customer called with the same problem. Different machine, different model – but the same phone company.

The tech thought about it for a little bit, then looked up the phone company’s service area and began calling ATM Network customers in the area. He found four more clients with ATMs that couldn’t communicate with the transaction processor.

He called the phone company for the third time and told them what he found. They still insisted it wasn’t their fault, and suggested it might be ATM Network’s server.

The tech seriously doubted that, but to be sure he called up merchants who had ATMs from competitors that didn’t use our processing network. They, too, reported processing problems.

He called the phone company a fourth time. The company said it couldn’t be their fault, but they’d look into it.

Two days later, everything started working again. The phone company never admitted anything.

The donation comes after independent ATM operators faced two direct threats to their businesses in less than two months.

BACKGROUND
In early April, Mastercard unilaterally reduced the transaction fee it pays to independent ATM networks while tripling the fee it charges to process Mastercard-branded cards or use its Cirrus network. Bottom line: Mastercard will siphon an additional $26 million a year from independent ATM operators — a transfer of wealth from thousands of small-business owners all across America to one of the world’s largest financial companies.

Then in mid-May, during Congressional debate over a financial-reform bill, Sen. Tom Harkin (D-Iowa) proposed an amendment that would have capped ATM surcharges at 50 cents — making most nonbank ATMs unprofitable to operate. Its passage would have resulted in ATMs disappearing from business establishments of all kinds, as well as destroying several thousand jobs.

Thankfully, the Harkin amendment was defeated. But the prospect of it being reintroduced in some form, as well as worries about future moves by Mastercard, has prompted the ATM Industry Association (ATMIA) to address the problem head-on with the creation of a “defense fund”.

THE FUND
The fund, made up of voluntary contributions from members and nonmembers, will pay for two things:

1. Legal advice in the wake of Mastercard’s profound changes to the industry’s fee structure.

2. A “white paper” on the nonbank ATM industry, to better explain what it does, how it works, and why proposals like Harkin’s would be disastrous for it.

ISSUES THAT AFFECT EVERYONE
Why should anyone outside the industry care? Let’s take a look.

In the case of the Harkin amendment, it’s pretty simple: a limit on ATM surcharges would make many ATMs unprofitable to own and operate.

Sen. Harkin clearly doesn’t understand the economics of nonbank ATMs. He assumes the only cost associated with an ATM transaction is the cost of processing — a cost erroneously estimated at 36 cents by Harkin’s staff.

But that ignores the cost of the ATM itself, as well as the time and cost of installation, maintenance, insurance, supplies and cash. Harkin seems to think that merchants would be happy to install and maintain a money-losing ATM. That’s simply ridiculous.

In the case of Mastercard and Cirrus, anti-competitive behavior hurts everyone who uses an ATM. Mastercard’s fee changes mean processing a Mastercard or Cirrus transaction is more expensive for merchants than, say, processing a Visa card. That leaves merchants with few choices — including raising surcharges for everyone (even if you don’t use Mastercard or Cirrus) or removing the machine because it’s no longer profitable.

None of the available options are good for either merchants or customers. The ATMIA fund will help the industry explore legal, regulatory and market strategies that would let us avoid such harmful choices.

WHAT CAN BE DONE
ATMIA has asked each member company to donate $500 to the fund. ATM Network has donated $3,000. We strongly urge others to step forward, too. You can donate online at the following links:

ATMIA members
https://www.atmia.com/unitedstates/membership/membershiprenewal

Nonmembers
https://www.atmia.com/unitedstates/membership/join

Thank you for joining us in this effort!

Thank you to everyone who called, faxed or wrote their senator to oppose this ill-considered amendment.

The amendment is not dead — Harkin could try to bring it up again, either with this bill or with a different bill later on in the session. But at this point it seems unlikely to be part of the current bill.

Meanwhile, here are a few more people speaking up to oppose the amendment.

From a letter in the Des Moines (IA) Register:

I have to tell you, Sen. Tom Harkin, how disappointed I am with your proposed 50 cents maximum per ATM withdrawal fees. I’m a small-business owner in the ATM business, not a bank, but a hard-working, tax-paying U.S. and Iowa citizen.

It is an absolutely ridiculous statement that ATM withdrawals cost us a mere 36 cents, Senator Harkin. I have quite a few ATMs and drive more than 1,800 miles per week. I have the cost of gas, a vehicle, the cost of the ATMs, the interest for the cash in the ATMs, etc. I pay my locations between 50 cents and $1.50 per withdrawal as I lease the space in the locations.

Is Congress going to stop the person who charges $2.29 for a cup of coffee versus the store that charges 99 cents? Is Congress going to put a cap on Nike shoes when a merchant charges more than $200 for a pair of shoes that cost him $65, but the demand is there, so he can charge what he wants?

The biggest difference is my ATMs have a screen that asks the customer if they agree to the charges. If not, they hit cancel.

— Jeff “Ole” Olson, Guttenberg

And the Cato Institute resurrects a paper from 1998, the last time a senator (in that case, Republican Al D’Amato of New York) proposed capping surcharges:

Consumers have the ability to obtain money from their bank accounts without paying a surcharge. ATM surcharges allow banks and other ATM operators to deploy machines in more convenient locations than might otherwise be possible. Customers who are unwilling to pay a surcharge incur the cost of inconvenience, while those who value the convenience more than the cost of the fee have the option of paying for it. Senator D’Amato, Rep. Bernie Sanders (I-Vt.)–Congress’s self-proclaimed socialist–and numerous consumer groups have formed an unlikely coalition to put an end to ATM surcharges. If successful, that campaign would limit the options of consumers, since there would be no means to support the more convenient ATM machines. Prohibiting ATM surcharges would only harm consumers by slowing the expansion of ATMs and reducing the number of ATMs currently deployed without making anyone better off.

The 1998 effort failed, which is why you find privately-owned ATMs all over the place, complementing the bank-owned ATM networks. It looks like the latest effort will fail, too — which is good for consumers and good for business.

If you agree, please link to this post. You can also email a copy of the letter to your senator using the links at the bottom of this page. Or sign the ATMIA petition.

May 17, 2010
The Honorable Christopher Dodd
448 Russell Building
Washington, D.C. 20510
Dear Senator,
I am writing to urge you to oppose Amendment #3812 to S. 3217, the Restoring American Financial Stability Act of 2010, which places caps on ATM surcharges.
I own ATM Network, an independent ATM company based in Minnesota. For the past 14 years, my company has sold and provided transaction processing for nonbank ATMs; we now have more than 5,000 customers nationwide, including grocery stores, bowling alleys, bars, restaurants, amusement parks, nightclubs, stadiums, retail stores and gas stations.
The case for ATM fees is simple: Without them, most nonbank ATMs wouldn’t exist. ATM owners must buy the machine, maintain it, keep it loaded with cash and paper, provide it with power and a communication link and pay other costs such as insurance and installation. None of this is free. The fees are what make such an investment viable.
This amendment would immediately reduce the number of ATMs available, slash the value of existing investments in ATM equipment, hurt the bottom line of hundreds of thousands of small business owners nationwide and put thousands of entrepreneurs out of business.
The Harkin amendment is promoted as “consumer friendly”, but how do consumers benefit from seeing ATMs disappear from stores, restaurants and gas stations? How does the economy benefit by removing machines that dispense billions of dollars in cash annually — money that drives sales and boosts our economy? How does cutting jobs and hurting small businesses help anyone?
Government intervention in market pricing may be justified when the free market is unable to set fair prices. But in this case the free market is working just fine. ATM surcharges are transparent and easily avoidable, and the sheer number of ATMs means customers always have a choice. They can go down the street to a machine with a lower surcharge, or to an ATM owned by their bank. Or they can skip the ATM altogether and pay with credit cards or checks.
With so many alternatives, an ATM surcharge is a purely voluntary payment for convenience. Anyone who doesn’t want to pay the fee can either use an ATM owned by their bank or get cash the old-fashioned way: by standing in line at a teller window. Most consumers don’t want to do that. They have grown up in a world filled with ATMs, and they expect easy access to ATMs. They appreciate the convenience and choice that nonbank ATMs provide. Because of ATM fees, customers can get cash nearly anywhere, at any time. Without the fees, they won’t.
The Harkin amendment would take us 10 steps backward and be disastrous for small businesses across the country. It will hurt the consumers it purports to help and damage our economy just as we’re pulling out of a deep recession. I strongly urge you to oppose this amendment and avoid harm to hundreds of thousands of hardworking American citizens.

Sincerely,

Phil Rock
Founder and President
ATM Network
10749 Bren Rd. E.
Minnetonka, MN 55343

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Write to your senator
You can email your home-state senators, as well as the heads of the Senate Banking Committee, using these links:

Senator Christopher Dodd, Chairman, Senate Banking Committee

Senator Richard Shelby, Ranking member, Senate Banking Commitee

Senator Tom Harkin, amendment sponsor

Senate Banking Commitee

Find your home-state senators