atm wrg guide · chapter 1 the lure of retail atms (i.e. convenience stores) that claim increased...

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A Guide from ATM Marketplace

INSIDE: ATMs are being placed at a faster pace. One factor driving the growth: Retailers have learned to profit from ATMs.

Leveraging profi tabilityRetail ATMs

Contents Retail ATMs: Leveraging profitability

Page 3 Introduction | The retail ATM

Page 4 Chapter 1 | The lure of retail ATMs Advanced-function ATMs

Page 7 Chapter 2 | Co-branding: Securing the investment ATM security The best route: TCP/IP vs. dial-up ATM replenishment

Page 13 Chapter 3 | Marketing the machine Breaking the barriers

Page 16 Conclusion | Marketing

Page 17 Appendix | Selected articles from ATM Marketplace Welcome to the ATM jungle Tranax wants to be first to ride wave of change A renewed interest in alarms that protect hardware, users ISOs add value to bank ATMs

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Copyright 2010 NetWorld Alliance Media 3

ATM Marketplace, owned and operated by Louisville, Ky.-based NetWorld Alliance, is the world’s largest online provider of information about and for the ATM industry. The content, which is updated every business day and read by business and industry professionals throughout the world, is free.

Written by Valerie KilliferDick Good, CEOTom Harper, president and publisherBob Fincher, executive vice president and general manager, Technology DivisionJoseph Grove, vice president and associate publisherPublished by NetWorld Alliance © 2007

Introduction The retail ATM

W hen Visa and MasterCard lifted their surcharge bans in 1996, the door opened for

independent sales organizations and retailers to add ATMs in the off-premises space.

But not every location is a financial drop in the bucket, which is why retailers must carefully consider their ATM placements. Regulatory changes also are making retail ATMs more cumbersome to deploy; however, with the right partnerships and information, exceptional opportunities exists.

In today’s financial market, retailers that do not provide a cash-access point for their customers are working at a disadvantage. In this miniguide,ATM Marketplace explores retail-ATMoptions and how retailers, ISOs andfinancial institutions can leverage thoseoptions for maximum profitability.

About NetWorld Alliance:

In today’s financial market, retailers that do not provide a cash-access point for

customers are working at a disadvantage.

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A TM placements, like the ATM industry as a whole, have evolved over the past 10 years.

In the United States in 2005, 68 percent of the country’s nearly 400,000 ATMs were in retail or off-premises locations, accor-ding to the American Bankers Association. And some industry insiders expect that number to increase as new sites for ATMs crop up over the next five years.

Prior to Visa and MasterCard’s decision to open the door for surcharging, there were relatively few ATMs, and most were found in financial institution branches. But when the bans were lifted, ATMs became a source of earned income for ISOs and retailers.

“I think people are starting to take a different view of ATMs today than when we started in the industry 10 years ago,” said Mike Stevenson, chief executive of Willoughby, Ohio-based WRG Services Inc., an ATM manufacturer that also distributes ATMs and processes transactions. “Then it was a business advantage to have an ATM. Today, people are starting to realize it’s a disadvantage not to have one.”

With 10.5 billion ATM transactions conducted in the United States in 2005, according to ABA, opportunity exists for retailers, ISOs and FIs to have pieces of the ATM-revenue pie. But how profitable a retail ATM is depends on its business model and location.

Chapter 1 Retail ATMs

It’s no secret that a customer will spend between 20 percent and 25 percent more in a retail location when she uses a location’s ATM. But if a location doesn’t generate the right amount of foot traffic or facilitate a need for cash, the ATM may not be as profitable.

“ATMs are where people are,” Stevenson said. “A lot of times they’re in the right types of locations, and those certainly drive transactions; but in the overall sense, it’s the number of people that walk by and need cash that drives transactions. Retail ATMs are selling convenience.”

According to ABA, more than half of all adults use ATMs regularly, with 40 percent of them visiting ATMs at least 10 times a month. That can equate to a lot of foot traffic and revenue for retailers and ISOs that make good ATM-placement decisions.

Mike Hudson, general manager for Carrollton, Texas-based NCR EasyPoint LLC, said the advantages of retail ATM placements are “numerous.”

“But most important, is the citation provided by independent sources

Customers will spend between 20 percent and 25 percent

more in a retail location where they use ATMs on site.

Copyright 2010 NetWorld Alliance Media

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CHAPTER 1 The lure of retail ATMs

(i.e. convenience stores) that claim increased average purchases in stores by ATM users, and increased overall sales attributable to the ATM service,” he said.

For retailers, revenue opportunities also exist from interchange rates, surcharge fees and branding deals.

Dennis Baker is the owner of Ohio-based Supreme ATM, a WRG distributor. His company has a portfolio of nearly 200 ATMs; about 148 of those machines are located in Giant Eagle grocery and GetGo convenience stores in Greater Pittsburgh.

Baker installed Giant Eagle’s first ATM five years ago. The placement was part of a pilot project requested by the grocer. Giant Eagle wanted to see how much it could profit, Baker said.

“They quickly realized the profitability of the program,” Baker said. “Because they owned the ATM, they collected 100 percent of the surcharge, plus a portion of the interchange fee. We had two ATMs that paid for themselves in a two- to three-month period.”

Giant Eagle had its ATMs custom-built by WRG so the units could be easily loaded from the back, away from the public eye. The grocer also managed and maintained the units in-house, so it didn’t have to absorb other service costs or fees.

“Typically, the merchant would own the terminal, put their own cash inside and would get the surcharge. The ISO would get the interchange,” said Steve Polk,

senior U.S. sales manager for Long Beach, Miss.-based Triton.

Interchange can play a critical role in an ATM deployment because it’s often used to help ISOs cover fees associated with regulatory compliance. For the retailer, building in additional profit-making opportunities is the name of the game. To that end, many are leaning on advanced self-service functions.

Advanced-function ATMs

Since 1996, the number of ATMs in remote, off-premises locations has skyrocketed, from 51,597 to 266,000 ATMs in 2005, according to the American Bankers Association.


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The number of transactions occurring at ATMs has been sporadic over the past 10 years.

According to ABA, there were 10.5 billion U.S.-based transactions in 2005, a 5 percent decrease from the 11 billion ATM transactions conducted in 2004, and a 30 percent decrease from the 13.6 billion transactions conducted in 2001.

One way retailers have sought to combat the decline is through the implementation of advanced-function ATMs.

Not all retailers have adopted the notion of check-cashing, bill-payment and automated-deposit functionalities on ATMs; however, industry experts say additional revenue-generating possibilities are promising, especially with an estimated U.S population of more than 44 million unbanked and underbanked consumers.

Advanced-function ATMs opens up the opportunity to generate increased revenue and profit in the same small footprint that currently supports ATM transactions only, said Hudson.

NCR EasyPoint developed the 3800 ATM. A sidecar can be attached to the 3800 that enables bill-pay, pre-paid card dispensing and other advanced functionalities.

“The retail market is a convenience-

driven market, and turning the ATM into a one-stop shop serves the needs of the retailer and their customers, alike,” Hudson said.

One retailer that has successfully implemented advanced-function ATMs is 7-Eleven Inc.

7-Eleven set the pace for advanced-function ATMs with its Vcom kiosk, which dispenses cash, cashes checks, and offers money orders, money transfers, billpay and Verizon phone services.

The first wave of Vcom kiosks was installed in 2002 in 98 locations throughout Dallas and Ft. Myers, Fla. Today the kiosks are deployed in 1,700 7-Eleven locations nationwide.

“At first we were targeting the underbanked, but we have found that people who have a bank account like the convenience of using 7-Eleven’s 24/7 Vcom when they need to cash a check or send a money order,” said 7-Eleven’s spokeswoman Margaret Chabris.

“Creating destination point-products is always going to be a great way

to make sure you get traffic.” Hamed Shahbazi, chairman and

chief executive, TIO Networks Corp.


The deployment created a sense of loyalty for 7-Eleven Vcom users, and it increased foot traffic in 7-Eleven locations.

“Creating destination-point products is always going to be a great way to make sure you get traffic,” said Hamed Shahbazi, chairman and chief executive of Burnaby, B.C.-based TIO Networks Corp., which provides billpay services at its TIO kiosk. “We have people that have paid their bills month over month, and they’ve come back to the same location to pay their bill or conduct a transaction.”

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There are many other sources of revenue through ATM placements. For its GetGo convenience stores, Giant Eagle chose another option, a co-branding deal with Citizens Financial Group, d.b.a. Citizens Bank, in Pennsylvania. Citizens, with $161 billion in assets, is the eighth-largest commercial bank holding company in the United States. It is owned by The Royal Bank of Scotland Group PLC and has branches in 13 states and non-branch offices in more than 40 states.

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Chapter 2 Co-branding: Securing the investment

C o-branded ATMs are another way retailers can generate revenue without taking the full-ATM-owner-

ship leap.

Retailers can build additional revenue streams by leasing store space for financial institution ATMs; retailers and independent sales organizations can profit from surcharge and interchange fees.

Keith Myers, executive vice president of financial services for Houston-based ISO Cardtronics LP, said co-branding is a “win-win” for all parties involved.

“The banks get the distribution they need to serve the customer, merchants get an increase in foot traffic to their stores, and the cardholder benefits because they have more access,” Myers said.

Additionally, ISOs generate income because more transactions are conducted at the ATM, Myers said.

Branding deals between ISOs, merchants and FIs are relatively new.

According to a 2005 report from Boston-based Celent LLC, “ATM: Strategies for Lowering Total Cost of Ownership,” the number of bank-branded ATMs jumped from about 1,500 in 2005 to an estimated 4,300 in 2006. Celent estimates that

number will continue to climb, reaching slightly more than 5,000 branded ATMs by 2008.

In the report, Celent analyst Madhavi Mantha says banks have turned to branding partnerships because high-quality ATM locations have been taken by ISOs.

“Rather than expend scarce time and resources to implement and oversee a major off-premises deployment, a number of banks are choosing to instead leverage an ISO’s existing ATM real estate,” Mantha says.

But in order to make the partnership viable, everyone must work together.

“The economics of the program have to make sense,” said Jim Tingey, senior vice president of administration for California-based PDNB Electronic Banking Solutions, a division of Palm Desert National Bank. “I don’t think it’s for every single site, but it certainly makes sense for certain geographic locations. Banks that may have had 10 or 15 ATMs now may have a larger footprint for their cardholders.”

According to a report from Boston-based Celent LLC, “ATM: Strategies for Lowering

Total Cost of Ownership,” the number of bank-branded ATMs jumped from about 1,500

in 2005 to an estimated 4,300 in 2006.


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Another co-branding trend making its mark on the industry is the multibranding platform, which involves more than one financial institution being branded on a single ATM.

“Banks group together in one offering so four or five or more banks can be represented on more than one terminal,” said Steve Polk, senior U.S. sales manager for Long Beach, Miss.-based Triton Systems. “The bank pays for the transactions conducted only by their customers.”

For retail locations, co-branded or multibranded ATMs give merchants the ability to tap into larger customer bases. And when it comes to finding a co-branding partner, retailers can rely on their ISOs to establish the right kinds of partnerships.

“It’s really just an ongoing process, with one team working for merchants and another working with FIs for locations,” Cardtronics’ Myers said.

Of Cardtronics’ 26,000 ATM placements, about 3,000 are co-branded.

Many partnerships are forged based on what is in the best interest of the merchant and the FI, especially if the FI is regional. For FIs that need increased ATM distribution, the ISO/merchant partnership could have far-reaching effects.

ATM security

ATM security is one of the most important aspects of having an ATM in a retail location. Ram raids and other ATM-related crimes threaten not only consumer confidence, but the ATM investment itself.

“If you have a retail location and want

CHAPTER 2 Co-branding: Securing the investment

ISOs can partner with FIs to brand machines, increasing the muscle behind otherwise generic ATMs, like this one.


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to protect what’s inside it, do the same thing you would do to protect your inventory and assets,” said Jason Kuhn, vice president of WRG Services Inc. “There’s a lot of common sense that can be done to protect that investment.”

Kuhn said retailers need to be aware of their equipment, including who their service providers are. They should check identifi cation badges, and if there’s a question about who is servicing the terminal, call the service provider and verify the technician’s identity.

Good signage, placing ATMs in well-lighted areas and installing video cameras in high-traffi c locations also help deter a thief trying to target a retail terminal.

Mark Coons, president and chief executive of Charlotte, N.C.-based American Special Risk, which insures ATMs, told ATM Marketplace in December 2006 that his company insures about 70 percent of the United States’ off-premises ATMs — accounting for nearly $1.5 billion in vault cash per month.

“We spend a tremendous amount of time on the risk-management side,” Coons said. “To help our clients drive those costs down, we have to help them understand what their risks are. How do we control their exposures to ultimately cut their costs? Anyone can buy an insurance policy. But without the guidance, it’s hard for them to know how to cut or reduce the threat.”

Online reporting also can add another layer of security for retailers.

Processors are now providing online terminal-management systems. These systems are leading the charge for the next generation of ATM deployers and merchants. Using online management, a retailer can check cash balances, run reports and see transactions in real-time.

Mike Stevenson, chief executive of WRG Services Inc., said online reporting has come a long way.

“You can run a complete ATM program with that and track (your ATM network)


Source: American Bankers Association

TOTAL U.S. ATM TRANSACTIONS (in billions)


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from any computer. You would only need to use a log-in and password.”

Whether an ATM is dial-up or Internet-based does not have an impact on the security of a terminal. But TCP/IP-based ATMs are open to outside threats through the hacking of open network operations.

David Miner, director of financial-services solutions for Cupertino, Calif.-based Symantec Corp., says open networks should be locked down so ATMs only perform the transactions they are programmed to perform.

Symantec offers an IP-ATM Security solution designed to protect IP-based ATMs. The solution monitors remote ATMs from a central environment and provides a layer of security on each network-connected ATM.

“A lot of the attacks are less about viruses and more about people gaining access and using it inappropriately,” Miner said. “With anything connected to the ATM, we want to make sure it is secure before it gains access to the network. A lot of the problems that people have with ATMs when they’re being monitored is configuration of the device, which could expose you to attacks. Make sure the ATM is current and compliant and only performing transactions it is designed to.”

Regulatory changes also are making it easier for retailers to protect their

investments.

The Triple DES encryption standard, mandated by Visa and MasterCard, could be confusing to retailers who don’t understand the ins and outs of ATM security. But Triple DES is making ATMs more secure, WRG’s Kuhn says.

The Triple DES mandate requires ATM deployers to upgrade or replace their legacy ATMs and/or central processing units. Merchants are responsible for ensuring that their ATMs comply with regulations, but ISOs should do their part to help educate and update merchants as often as necessary.

The best route: IP vs. dial-up

Speculative security issues should not impact a merchant’s decision to use IP or dial-up ATM connectivity. In many cases, if a retail location already has high-speed Internet access for credit- and debit-card terminals, retailers can eliminate land-based phone lines.

“It can change the business a bit if there’s an IP connection,” Triton’s Polk said. “Retailers won’t have to pay for an additional phone line, so they can


“A lot of attacks are less about viruses and more about people gaining access and using it (an ATM) inappropriately.” David Miner, director of financial services solutions, Symantec Corp.


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take advantage of not having the extra cost. It also affects the speed of the transaction.”

Generally, IP-based ATM transactions are faster than dial-ups; but if a terminal does not have a high number of transactions, it won’t matter.

And a wireless network is a “self-healing” one, says Ron Riva, vice president of technical operations for


Connecticut-based Ventus Networks.

“If there is a problem, you don’t have to wait on a tech crew to take care of it,” Riva said. “During the aftermath of Katrina, for example, the first mode of communication that was back up was cellular. In this day and age, that’s a very important factor.”

Wireless ATM connectivity also is being bolstered by the introduction of “black boxes” that spoof the ATM into thinking it’s using a phone line. Black boxes serve as a bridge between old and new technology, and they provide deployers an inexpensive way to go wireless.

ATM replenishment

Effectively managing an ATM fleet, or even a single ATM, depends on a well-organized cash-management program. Vault-cash replenishment, ATM maintenance, and service and remote monitoring are all important.

“Retailers must understand the total cost of cash, from fees charged by cash-in-transit operators, and banks for issuing the cash, to the internal costs of cash handling at the store,” said Andrew Osborne, global marketing manager for MEI’s retail division.

Cash management is the most expensive component of ATM management, much more so for FIs than for merchants. According to ABA,

Unless an ATM does a high volume of transactions, a dial-up connection can work just fine.


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off-premises ATMs in 2005 cost $1,194, in total, to operate. Of those costs, maintenance was the second-highest at an estimated $244 per month.

“If a merchant is willing to (self-load an ATM), they really change the economics of how that terminal can operate,” said Triton’s Polk. “The biggest key to off-premises deployment is having the merchant load the cash and do the first-line maintenance.”

First-line maintenance includes a retailer’s ability to load the machine and

make minor adjustments that do not require a technician.

Merchant-loaded ATMs also provide retailers the ability to monitor their cash amounts daily and clear the ATM of cash after-hours, decreasing the terminal’s risk of an attack.

Most of the retailer’s benefit stems from providing their own cash-load service, but if they own a portfolio of ATMs, outsourcing that service could be a better way to go.


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Chapter 3 Marketing the machine

W hen it comes to marketing an ATM, abundant opportunities exist for retailers. Top-ups,

stickers with logos, neon lighting and signs all can help drive ATM transactions. Placing terminals near other impulse items also is a big motivator.

“A lot of transactions are impulse; the sign reminds them they may need money. It’s convenience and impulse driven,” said Mike Stevenson, chief executive of WRG Services Inc.

Keeping ATMs visibly clear to customers — such as near the front door or around the cash register — is essential. High-traffic areas are a must, but a lot of the marketing and promotion depends on who a retailer does business with.

For merchants that have co- or multibranding deals, ATM marketing is handled by partnering financial institutions, because consumers typically feel more comfortable using an FI’s machine.

Overall, a well-used terminal is indicative of the type of advertising it receives.

“Customers are creatures of habit,” said Steve Polk, senior U.S. sales manager for Triton Systems. “If they see something one time, they will figure it out. And they will continue to come back to it.”

Promoting an ATM that is compliant with Payment Card Industry and Triple DES standards is another way to market and promote.

“Using stickers and signs to promote that your ATM is PCI and 3-DES compliant may provide consumers with an added sense of security,” said Megan Bublik, director of marketing for WRG Services Inc. “That, coupled with a well-lit, visually appealing and high-traffic placement could have a positive impact on transaction volume.”

Breaking the barriers

To fully understand the ATM-business

“Using stickers and signs to promote that your ATM is PCI (Payment Card Industry) and 3-DES compliant may provide consumers

with an added sense of security. That, coupled with a well-lit, visually appealing and high-traffic placement could have a

positive impact on transaction volume.”Megan Bublik, director of marketing, WRG Services Inc.


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CHAPTER 3 Marketing the machine

model, retailers must be aware of industry impediments.

Ram raids and the number of media reports about ATM-related crimes have had a definite impact on the industry. ATM associations, FIs and independent deployers are fighting hard to dispel the myths.

“The media creates fear with consumers,” said Anna Istnick, North Canton, Ohio-based Diebold Inc.’s senior product marketing manager. “We have to educate the entire industry, and not by instilling fear,” she said.

Istnick says the industry must pay attention to fraud issues and how they impact the consumer. She pinpointed misleading media reports and a lack of communication between the industry and consumers as contributors to the problem.

Retailers also can help. By promoting their ATMs as compliant with industry standards, retailers are setting the model that all ATMs must follow the same regulatory path — illustrating that off-premises, “white label” ATMs are as safe as machines owned and operated by FIs.

WRG’s vice president Jason Kuhn says the industry must work together to instill consumer confidence.

Even though ATM fraud will never be

completely eliminated, he said, “we need to continue to push to protect cardholder confidence.”

Discovering new markets

Market saturation also has been discussed for several years; however, new and untapped placement sources are constantly being discovered and investigated.

Co-branding has been an unexpected solution to the market-saturation problem.

Market saturation has led to a decrease in per-ATM transactions. But through innovative ATM marketing, such as co-branding deals with FIs, ISOs are learning how to break the profitability

Making sure an ATM is visible is one obvious, but often overlooked, way of generating traffic to it.


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Electronic Banking Solutions, a division of Palm Desert National Bank.

It also has opened the door for retailers to generate additional funds in regard to placement rental fees.

“The number of transactions per terminal has declined, but the number of terminals in the U.S. continues to increase,” Kuhn said. “There is always that constant need for cash.”

CHAPTER 3 Marketing the machine

quandary.

Co-branding has given ISOs the ability to take what they learned in the off-premises space and share it with FIs. As a result, FIs are extending their ATM footprints and ISOs are making money — compensating for shrinking margins.

For ISOs, the ability to co-brand ATMs has enabled them to share and stabilize revenue and still provide a service to the cardholder, said Jim Tingey, senior vice president of administration for PDNB


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Conclusion

T he retail ATM is entering a new phase. For retailers, an increasing consumer demand

must only be met with the ability to provide the best ATM services. Retailers that can provide those services will play a leading role in shaping consumer habits.

ATMs can help retailers increase foot traffic and build consumer loyalty. Locations, branding partnerships and the ability to work with large retailers can help create previously untapped revenue-building opportunities for independent sales organizations, leveraging profitability.

Locations, branding partnerships and the ability to work with large retailers

can help create previously untapped revenue-building opportunities for

ISOs, leveraging profitability.


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Appendix Selected articles from ATM Marketplace

Welcome to the ATM jungleBy Tracy Kitten

This story was published Nov. 8, 2006, on ATMmarketplace.com.

In the ATM world, it truly is a jungle at times, and it’s left many independent players wondering how they can keep from going under.

American pop references aside, winners and losers are quickly emerging in the independent sales space. Mergers, acquisitions, a surcharge-backlash and a renewed interest in the ATM channel from the financial-institution side of the street are fueling the independent sales organization struggle. And the continual drop in per-ATM transactions, arguably the result of the United States’ saturated market, isn’t helping the ISOs’ plight.

ISO ATMs, which once dominated the U.S. market, now account for only half of all U.S. installations, according to Dove Consulting’s 2006 ATM Deployer Study, a biennial research report that examines the health and viability of the U.S. ATM industry.

Renewed interest on the part of FIs in the ATM channel is forcing ISOs to collaborate with banks and credit unions — entities once deemed the enemy.

During last month’s ATM, Debit & Prepaid Forum in Las Vegas, Keith

Myers, Cardtronics LP’s executive vice president, said deals between FIs and ISOs for branded ATMs are laying the groundwork for strange bedfellows, but the deals are a win-win.

For all of the reasons mentioned above — mergers, acquisitions, surcharging and competition for off-premises locations — branding deals make sense. Take a step back and it’s easy to see that ISOs like Houston-based Cardtronics, which are pursuing relationships with FIs, are making strides in the right direction.

Close to the edge

The vigor of most U.S. ISOs is difficult to gauge, since the majority are privately held. Among those that are publicly traded, such as Portland, Ore.-based TRM Corp. and Ponte Vedra Beach, Fla.-based Global Axcess Corp., the future looks bleak.

Both TRM and GAXC are struggling. This week, TRM said its “goodwill and certain other long-lived assets are impaired.” As a result, the company has delayed its third-quarter filings until it can get all of its financial statements in order. The company has reported losses for the last two quarters.

GAXC is facing similar woes. Beyond shake-ups at the top, including the naming of a new chief executive, board chairman and board vice chairman,


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which the company announced last month, GAXC’s financials reflect a downward spiral. All three new heads are touted for their histories of helping turn companies around.

In August, GAXC reported a net income loss of $373,000 for the second quarter of 2006, a loss eight times greater than the loss the company reported a year prior.

Some industry insiders argue that the Goliath-like size of TRM and GAXC has played a role in their demise. TRM, with nearly 18,000 ATMs, and GAXC, the parent of Nationwide Money Services with just more than 5,000 ATMs, probably grew too big, too fast, they say.

There could be some truth to that, but it’s not the whole truth. When ISOs like Cardtronics — albeit a privately held business, at least for the moment — get tossed into the mix, the argument changes.

Not losing your head

Cardtronics is the world’s largest ISO. Its network of more than 25,000 ATMs spans the United States, the United Kingdom and Mexico. And though Cardtronics’ last quarterly statement reflected a net loss from 2005, the company continues to grow and diversify, unlike its fellow ISOs.

Beyond making a name for itself in

the branding space, including deals with well-known retailers like Target Corp., Walgreen Co. and CVS Corp., Cardtronics spent 2006 buying interests in businesses that fall outside the branding scope.

In February Cardtronics bought a majority interest in CCS Mexico, a family owned and operated ISO; in December it acquired Allpoint Network, the nation’s largest surcharge-free ATM network.

Ben Psillas, president and founder of Allpoint, said the acquisition of Allpoint, although outside the realm of ISO focus, made sense for Cardtronics.

“We reached out early to Cardtronics in this process as a partner,” Psillas said. “We have a lot of synergies, including how we can use the ATM.”

Cardtronics’ size and established relationships with large retailers was attractive to Allpoint’s 350 FI customers.

“We were looking for a way to work with the big-box retailers, and we wanted to piggy back on Cardtronics’ success,” Psillas said. “Since the acquisition, our connection to Cardtronics has been invisible to the FIs I work with.”

Allpoint operates as an independent subsidiary.

“What is it about Cardtronics that stands out?” Psillas asked. “I think it starts

APPENDIX Selected articles from ATM Marketplace


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with management. Their management team is top notch, has a breadth of experience, knowledge — they are a well-rounded management team, which has allowed them to access money and funds.”

That management team, which includes a healthy pool of former bankers, has done a good job of anticipating industry changes and has adjusted accordingly, Myers said.

“I think we realized that we needed to diversify beyond the traditional surcharge model, and that’s when we started working with Allpoint,” Myers said. “We saw that a lot of customers don’t want to pay surcharge — so we have both. Our customers can use the surcharge-free model or they can surcharge. We see that as the direction the industry is going in, to surcharge-free, so we wanted to get ahead of that.”

International opportunities also have garnered attention.

“A further differentiator, I would say, is our expansion into the international markets,” Myers added. “We saw an opportunity to take our same model and scale to other countries. Our acquisition of Bank Machine in the U.K. has been very successful. And today we now have over 400 ATMs in Mexico.”

Myers said the company eventually plans to deploy 4,000 ATMs in Mexico.

Chris Brewster, Cardtronics’ chief financial officer, said the company is examining other international markets as well; but for the moment, Cardtronics plans to focus its attention on markets, like Mexico, where it already has deployments.

“Fewer people in Mexico have bank accounts, and Mexico has about half the ATMs per people with bank accounts than the U.S. But beyond that, it’s fairly similar, in that the market allows surcharging, and we see the market developing in a similar way to the way the U.S. developed,” Brewster said. “We want to develop relationships with large retailers there like we have done here.”

Mexico has approximately 20,000 ATMs.

Other opportunities the company plans to pursue include deposit-automation, leveraging the promise of Check 21, and functions like bill payment and card dispense that target unbanked and underbanked consumers.

Cardtronics also is expected to make a public offering sometime in the future. And though Brewster would not comment about a pending IPO, the company did make a bond offering last summer that is fully registered with the Securities and Exchange Commission. Because of that registration, Cardtronics discloses its quarterly statements to the public. Its third-quarter earnings are expected to be released later this week.



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Keep from going under

Beyond diversification, the strength of branding is obvious. And Myers said Cardtronics is banking on the branding model.

“We’re seeing more and more consulting firms like Dove recommending branding programs and surcharge-fee programs for banks, which is exactly what we envisioned and talked about two years ago. It’s really exciting.”

According to Dove’s 2006 Deployer Study, 41 percent of the United States’ largest banks have at least one branding deal with an ISO; another 7 percent are actively pursuing a branding deal; and another 19 percent say they may be interested in branding in the future.

Credit unions and smaller banks are reportedly less interested in branding deals, but Dove expects that perspective to change as branding with ISOs becomes more common.

“Looking forward, FIs have every reason to be optimistic about ATM branding and the opportunities it can afford in terms of expanding their off-premise(s) footprint and increasing cardholders’ surcharge-free ATM access at a lower cost than deploying ATMs,” the study says.

Dove found that FIs pay a monthly fee of between $90 and $300 to brand an ATM.

But not all ISOs are willing to diversify and adjust in the same way Cardtronics has.

Steve Polk, North American retail sales director for Long Beach, Miss.-based Triton Systems, said ISOs that refuse to change will continue to lose.

“Just trying to make money on surcharging is not a model that I endorse,” Polk said. “But some are not willing to take an aggressive approach to get more. You can just see some that are dying on the vine. I think that you’ll see over time that they will be acquired, or they’ll just drift off into mediocrity.”

Some (ISOs) are not willing to take an aggressive approach to get more. You

can just see some that are dying on the vine. I think that you’ll see over

time that they will be acquired, or they’ll just drift off into mediocrity.

Steve Polk, Triton Systems



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Tranax wants to be first to ride wave of changeBy Tracy Kitten

This story was published June 22, 2006, on ATMmarketplace.com.

For Dr. Hansup Kwon, change is a good thing. It had better be, for the mild-mannered leader of Tranax Technologies Inc. is banking his company’s future on it.

Kwon is shaking things up by allowing Tranax’s core ATM products to be modified with enhanced self-service functionality. Calling his breed of self-service devices “SSTs,” Kwon is refocusing the company’s market vision and strategically partnering with software and solutions players.

The Fremont, Calif.-based company that found its niche in the entry-level retail ATM space is forging ahead with a plan to become the financial and retail markets’ defacto self-service-technology provider.

“The SST market is like the snowball effect,” Kwon said to an audience of distributors gathered in Lake Tahoe, Nev., last week. “Once we get in and we demonstrate that it works, then I think everybody will jump in. But I believe, at least at the beginning, it has a higher barrier for entry.”

And that’s where Tranax, a known leader in the ATM space, has an advantage, Kwon said.

A strategic plan

The ATM is arguably the most accepted and widely used self-service instrument, and it undoubtedly accelerated consumer acceptance of other self-service devices such as the grocery self-checkout and the airline self-check-in.

Tranax hosted its annual distributors’ conference in Lake Tahoe, Nev. This year marked Tranax’s sixth conference.

With more self-service, says Kwon, comes greater consumer demand, especially in the financial-services space. He said the market is more advanced than it was even four or five years ago, and financial institutions and retailers who jump aboard now will quickly attract a loyal following.

“Adoption of the self-service terminal is coming to realization very fast,” he said.

Tranax has shipped about 72,000 ATMs in the United States and Canada since it introduced the Mini-Bank 2000 in 1997.

This year Tranax expects to deploy at least 500. About 50 SSTs are being piloted in the market; only about 10 of those are located in FIs.

Tranax estimates that it has 40,000


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Mini-Bank 1500s in the market.

Tossing out what he calls conservative estimates, Kwon said 50 percent of Tranax’s business comes from retail ATMs (like the Mini-Bank 1500 and the Mini-Bank c4000), 20 percent from FI-geared ATMs (like the MBS 2500 and 5000), and 30 percent from the company’s line of SSTs.

By the end of 2006, Kwon expects that breakdown to shift in favor of more self-service terminals.

But Kwon is being careful not to rock the foundation. He said he doesn’t foresee a division between Tranax’s self-service and ATM businesses; rather, he sees the two complementing each another.

“We’re building a self-service business on top of the ATM (business),” Kwon told distributors. “The ATM is our core competence and our core product. Even though we are marketing the SST, we plan to grow both businesses together.”

Out in the market

Tranax has always focused on financial transactions, so offering more advanced financial services — cash dispense, deposit, bill-payment, check-cashing and stored-value dispense — makes sense.

Tranax expects to build the self-service business through

its existing domestic network of ATM distributors and banking business partners who sell directly to FIs.

Getting distributors to buy into Tranax’s advanced offerings will be key.

Tranax’s Bill Dunn told distributors that the company’s SST will “ensure stability in a competitive marketplace. It offers another way for ISOs to build revenue.”

Distributors like ATM Express Inc., Tranax’s No. 1 distributor, believe in Tranax’s ability to deliver complex functions.

In a March interview, ATM Express’ Neil Clark said, “I have all the confidence that it will work. Hansup Kwon is a smart guy. He understands computers and how equipment can function and needs to function.”

The big question for Tranax is whether ISOs will go out and sell those functions.

Some distributors expressed concern that too many functions would complicate the ATM. But while the addition of billpay functionality raised eyebrows, check-cashing received enthusiastic nods from the conference’s 100 or so attendees.

“Check-cashing is the single most revenue-building function you can add to your ATM.”

Joseph Abbo, Vero Inc.


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“Check-cashing is the single most revenue-building function you can add to your ATM,” Vero Inc.’s Joseph Abbo said.

Tranax in September will begin testing Vero’s check-cashing solution. The pilot will run on Tranax’s new Mini-Bank x4000 and Hybrid Kiosk 3000. The x4000 is the c4000 with a touchscreen built on Microsoft Windows XP instead of Win CE.

“It’s the c4000 on steroids,” Dunn said.


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A renewed interest in alarms that protect hardware, usersBy Tracy Kitten

This story was published Dec. 28, 2005, on ATMmarketplace.com.

Ram raids, ATM break-ins and attacks at the ATM are nothing new, but they’ve recently caught a lot attention. From Australia to the United Kingdom to the United States, ATM deployers, especially independents, are working to address not just the loss of vault cash, but the loss of ATMs.

Barry Schreiber, a criminal justice professor at St. Cloud State University in Minnesota, has studied ATM crime for more than 20 years. Based on his research, an estimated 200 ATMs are stolen annually in the U.S. In the U.K., according to information collected by Alan Townsend of the Metropolitan Police Flying Squad, 126 ATMs were stolen from January to September.

By themselves, those numbers, which account only for the physical removal of ATMs, aren’t that alarming. But add those to the overall number of attacks at the ATM, and the equation of loss is more revealing.

In the U.K., the total estimated cash loss in raids, break-ins and attacks in the first nine months of 2005 was about £6 million (U.S. $11 million). The total

number of ATM incidents in the U.K., including break-ins and theft attempts, increased from 472 in 2003 to 657 in 2004. As of September, incidents for 2005 already totaled 648. And those numbers don’t reflect losses associated with repairing, and in most cases, replacing stolen or damaged ATMs.

Total losses for the U.S. are difficult to gauge, said Jerry Gregory, corporate development officer of Dallas-based Cash Carriers USA, since no government agency really tracks those numbers. But losses are on the rise, he said.

As the size and weight of retail ATMs continues to decline, some industry experts believe the number of smash-and-grab raids will continue to increase.

Mark Coons, president of Charlotte, N.C.-based American Special Risk LLC, a company providing an ATM insurance program through the ATM Industry Association, told ATMmarketplace in 2004 his company pays about $4.5 million a year for claims related to smash-and-grab attacks. Eighty percent of those claims, an estimated 300 a year, involve the removal of an entire ATM.

‘Smash and grab’ on the rise?

“The biggest problem I see is smash and grab,” Gregory said. “It’s the most prevalent thing in our industry.”


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Not surprisingly, retail locations, primarily convenience stores, are the most vulnerable, he added, because most retail ATMs weigh less than 200 pounds.

“We have one store that has had its ATM rammed seven times. Last week, we had the same thing happen at two machines owned by the same customer. There’s a lot of it going on.”

C-stores also are the most vulnerable in the U.K. Townsend’s statistics show that 30 percent of ATM thefts and attacks occur at c-store locations.

Companies are now developing products that deter thieves by preventing easy ATM break-ins or removals.

Cash Carriers, which developed its Phase II Cash System for Diebold’s 1074 Island ATM, recently released its newest product, Phase II Cash Sphere.

Gregory said his company has sold between 100 and 200 of its Phase II Cash System, which delays entry into Diebold’s 1074, 1074i and 1074ix by several minutes to hours. The product, which sells for less than $500, is designed to keep ATMs of any make or model bolted to the floor. It’s a simple sphere design that fastens to the bottom of an ATM and is then anchored to the floor.

Other companies are marketing alarm products to deter would-be thieves.

Six months ago, Dax Bosnich, owner of Cincinnati-based Bull Horn ATM Alarm, released an alarm system with a microprocessor that adheres to the bottom of an ATM’s safe. If the ATM is pulled from its foundation, tilted or moved, the alarm — which produces a sound with the decibel level of a jet engine — goes off.

“We’re selling 60 to 70 units per month, and it’s been growing every month,” Bosnich said of the alarm, which sells for less than $400. His company also is developing a new alarm that uses a microwave sensor to detect when the door of an ATM enclosure is opened. That product is expected to release in early 2006.

An extra layer of protection

Alarms are big business. Bosnich, who also owns Hassle Free ATMs, a Cincinnati- based ISO, developed the Bull Horn ATM Alarm after a couple of his own ATMs were hit. He said he sees potential for the market. And it’s not just for retail ATMs. It’s a big market for financial institutions, which have a vested interest in protecting cash, cash carriers and consumers.

“The biggest problem I see is smash and grab. It’s the most

prevalent thing in our industry.” Jerry Gregory, Cash Carriers USA


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California-based La Gard, a division of Computerized Security Systems and distributor of electronic-safe locks, is expected to release its Navigator lock system, which includes an alarm, in the first quarter of ’06. The alarm works in duress mode and is designed to protect cash carriers and service providers, said Orlando Consalvi, the company’s national product manager.

If a carrier or service provider is approached while at the ATM, he enters his seven-digit access code plus an additional number. A silent alarm is routed to the alarm company, which then notifies the police.

“Navigator also has a monitoring module, which provides a real-time look at what’s going on at the ATM,” he said. “As soon as a carrier goes to an ATM and requests to open it on the central server, if he’s not supposed to be there, it sends a red flag.”

However, Consalvi said there hasn’t been a great deal of interest in the duress option, since many ATMs, especially those manufactured by Diebold and NCR, come equipped with similar functions.

But protecting cash carriers and service providers is only part of the problem. Other companies are marketing products that are geared toward consumers.

Like the figures for ram raids, Ron Russikof, president of Philadelphia-based ATMOnGuard, said the number of forced withdrawals throughout the world hasn’t decreased from year to year.

The problem is a growing one.

According to ATMOnGuard’s research, 82 percent of ATM-cardholder crimes in the U.S. are forced withdrawals.

But attempts to remedy consumer threats, such as panic buttons and reverse PINs, haven’t had widespread adoption for a number of reasons, he said.

Consumers were intimidated to use panic buttons, since their use wasn’t easily concealed from assailants. And the reverse PIN, developed by Joe Zingher, has been difficult to sell, since a consumer in duress isn’t likely to remember his PIN in reverse order.

Chip Minto of Safealert Systems, a division of Pace, Fla.-based North American Communications Corp., disagrees with Russikof, adding that panic buttons and similar products serve different purposes. His company’s ATM911 emergency communications system, a 911 panic button, is installed at more than 2,000 U.S. ATMs.

Minto adds it is the only system of its kind currently in use.


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“We’ve been putting these systems on ATMs in high-crime areas since ’98 and ’99. Our market now is primarily smaller banks and credit unions.”

The ATM911 system is individually installed at each ATM and is meant to provide ATM users a means of contacting 911 dispatchers after robberies or attacks.

“If someone is sitting there robbing you at the ATM, we don’t encourage you to risk your life (by pressing the button),” he said. “The 911 button is designed to do two things: No. 1, it acts as a (crime) deterrent, and No. 2, it helps speed up the police-response time.”

The product is not designed to alert authorities while a crime is being committed.

Russikof, who’s been tracking forced ATM withdrawals since 1999, is

expected to release a new product next month that is specifically designed to thwart crimes in the making. The solution is simple, and it’s similar to what La Gard includes on its Navigator lock for cash carriers and service techs. When a user enters his PIN, instead of hitting four digits, he always hits five. After entering the PIN, the user hits either a “1” for transaction acceptance or a “9” for duress from a password-selection list.

Russikof points out that the solution’s deployment is expected to be seamless, since the software is installed at the host and deployed network-wide.

“To me, it’s simpler,” he said. “It’s just one more button they have to punch. It’s a lot easier to remember because you’re using it every time — you’re always pressing an additional key.”


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ISOs add value to bank ATMsBy Ann All

This story was published Oct.27, 2004, on ATMmarketplace.com.

Debit is eroding the ATM’s value as a cash dispenser.

The proof is in the numbers, said Bill McCracken, chief executive of Synergistics Research. Between 1997 and 2003, debit transactions grew 271 percent; during the same period, ATM transactions declined 1.5 percent. Four in 10 debit card users obtain cash back at the point-of-sale, and almost three-quarters of them say they visit ATMs less often.

McCracken said deployers must consider introducing new transactions if ATMs are to remain relevant. The ATM “is not going to win back debit users with cash withdrawal. It’s going to have to be an issue of what services the ATM can offer that debit cannot.”

In a recent Synergistics survey, respondents expressed interest in a variety of non-traditional ATM transactions, including personalization options and improved deposit taking.

Yet financial institutions are reluctant to add services to unprofitable ATM sites, said Karl Asplund, senior vice president of business development for transaction

processor Genpass.

One way of turning ink from red to black, Asplund said, is partnering with independent sales/service organizations (ISOs) to manage non-branch locations. “Instead of saying ‘these (ISOs) are causing us problems,’ more banks are saying ‘we need those guys.’”

In some cases, ISOs install and maintain bank-branded equipment for financial institutions. In others, they offer surcharge- free access at existing retail ATMs to customers of participating banks.

Asplund said some of Genpass’ ISO and bank clients are considering splitting costs of the upgrades necessary to offer new services such as check imaging at ATMs, with both profiting from the higher interchange that is likely to result.

According to a 2002 study conducted by Dove Consulting, ISOs can operate ATMs for $732 to $1,068 a month. In contrast, banks’ monthly operating costs for non-branch ATMs range from $1,111 to $1,624.

Gary Walston, general manager of Momentum Cash Systems, agreed that

Depending on the types of locations and the hardware, ISOs can operate a

turnkey off-premises program at about half the cost that a bank can.


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depending on the types of locations and the hardware, ISOs can operate a turnkey off-premises program at about half the cost that a bank can.

Beaumont Area Educators Federal Credit Union is one of about a dozen financial institutions participating in Momentum’s Toll-Free ATM program, which offers cardholders surcharge-free access to some 750 ATMs in Texas and Louisiana.

Jimmy Lackey, BAEFCU’s executive vice president, said his institution, which owns five ATMs at three branches, was looking for a cost-effective way to offer increased ATM access to 29,000 members in southeast Texas — many of them educators working in rural areas.

“It was hard to justify putting an ATM in a town of 2,000 or 3,000,” Lackey said. “(Toll-Free) allowed us to increase our ATM penetration at a reasonable cost.”

A downside to the program, Lackey said, is entrusting service to an outside party.

Though BAEFCU has had no complaints with Momentum, “It’s hard for us because we’ve always done all of the first-line service on our machines, and we’re very committed to that.”

Asplund said banks can minimize such concerns by relying on “a trusted entity” for an introduction to reputable ISOs and help managing service-level agreements.


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