2006 atm deployer study 082506_co-op_execsummary

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2006 ATM

Deployer Study

The Stratification of the ATM Industry

Executive Summary

Prepared by

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Copyright © 2006

CO-OP Financial Services

NYCE Payments Network, LLC

PULSE EFT Association, LP

STAR Networks, Inc.

Dove Consulting, a Division of Hitachi Consulting

September 2006

All rights reserved. Reproduction by any method or unauthorized circulation is strictly prohibited, and is a violation of federal copyright law.

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CO-OP Financial Services is the nation’s largest credit union EFT network and processor. Established in 1981 and located in Ontario, CA, CO-OP Financial Services (formerly CO-OP Network) is wholly-owned by its credit union shareholders and provides volume discounts on products and services that include ATM network access, ATM processing, debit/card services and shared branching. With nearly 2,000 credit union members, more than 25,000 surcharge-free ATMs (including 6,000 deposit-taking), 100 million-plus monthly transactions and 24 million cardholders, CO-OP Financial Services is the largest CUSO in the U.S. financial services industry. CO-OP Financial Services membership has access to over 800,000 ATMs worldwide through links to NYCE, STAR, Cirrus, PULSE and Plus.

For more information on CO-OP Financial Services, visit: www.co-opfs.org or call 800-782-9042.

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Dove Consulting, a division of Hitachi Consulting, is a Boston-based consulting practice specializing in strategy and organizational effectiveness. Dove’s value proposition—deep expertise for immediate value, sincere collaboration with clients, and the delivery of clear results—has enabled the practice to become a highly valued and trusted advisor to leading companies and their executive teams all over the world. Founded in 1981, Dove offers deep expertise in defined industry areas: financial services, consumer broadband, consumer packaged goods, high technology, and government.

The practice’s Financial Services Group is a leader in developing retail payments, distribution, and customer strategies. The group has performed payment strategy work with banks (including eight of the Top 10), credit unions, major payment networks and processors, and government entities.

Our client consulting work is supported by an ongoing commitment to industry research. Our primary research has addressed payment trends related to consumers, retailers, ATM deployers, card issuers, and remittance processors.

For more information on Dove Consulting, visit: www.doveconsulting.com or call 617-482–2100.

Study Authors

Christopher D’Ambrosio

Melissa Fox

Tony Hayes

Executive Summary Dove Consulting

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Executive Summary

The ATM industry reached an inflection point in 1996, when the widespread adoption of surcharging redefined the ATM business model that had existed for almost thirty years. Ten years later, in 2006, we have reached the industry’s second inflection point.

In 2004, findings from the ATM Deployer Study showed an industry at a crossroads. Deployment growth was outpacing transaction growth, resulting in declining per-ATM transaction levels—particularly foreign acquired (i.e., revenue-producing) transaction levels. Declining revenues, coupled with fixed or increasing costs driven by regulatory requirements (e.g., Triple DES) and increased rent and cost of funds, were putting increasing pressure on deployers’ profitability. As a result, the ATM industry was in search of a new model.

Over the last two years, the search for a new model has prompted many deployers, particularly financial institutions, to re-evaluate the role of the ATM: Is the ATM purely a cash dispenser, or is it a strategic customer delivery channel?

How deployers choose to answer that question underpins their ATM strategy, and determines how they manage their ATMs—from how many they deploy and where they deploy them, to what functionality they support and what software they run. As a result, we are now entering a third phase in the evolution of the ATM industry, one that is characterized by the stratification of deployers’ ATM strategies: the search for a new model has resulted not in one new model, but many new models.

Evolution of the ATM Industry

Figure 1.1

Overview of the Evolution of the ATM Industry from 1969 to 2006

Phase I:Channel Emergence

1969-1996

Phase 2:Era of Surcharging

1996-2005

Phase 3:Industry Stratification

2006

Phase 3:Industry Stratification

2006

ATMs emerge as a distinct and viable channel.

Proprietary ATMs

Emergence of shared EFT networks

Deployment and usage growth

Focus on customer service and convenience

Deployment growth booms; ATMs become P&Ls.

New revenue sources

New entrants

Surge in deployments Profitability declines.

Declining per-ATM txn levels

Declining revenue

FI deployers split along strategic dimensions:

Role of the ATM - Cash dispenser - Full service channel

Fee-free access - Shared access - Owned/branded access


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Rising costs

I n d u s t r y S t r a t i f i c a t i o n

Over the last few years, most of the traditional metrics for measuring ATM performance—transactions per ATM, revenue per ATM, profit per ATM—have been declining. As a result, many deployers have been redefining how they assess the value of their ATM network and refocusing on customer needs and preferences. Many are now coming full circle and returning to the historical roots of the ATM as a customer service channel, looking at the ATM not as a stand-alone profit center but as a critical customer touch point. At the same time, rising costs, compliance requirements, and technology advancements have compelled deployers to begin making decisions—either explicitly or implicitly—regarding their ATM placements, technology investments and operations infrastructure.

Changing dynamics have prompted deployers to re-evaluate their investment priorities and make a number of strategic decisions that will set the course for the future direction of their ATM networks.

As surcharge levels have continued to rise, FIs have aggressively pursued a variety of ways to increase their cardholders’ fee-free access to ATMs through branding deals, surcharge-free alliances, and surcharge reimbursement.

— For ISOs, the trend towards fee-free access has provided opportunities to partner with FIs and EFT networks, helping to diversify revenue streams and maintain transaction levels.

Triple DES requirements, combined with the obsolescence of OS/2, have driven wholesale ATM replacements—effectively ‘refreshing’ many deployers’ networks.

With a new, more flexible technology platform, some deployers are beginning to be able to offer a more dynamic and engaging user experience (e.g., preferences, targeted marketing).

Although some deployers are still evaluating the business case for deposit imaging at the ATM, many have made investments in imaging technology and back office processes, and image-enabled ATMs are now moving from pilot to roll-out—with reports of positive customer experiences to date.

As a result of these and other strategic decisions, the ATM industry is stratifying, with deployers bifurcating along two dimensions: ATM access and user experience.

ATM Access

Due to declines in average transactions per ATM, most FI ATMs lose money, as measured on a direct basis. Deployers have responded by attempting to cut costs (through operational efficiencies or by removing unprofitable ATMs) and/or increasing their revenues (by raising their fee levels). Although fee increases have propped up revenues for individual deployers, rising fee levels overall are perpetuating a ‘death spiral’ of deteriorating ATM economics—and at the same time heightening the importance of providing fee-free ATM access.

As deployers raise their surcharge rates, the value cardholders place on convenient, fee-free access to ATMs increases. In this environment, offering a


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large, local, free ATM network becomes an increasingly important part of an FI’s value proposition and an important tool for attracting and retaining customers. ATM users typically rank ATM convenience as one of the most important factors (if not the most important factor) in selecting an FI—and the advantages of providing fee-free access will only become more pronounced over time.

In the current ATM environment, there is an ongoing tension between access and cost, as deployers evaluate the trade-offs between reducing expenses and maximizing cardholder access—and that tension is unlikely to dissipate over the next few years. All FI deployers will strive to achieve low-cost, fee-free ATM access for their cardholders: how they achieve that objective, however will vary depending on their strategic priorities.

Some FIs (primarily smaller institutions) will likely choose to reduce the size of their individually owned ATM fleets and move to more of a ‘shared-access’ model. They will join surcharge-free alliances/networks to extend their reach, and may reimburse surcharge fees at other deployers’ ATMs. For the ATMs they continue to deploy, they will outsource more and more components of their network operations to third parties in order to reduce costs and complexity.

Other FIs, particularly large banks, will continue to expand their proprietary ATM networks, often in conjunction with de novo branch expansion, and will enter into branding partnerships with ISOs for ‘opportunistic expansion’ in the off-premise space. They may turn to independent providers (rather than ATM manufacturers) as a means of lowering ATM servicing costs.

Early indicators of this division are appearing in the marketplace, as large banks aggressively pursue exclusive branding agreements, and selective surcharge alliances/networks negotiate shared access to ISO ATMs on behalf of their members.

User Experience

To date, the role of the ATM has been derivative of the technology in place: as defined by legacy technology and systems, most ATMs today deliver a functional, generic customer experience. As deployers upgrade to Windows operating systems, open software, and multi-server connectivity, however, they have an opportunity to redefine the role of the ATM and to differentiate the user experience (should they choose to do so).

There are two schools of thought as to what the role of the ATM is and will be:

The ATM is a cash dispenser. Consumers want ATMs to dispense cash; that is how they have always used them, and they have little interest in an expanded transaction set. The use of cash is declining, and will continue to decline, as consumers migrate to card-based payments.

ATMs are a critical, full-function customer delivery channel. More customers are using ATMs than ever before; service transactions are increasingly being conducted outside bank branches (at ATMs, online, etc.); cash and deposits will continue to be a mainstay of the customer relationship.

How deployers view the role of the ATM will be a primary determinant of their future channel investment and the user experience they create.


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Deployers that view ATMs purely as cash dispensers will minimize their investment in a ‘declining’ ATM channel. The user experience at these ATMs will continue to be functional, but generic.

Deployers that view ATMs as a critical, full-function customer delivery channel will invest in creating a compelling user experience at the ATM. For this group, the future of ATMs will be marked by a shift from a homogenous to a heterogeneous customer experience, and ultimately the ATM will become a 1:1 customer relationship and marketing vehicle. ATMs will become more than just cash dispensers; they will become ‘points of banking.’

As deployers envision the future user experience at their ATMs, their goals are dictating their investments in ATM hardware, terminal software, and all aspects of their network operations (servicing, terminal driving, back office operations, etc.), as they lay the foundation for their channel strategy.

Diverging Paths

Historically, the operating model for the ATM industry has been based on proprietary ATM networks and a generic user experience. Over the next five years, deployers’ ATM strategies will become stratified: some deployers will focus on minimizing the cost of owning and operating a large network of basic cash dispensers; others will focus on providing access to a large network of basic cash dispensers—but not necessarily on owning and operating them. Still others will focus on leveraging their investments in technology and advanced functionality to improve and differentiate the ATM user experience.

Stratification of Deployer Strategies

Figure 1.2

Illustration of Deployers’ Strategic Options

Today Tomorrow

Access

Experience

OwnedShared

Highly differentiated

Basic appliance

Access

Experience

OwnedShared


Basic appliance

Access

Experience

OwnedShared


Basic appliance

Access

Experience

OwnedShared


Basic appliance

Access

Experience

OwnedShared


Basic appliance

As deployers pursue the strategies that will best meet their needs, and the needs of their customers, the evolution of the ATM industry will no longer be a single path, but rather an array of diverging paths.

As the ATM industry’s business model evolves and deployers’ strategies diverge, it is increasingly important to understand deployers’ perspectives and outlooks—since it is their needs and priorities that will shape the future direction(s) of the ATM industry. To this end, the 2006 ATM Deployer Study provides an in-depth


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look at current ATM performance metrics and recent trends and developments, and presents an outlook for the next few years.

S t u d y O b j e c t i v e s & M e t h o d o l o g y

ATMs are bought, installed, managed, and operated by deployers. In order to understand the most critical performance metrics and trends in the industry—terminals, transaction volumes, functionality, surcharges, costs—one must go directly to the ATM deployers themselves. Accordingly, the 2006 ATM Deployer Study findings are based on data collected from a representative sample of U.S. ATM deployers.

The 2006 ATM Deployer Study is the fourth in a series of bi-annual studies sponsored by the leading EFT networks that tracks the ongoing evolution of the ATM industry. To the best of our knowledge, the 2006 ATM Deployer Study is the definitive primary research study tracking the ongoing evolution of the U.S. ATM industry and benchmarking ATM deployer performance. This study is intended to provide an assessment of the ATM industry and to serve as a tool for measuring deployers’ performance relative to the industry and their peers.

In particular, this study covers several key topics, including:

Terminal deployment trends

Historical, current, and future transaction levels

Adoption of (and interest in) advanced ATM functionality

Experience with and perceptions of check imaging at the ATM

Network operations and performance metrics

Technology trends (migration to Windows, next generation software)

Trends in surcharging and surcharge-free access

Deployer economics and revenue/cost structures

The findings presented in the 2006 ATM Deployer Study are based on survey responses from 161 deployers from across the country representing 134,110 ATMs. The survey sample represents 34% of the estimated 396,000 ATMs installed in the U.S. 1, and includes deployers of all types and sizes. Many of the industry’s most influential players participated in the study, including 26 of the top 50 retail banks (and 8 of the top 10), 12 of the top 25 credit unions, and 3 of the top 10 ISO ATM owners.

1 SourceMedia, ATM & Debit News, 2006 EFT Data Book


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Deployer Sample

Figure 1.3

Segment Definitions and Number of Respondents and ATMs by Segment

Definition # of

Deployers % # of ATMs %

Large Bank Assets $10Bn or higher 28 17% 65,077 49%

Other Bank Assets less than $10Bn 57 35% 3,068 2%

Large CU Assets $500MM or higher

38 24% 2,526 2%

Other CU Assets less than $500MM

14 9% 237 0%

Large ISO 2,500 ATMs or more 7 4% 54,559 41%

Other ISO Fewer than 2,500 ATMs 17 11% 8,643 6%

Total 161 100% 134,110 100%

The data collected for the 2006 ATM Deployer Study is a nationally representative sample that provides a comprehensive view of the ATM industry from which meaningful inferences and conclusions can be drawn.

A T M D e p l o y m e n t

Over the last ten years, the base of terminals installed in the U.S. has increased from 139,000 to 396,000—an average annual growth rate of 12%2. More recently, however, growth in terminal deployments has slowed significantly: between 1996 and 2001, ATM deployments grew at an average annual rate of 18%; between 2001 and 2004, deployments grew at an average annual rate of 6%; since 2004, deployments have increased only 3% per year.

Deployment Growth

Although industry deployments are increasing at a rate of 3% per year, individual deployers have experienced higher average annual growth rates due to both organic growth and mergers/acquisitions, with most deployer segments’ average growth rates ranging from 2% to 10% (large ISOs being the one exception).

2 SourceMedia, ATM & Debit News, 2006 EFT Data Book


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Average Annual Growth, 2004-2006

Figure 1.4

Average Annual Growth of On- and Off-Premise ATMs by Deployer Segment from 2004 to 2006

On-Premise Off-Premise

Large Bank 9% 7%

Other Bank 7% 9%

Large CU 8% 2%

Other CU 5% 3%

Large ISO N/A 43%

Other ISO N/A 8%

New ATM Purchases

The majority of ATM purchases over the last two years have been replacements for existing terminals, as deployers upgrade their ATM networks to meet compliance requirements and migrate to new technology platforms. 92% of FIs’ on-premise ATMs and 90% of their off-premise ATMs are now Triple DES compliant, and 74% and 90% of their on-premise and off-premise ATMs, respectively, have encrypted PIN pads. For ISOs, 65% of their ATMs are Triple DES compliant, and 59% have encrypted PIN pads.

Hardware Features

Figure 1.5

Percentage of ATMs that Have Different Hardware Features by Type/Location

0%13%

53%

81%

90%

90%

13%

53%

69%

74%

92%

95%

32%

54%

59%

65%

22%

0% 20% 40% 60% 80% 100%

Touch Screen

Audio-Enabled

Color Screen

Encrypted PINPads

Triple DES

Deposits

ISO FI Off-Premise FI On-Premise

Looking forward, almost all deployers plan to continue expanding their ATM networks, although most of the new terminals purchased between now and 2008 are intended to replace exiting terminals; 100% of them are expected to be Triple DES compliant, and the vast majority will have encrypted PIN pads and


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color screens. Most of deployers’ intended ATM purchases will be from NCR, Triton, and Diebold, which together are on track to supply 70% of the demand for new terminals over the next two years.

A T M T r a n s a c t i o n s

For individual deployers, the single most important performance metric is the number of monthly transactions performed at their ATMs on a per-terminal basis, which ultimately determines the viability of an ATM placement. The number of on-us transactions per ATM is a primary indicator of the degree to which an ATM is meeting the needs of an FI’s customers, while the number of foreign transactions has a direct impact on ATM revenue and the financial profitability of an ATM.

Per-ATM Transaction Volumes

The average number of monthly transactions per ATM varies significantly depending on the type of ATM deployer and the location in which an ATM is placed. FIs’ on-premise ATMs currently average 3,651 transactions per ATM per month, compared to 1,807 for their off-premise ATMs and 329 for ISO ATMs.

Per-ATM Transaction Profile

Figure 1.6

Average Monthly Transactions per ATM and Foreign Transactions per ATM by ATM Type/Location

Note: ISO average reflects a blend of ISO-Owned and Merchant-Owned ATMs

FI On-Premise FI Off-Premise ISO

Average Txns/ATM 3,651 1,807 329

% Foreign Acquired 20% 49% 100%

Average Foreign Txns/ATM

730 885 329

The percentage of transactions that are foreign acquired (i.e., performed by non-FI cardholders) also varies by deployer type and ATM location. At FIs’ on-premise ATMs, 20% of transactions, on average, are foreign acquired, compared to 49% of transactions at their off-premise ATMs. For ISOs, which do not have cardholders, all transactions are, by definition, foreign acquired.

Among deployers of on-premise ATMs, large credit unions have the highest per-ATM volumes, averaging 5,601 transactions per month, compared to 5,088 for smaller credit unions, 4,500 for large banks, and 1,910 for smaller banks. Credit unions also have the highest per-ATM volumes in the off-premise space, averaging 2,409 transactions per ATM per month for large credit unions and 2,266 for smaller credit unions. Large banks average 1,996 transactions per ATM and smaller banks 1,235. ISOs have the lowest average transactions per ATM, with large ISOs averaging 328 transactions per ATM, and smaller ISOs 330.


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Per-ATM Transaction Profile by Segment

Figure 1.7

Average Monthly Transactions per ATM by Deployer Segment

Note: ISO average reflects a blend of ISO-Owned and Merchant-Owned ATMs

On-Premise Off-Premise

Large CU 5,601 2,409

Other CU 5,088 2,266

Large Bank 4,500 1,996

Other Bank 1,910 1,235

Other ISO N/A 330

Large ISO N/A 328

Although volumes vary among deployer segments, across almost all segments, deployers are experiencing a decline in per-ATM transaction levels. Between 2004 and 2006, deployers’ average number of monthly transactions per on-premise ATM fell from 4,216 to 3,651, representing an annual decline of 7%. Similarly, per-ATM transaction volumes for off-premise ATMs decreased at an annual rate of 8%, from 2,123 in 2004 to 1,807 in 2006. ISOs’ transaction volumes, for the most part, have remained flat.

As per-ATM transaction levels decline and the percentage of foreign acquired transactions stagnates, the number of foreign acquired transactions per ATM—the number of transactions that produce revenue for deployers in the form of surcharge fees and interchange fees—is decreasing. This trend means that, in the absence of a surcharge-rate increase, deployers’ direct revenues per ATM are declining—and by extension, deployers’ profit margins are being increasingly squeezed.

Industry Transaction Volume

Based on transaction data provided by deployers and the estimated number of ATMs per deployer segment, we calculate that, currently, 8.0 billion transactions are performed at U.S. ATMs annually, representing a total of $600 billion in cash dispensed.


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Total U.S. ATM Transactions

Figure 1.8

Total Annual Number of ATM Transactions for On-Premise, Off-Premise, and ISO ATMs

Total ATMs

Average Transactions

per ATM Total Annual Transactions

On-Premise 130,000 3,651 5.7 Bn

Off-Premise 71,000 1,807 1.5 Bn

ISO 195,000 329 0.8 Bn

Total 396,000 8.0 Bn

It is interesting to note that while ISOs account for almost half of all ATM placements, they represent only 10% of the industry’s estimated total ATM transaction volume.

Redefining ATM Performance

As the number of transactions per ATM (and foreign transactions per ATM in particular) continues to decline, deployers are redefining the role of the ATM—and therefore will need to recalibrate how they measure ATM performance.

For those deployers that are refocusing on the ATM as a strategic customer touch point, old metrics such as transactions per ATM and revenue per ATM will be less relevant, and over time, these metrics may be replaced by new metrics such as percentage of customers that use an ATM, the profitability of customers that use ATMs, new accounts attributed to ATMs, balances and relationships saved due to ATMs, and the percentage of customers who are cross-sold at an ATM.

A T M F u n c t i o n a l i t y

Thirty years after ATMs were first deployed, their primary function—withdrawing cash—remains the same. Cash withdrawals continue to account for the vast majority of ATM transactions (75%), and other standard transactions (deposits, transfers, inquiries) account for 23% of ATM transactions. Only 2% of transactions are ‘other’ or advanced functions. However, as deployers re-evaluate the role of the ATM, some are taking another look at advanced functionality.

Advanced functionalities fall into three main categories: advanced banking functionalities such as mini statements and bill payment, value-added functionalities such as stamps and cell phone ‘top ups’, and marketing/customer relationship management (CRM) functionalities such as targeted marketing and cardholder preferences.

Most of the advanced features currently offered by deployers are banking functions: shared deposits are offered by 37% of deployers, domestic account-to-account transfers by 26%, and mini statements by 23%. The only value-add and marketing/CRM functions that have gained significant adoption are stamps


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(offered by 24% of deployers) and slide-show advertising (offered by 21% of deployers).

Current ATM Functionality

Figure 1.9

Percentage of Deployers that Offer Different Banking, Value Add, and Marketing/CRM Functionality

Note: Only functionality supported by at least 5% of deployers is shown.

6%

10%

10%

11%

17%

19%

21%

23%

24%

26%

37%

6%

7%

7%

9%

0% 10% 20% 30% 40%

Check Cashing

Bulk Cash Acceptance

Full Statements

'Internet Look and Feel'

Product Offers

Coupons

Targeted Marketing

Envelope-Free Deposits

FI Billpay

Multi-Currency

Slide Show Advertising

Mini Statements

Stamps

Domestic A2A Transfers

Shared Deposits

Banking Value-Add Marketing/CRM

6%

10%

10%

11%

17%

19%

21%

23%

24%

26%

37%

6%

7%

7%

9%

0% 10% 20% 30% 40%

Check Cashing


Full Statements


Product Offers

Coupons

Targeted Marketing


FI Billpay

Multi-Currency


Mini Statements

Stamps

Domestic A2A Transfers

Shared Deposits


Although the current penetration of advanced marketing/CRM functions is low, deployers’ interest in these functions is high. Of the top ten functions deployers indicate interest in, seven of them are features that will enable deployers to tailor the user experience to individual cardholders and strengthen their customer relationships and cross-selling capabilities. Deployers’ top three areas of interest for future advanced functionality are targeted marketing campaigns, product offers (e.g., credit card solicitations), and cardholder preferences.


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Interest in ATM Functionality

Figure 1.10

Average Interest Ratings for Functionality Not Currently Offered

Note: Interest ratings are based on a scale of 1-10, where 1 = Not Interested and 10 = Extremely Interested.

3.3

4.4

5.1

5.3

5.8

6.6

3.9

3.9

4.1

4.3

1 2 3 4 5 6 7

Prepaid Card Purchases



Full Motion Advertising


Request Information


Cardholder Preferences

Product Offerings

Targeted Marketing


3.3

4.4

5.1

5.3

5.8

6.6

3.9

3.9

4.1

4.3

1 2 3 4 5 6 7

Prepaid Card Purchases



Full Motion Advertising


Request Information


Cardholder Preferences

Product Offerings

Targeted Marketing


The industry is now at a crossroads with respect to ATM innovation. For deployers that view and manage the channel using traditional metrics, investment in new functionality will be minimal. On the other hand, deployers that view ATMs as a strategic channel and a point of banking will leverage new functionality to create a differentiated customer experience at their ATMs. For these deployers, functionality will not be defined in terms of specific functions, however, but in terms of the level of personalized service and convenience it offers.

C h e c k I m a g i n g a t t h e A T M

Deposits have been part of the standard ATM transaction set for decades, but with new legislation and improved technology, ATM deposits are now taking center stage.

The Check Clearing Act for the 21st Century (Check 21) was signed into law in October 2003, giving substitute checks the same legal status as the paper checks, and paving the way for check imaging at the ATM. After three years of testing and pilots, it appears as though imaging ATMs are ready to hit the mainstream.

Wells Fargo recently announced plans to add imaging capability to 400 terminals by the end of 2006.3

Bank of America has announced plans to rollout 1,500 imaging ATMs by the end of the 2006.4

3 Wells Fargo Press Release, May 25, 2006.


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There are many potential benefits associated with imaging check deposits—including cost savings, extended ATM cut-off times, reduced check fraud, and increased ATM deposit volumes—which have driven the recent investment in imaging ATMs. There are also, however, a number of challenges and issues that still need to be addressed as FIs roll-out image-enabled ATMs: introducing imaging technology and processes requires significant investment, and those costs may outweigh the benefits for some deployers; similarly, some deployers are still deciding whether envelope-free ATMs are really better than envelope-deposit ATMs in terms of transaction speed, reliability, and consistency of experience.

Currently, the deployment of image-enabled ATMs is limited to large banks and large credit unions—although deployers across all segments indicate plans to begin piloting image-enabled ATMs within the next 12 months.

Deployers with Imaging ATMs

Figure 1.11

Percentage of Deployers that Currently Deploy or Plan to Deploy Imaging ATMs, by Segment

43%

93%

35%

69%

43%

81%

37%

7%

41%

31%

57%

19%21% 21%

0%

20%

40%

60%

80%

100%

LargeBank

OtherBank

Large CU Other CU LargeISO

OtherISO

Yes, have imaging ATMsNo, but plan to offer within 12 monthsNo, and no plans to offer within 12 months

Although a sizable number of larger FIs have begun to deploy imaging ATMs, these terminals represent only a very small portion of their overall ATM fleets. This dynamic is set to change, however, as FIs that currently have imaging ATMs move from pilot to a broader roll-out within the next two years. Large banks that already have image-enabled ATMs project that, by 2008, imaging ATMs will make up 31% of their ATM networks; for large credit unions, imaging ATMs are projected to constitute 45% of their ATM mix by 2008.

4 ATM & Debit News, "ATM Check Imaging May Finally Make Debut In The Mainstream", June 15, 2006.


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Imaging ATMs, 2006 vs. 2008

Figure 1.12

Imaging ATMs’ Share of Deployers’ ATM Mix in 2006 and 2008

Note: Percentages are for deployers that currently have at least one imaging ATM.

2006 2008

98%90%

10%2%

0%

20%

40%

60%

80%

100%

Large Bank Large CU

Non-Imaging ATMs Imaging ATMs

69%55%

45%31%

0%

20%

40%

60%

80%

100%

Large Bank Large CU

Non-Imaging ATMs Imaging ATMs

Both deployers and vendors are optimistic about the future of deposit automation. For the last two and half years, vendors have been developing and improving imaging capabilities, deployers have been piloting and testing imaging ATMs, and FIs have been upgrading their back offices to be able to accept and process images. The results of these investments are about to bear fruit, and the next five years will be a break-out period for ATM deposit automation.

Although there are still issues to be addressed, one thing is clear: with both deployers and vendors committed to making imaging work, the focus on ATM deposits and deposit automation will increase—and as deposit volume at ATMs increases, the shift in transaction mix may help change the perception of the ATM from that of a cash dispenser to that of a full self-service terminal.

A T M O p e r a t i o n s

Operating a network of ATMs is a complex proposition involving numerous disparate functions: ATMs must be purchased and installed; transactions must be processed and balances settled; paper jams must be cleared and broken parts repaired; cash must be restocked; deposits must be picked up and processed; software must be maintained and upgraded. How a deployer manages these functions has significant implications for its cost structure and operational efficiency—which have become increasingly important as ATM profit margins deteriorate.

ATM Servicing

Some deployers have been able to reduce their expenses and/or the complexity of servicing their ATMs by outsourcing some or all of these functions to third party providers with greater scale and focus; others have chosen to keep these functions in-house to ensure quality and retain greater control over their network. How and by whom an ATM network is serviced varies from deployer to deployer depending on their network size, terminal density, and available resources, and may vary within a deployer’s network depending on ATM location or ownership.


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FI deployers may service all of their ATMs in-house or rely exclusively on third party providers, or they may use them to supplement their own in-house capabilities. Figures 1.13 and 1.14 show FIs’ servicing infrastructures for cash replenishment, deposit pick up, first line maintenance (FLM), and second line maintenance (SLM) for their on-premise and off-premise ATMs.

Infrastructure – FI On-Premise Infrastructure – FI Off-Premise

Figure 1.13

FIs’ Servicing Arrangements for their On-Premise ATMs

Figure 1.14

FIs’ Servicing Arrangements for their Off-Premise ATMs

50%58%

31%

8%

13%

35%29%

33%

18%

14% 13%23%

72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CashRep.

Dep.Pick Up

FLM SLM

% o

f D

ep

loyers

50%58%

31%

8%

13%

35%29%

33%

18%

14% 13%23%

72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CashRep.

Dep.Pick Up

FLM SLM

% o

f D

ep

loyers

12% 14% 9%

12%17%

15%

12%

76%68% 73%

84%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CashRep.

Dep.Pick Up

FLM SLM

% o

f D

ep

loyers

12% 14% 9%

12%17%

15%

12%

76%68% 73%

84%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CashRep.

Dep.Pick Up

FLM SLM

% o

f D

ep

loyers

All Handled In-HouseIn-House Business Hours/3rd Party After HoursSome In-House/Some 3rd PartyAll Handled by 3rd Party

All Handled In-HouseIn-House Business Hours/3rd Party After HoursSome In-House/Some 3rd PartyAll Handled by 3rd Party

For ISOs, servicing arrangements often vary depending on which entity owns the ATM and what kind of contract they have negotiated with the site owner. An ISO may provide its own ATM servicing, contract with a third party, or leave servicing to the site owner. ISOs’ servicing infrastructures for cash replenishment, first line maintenance, and second line maintenance for their owned and merchant-owned ATMs are depicted in Figures 1.15 and 1.16.


Page 16

Infrastructure – ISO-Owned

Figure 1.15

ISOs’ Servicing Arrangements for their ISO-Owned ATMs

Infrastructure – Merchant-Owned

Figure 1.16

ISOs’ Servicing Arrangements for their Merchant-Owned ATMs

48%

64% 64%

14%

9%

38%27%

36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cash Rep. FLM SLM

% o

f D

ep

loyers

48%

64% 64%

14%

9%

38%27%

36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cash Rep. FLM SLM

% o

f D

ep

loyers

24%

43%

62%

62%

43%

14% 14%

38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cash Rep. FLM SLM

% o

f D

ep

loyers

24%

43%

62%

62%

43%

14% 14%

38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cash Rep. FLM SLM

% o

f D

ep

loyers

Handled In-HouseHandled by Merchant/ Site OwnerHandled by Third Party

Handled In-HouseHandled by Merchant/ Site OwnerHandled by Third Party

Terminal Driving

Terminal driving—transaction authorization/settlement and EFT network routing—is a competitive, scale-driven business: the greater the transaction volume, the lower the cost per transaction.

Overall, 67% of deployers outsource terminal driving to a third party provider; 31%, primarily large banks and credit unions, drive their terminals in-house.

Of those that outsource their terminal driving, 54% use one of the leading EFT networks or their parent processing company.

For those deployers that maintain their terminal driving platforms in-house, 28% have an ACI BASE24 platform, 19% have a Mosaic platform, and 8% have an S2 platform. In terms of their share of ATMs, however, ACI BASE24 has the strongest presence: 64% of ATMs with in-house terminal driving systems connect to a BASE24 platform.

ATM Fraud

An increasingly important component of deployers’ ATM operations is detecting and preventing ATM fraud. Defining ATM fraud can be challenging, however, as the term can mean a variety of things: 1) that the ATM was the point of fraud, meaning that a compromised card was used at an ATM, or 2) that the ATM was the point of compromise, meaning that a card was compromised at an ATM.

As a point of fraud, ATMs are the primary channel for FIs’ debit card losses. In 2004, FIs had estimated net losses of $546 million due to debit card fraud, of which $345 million (64%) was withdrawn from ATMs. As a point of compromise, however, ATMs are not the primary source of breaches or card/PIN compromises. According to data from Fair Isaac’s CardAlert Fraud Manager, only 3% of


Page 17

identified cases in which perpetrators were able to obtain card track data and PINs between January 2006 and July 2006 took place at ATMs.5

Most deployers have taken proactive steps to prevent fraud at their ATMs. In addition to upgrading ATMs to comply with Triple DES regulations, many deployers monitor their ATMs for false fronts and compromised parts, verify the legitimacy of their third party servicing companies, and ensure that their hardware and parts are certified.

ATM fraud is an issue for individual card issuers and terminal deployers—but it is also an issue that must be addressed by the broader ATM industry. Topping deployers’ list of industry-level initiatives to combat fraud are improving authentication methods (moving to chip cards, biometrics, etc.), improving transaction monitoring (through checking card verification values (CVV) and the use of neural networks), and increased education/awareness for consumers, merchants, and FIs.

A T M T e c h n o l o g y

For much of their thirty-year life, ATMs have been vertically integrated devices, combining hardware and software from one provider. The ATM technology landscape is poised to change significantly, however, as deployers migrate from OS/2 to Windows and from proprietary software to open standards. As hardware and software become decoupled, deployers are no longer locked into the proprietary software that accompanies a terminal. As a result, selecting ATM software is becoming a strategic decision in its own right—and one that has significant implications for deployers’ future ATM capabilities.

ATM Operating Systems

Although no longer sold, OS/2 continues to be the predominant ATM platform, with the majority of ATMs—58%—currently running on OS/2. The prevalence of OS/2 will not last much longer, however, as most deployers have already begun migrating to Windows: 74% of deployers have at least one Windows ATM in their fleet, and 23% of deployers have already migrated 100% of their ATMs to Windows. Many deployers plan to complete their migration to Windows over the next two years, and by 2008, 56% of deployers will be running Windows on 100% of their ATMs. In terms of the installed ATM base, 63% of ATMs in the U.S. will be running on Windows by 2008.

5 Fair Isaac, CardAlert Fraud Manager, 2006.


Page 18

ATM Operating System Mix, 2006 vs. 2008

Figure 1.17

Percentage of ATMs Running Different Operating Systems in 2006 and 2008

2006 2008

DOS1%

OS/258%

Other15%

Windows26%

DOS1%

OS/222%

Other14%

Windows63%

Although migrating to Windows provides increased flexibility and some operational efficiencies, deployers are facing new challenges that did not exist in an OS/2 environment (virus protection, patch management, firewalls, etc.), which increase the complexity of managing ATMs in the new technology environment.

Next Generation Software

Currently, 14% of ATMs are running advanced, Windows-based software. By 2008, approximately one third of all ATMs will be running next generation software. The percentage of ATMs running NCR’s APTRA software will increase from 7% to 19%, and the percentage of ATMs running Diebold’s Agilis software will increase from 5% to 9%; 3% of ATMs will be running Wincor software, and 1% will be running Phoenix’s VISTAatm. For 13% of ATMs, the software they will be running in 2008 is still undetermined.


Page 19

ATM Software Mix, 2006 vs. 2008

Figure 1.18

Percentage of ATMs Running Different Software Products for 2006 and 2008

Note: Percentages are based on number of ATMs.

2006 2008

Fujitsu1%

TritonStandard

24%

Diebold TCS/TCS+

15%

Other2%

TranaxStandard

10%

Proprietary4%

Wincor 2%

Tidel Standard

7%

NCR Other7%

NCR APTRA

7%

NCR NDC11%

DieboldOther5%

DieboldAgilis5%

NCR25%

Diebold25%

Diebold TCS/TCS+

7%

TranaxStandard

6%

PhoenixVISTA1%

Proprietary1%

TBD13%

TritonStandard

27%

Wincor3%Tidel

Standard8%

NCR APTRA19%

DieboldOther2%

DieboldAgilis9%

NCR NDC4%

NCR23%

Diebold18%

Diebold TCS/TCS+

7%

TranaxStandard

6%

PhoenixVISTA1%

Proprietary1%

TBD13%

TritonStandard

27%

Wincor3%Tidel

Standard8%

NCR APTRA19%

DieboldOther2%

DieboldAgilis9%

NCR NDC4%

NCR23%

Diebold18%

As deployers migrate to open, next generation software, multi-vendor software has begun to gain traction, although examples of mass roll outs are limited. Over time, however, it will become a more viable option—and a number of FI deployers are interested in moving to multi-vendor platforms.

The New User Experience

Until recently, the role of an ATM, in terms of the customer experience, was well-defined—an ATM was an ATM. That view, however, has been largely derivative of the technology in place. In the new environment, deployers will be able to differentiate the customer experience by terminal and/or by cardholder: the ATM experience will not have to be generic.

For many deployers, ATMs will continue to deliver a purely functional user experience. For others, however, the investments they have made (and are making) in advanced Windows software are positioning them to provide a more flexible and engaging ATM user experience. In the short term, this differentiated experience is taking the form of more visually appealing ATM screens and cardholder preferences. In the longer term, it will take the form of segment-level and 1:1 marketing that enhances and differentiates customers’ ATM experiences in a meaningful way.

S u r c h a r g i n g & S u r c h a r g e - F r e e A c c e s s

April 1, 2006 marked the 10th anniversary of the day that the cross-border ATM networks, Plus and Cirrus, lifted their bans on ATM surcharging in the U.S. —and fundamentally altered the dynamics of the ATM industry.


Page 20

Surcharge Fees

In the ten years since surcharging was introduced at the national level, nearly all deployers have incorporated surcharging into their ATM strategy and business model. Across all segments, 97% of deployers impose a surcharge fee on at least a portion of their foreign acquired transactions.

Deployers continue to increase the surcharge fee they charge to non-customers: the average surcharge rate at an on-premise ATM has increased 20% over the last five years, from $1.45 in 2001 to $1.57 in 2003 and $1.74 in 2006; similarly, off-premise surcharge rates have increased 21% from $1.48 in 2001 to $1.65 in 2003 to $1.79 in 2006.

Average Surcharge Rates, 2001 vs. 2003 vs. 2006

Figure 1.19

Average Surcharge Rates for On- and Off-Premise ATMs for 2001, 2003, and 2006

Note: Averages are based on number of survey respondents, not ATMs (i.e., unweighted).

$1.45 $1.48

$1.57$1.65

$1.74$1.79

$1.00

$1.25

$1.50

$1.75

$2.00

On-Premise ATMs Off-Premise ATMs

2001 2003 2006

Combined with an average foreign fee of $1.27, consumers currently pay more than $3.00 every time they use an ATM that is not deployed by their own FI—and potentially much more. As the cost of using a foreign ATM increases, a deployer’s ability to provide convenient fee-free access to ATMs is becoming increasingly important.

One way to provide convenient fee-free ATM access is simply to deploy more ATMs—and many FIs have historically pursued this path. In today’s environment of declining per-ATM transaction volumes and rising costs, however, the business case for deploying additional ATMs can be challenging. To solve this dilemma, many deployers are pursuing one or more of the following strategies to increase their cardholders’ ATM access:

Selective surcharge alliances

Surcharge reimbursement programs

ATM branding agreements


Page 21

Selective Surcharge Alliances

Across deployer segments, credit unions are most likely to participate in selective surcharge alliances, many of which are credit union-specific. 86% of smaller credit unions and 79% of large credit unions participate in a selective surcharge alliance, compared to 39% of smaller banks and 25% of large banks.

Selective surcharge alliances come in an increasing variety of ‘flavors’, and different selective surcharge alliances have different participation requirements: some require that all of a deployer’s ATMs participate, others only a portion of them, while others are card-only agreements.

Credit unions and smaller banks are most likely to participate in reciprocal sharing agreements, and by choice or by requirement, to share all of their ATMs.

Large banks and ISOs typically share only a portion of their ATMs—and large banks are most likely to participate in card-only agreements that expand their cardholders’ ATM access but maintain the unique benefit provided by their proprietary ATM network.

Surcharge Reimbursement

Reimbursing surcharge fees can be an effective tool for attracting and retaining customers, and, for smaller FIs, can help ‘level the playing field’ in terms of ATM access. It can also, however, be very expensive.

Currently, 48% of large banks, as well as 26% of smaller banks and 21% of large credit unions, reimburse surcharge fees for at least some of their cardholders.

Most FIs that reimburse surcharge fees do so selectively, in highly competitive geographic markets or for high value customers (which a bank may define by account balance, account tier, or banking behavior). Others control their costs by imposing limits on monthly reimbursements (either by capping the amount they will reimburse or reimbursing cardholders for a certain number of foreign transactions).

ATM Branding Agreements

ATM branding is one of the hottest topics in the ATM industry—and may go a long way toward redefining industry economics.

ATM branding agreements typically exist between FIs and ISO deployers. Under these arrangements, the ISO owns and operates an ATM, but the ATM is branded with the FI’s logo, name, and, in some cases, ATM screens. The FI usually pays a monthly fee to the deployer in return for surcharge-free access to that ATM for its cardholders.

Currently, 38% of ISOs—primarily large ISOs—have one or more ATM branding agreements with FIs in place. Another 24% are actively pursuing branding agreements, and 33% may be interested in the future. Only 5% of ISOs are not interested.

To date, most branding partnerships have been limited to large banks: 41% of large banks currently have at least one branding agreement in places, and


Page 22

another 7% are actively pursuing one. Although some smaller FIs are pursuing branding agreements or are interested in exploring them, interest is primarily concentrated among large banks and large credit unions.

Branding Practices – FIs

Figure 1.20

Current Participation/Interest in Branding Partnerships among FI Deployers

8%

7%

7%

24%

19%

79%

66%

69%

30%

9%

41%

14%

0% 20% 40% 60% 80% 100%

Other CU

Large CU

Other Bank

Large Bank

Currently have Branding Agreements in PlaceActively Pursuing Branding AgreementsMay be Interested in ATM Branding Long TermNot Interested in ATM Branding

% of Deployers

8%

7%

7%

24%

19%

79%

66%

69%

30%

9%

41%

14%

0% 20% 40% 60% 80% 100%

Other CU

Large CU

Other Bank

Large Bank

Currently have Branding Agreements in PlaceActively Pursuing Branding AgreementsMay be Interested in ATM Branding Long TermNot Interested in ATM Branding

% of Deployers

FIs currently pay between $90 and $300 per month to brand an ATM, with a median fee of $250. The cost per ATM varies depending on the owner of the ATM, the location of the ATM, and the number of transactions the FI’s cardholders currently perform (which determines how much surcharge income the ATM owner will be foregoing).

FIs report that their cardholders currently perform an average of 117 transactions per month at their branded ATMs, which means that, on a per-transaction basis, FIs are paying $2.13 per cardholder transaction (plus interchange)—a 19% premium over what they would pay to reimburse those cardholders for surcharge fees incurred at an unbranded foreign ATM, but without the benefit of branded recognition.

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 footprint and increasing cardholders’ surcharge-free ATM access at a lower cost than deploying ATMs. Of those FIs that have branded ATMs, three-quarters plan to brand additional ATMs—and many of them are in the process of negotiating additional agreements.


Page 23

A T M E c o n o m i c s

When the 2004 ATM Deployer Study was published, ATM deployers faced the challenge of shrinking margins—the result of declining revenues and rapidly increasing costs. Over the last three years, that margin pressure has not abated.

The fundamental economics of owning and operating ATMs are still misaligned. Revenue is generated almost exclusively on a per-transaction basis (more specifically, per foreign acquired transaction), while expenses are largely fixed and incurred on a per-ATM basis.

Per-ATM Revenues

A number of factors are combining to further erode the number of foreign transactions per ATM. Despite declining foreign transaction volumes, however, deployers have successfully maintained historical revenue levels, largely by increasing their surcharge rates. Since 2003, average per-ATM revenues for both on- and off-premise ATMs have increased by approximately 5%.

Deployers currently earn an average of $1,104 per month at their on-premise ATMs (64% from surcharge income and 36% from interchange income), and $1,013 per month at their off-premise ATMs (70% from surcharge income and 30% from interchange income).

Per-ATM Revenue by Location

Figure 1.21

Average Monthly Revenue for On- and Off-Premise ATMs

Note: Average off-premise revenues include both FI and ISO deployers.

Revenue Line Item On-Premise ATMs Off-Premise ATMs

Surcharge Income $706 $709

Interchange Income $398 $304

Total $1,104 $1,013

Per-ATM Expenses

On average, deployers incur monthly operating expenses of $1,444 per on-premise ATM, and $1,450 per off-premise ATM.


Page 24

Per-ATM Expense by Location

Figure 1.22

Average Monthly Expenses for On-Premise and Off-Premise ATMs

Note: Average off-premise revenues include both FI and ISO deployers.


Depreciation $417 $260

Cash Replenishment $185 $221

First Line Maintenance $125 $109

Second Line Maintenance $200 $150

Telecommunications $58 $100

Terminal Driving $100 $69

Back Office Operations $179 $100

Cost of Funds $100 $100

Corporate Overhead $80 $70

Rent N/A $271

Other Expense $0 $0

Total $1,444 $1,450

In spite of deployers’ ongoing efforts to reduce expenses, the cost of managing an ATM network, on a per-ATM basis, continues to rise. For on-premise ATMs, the increase in expenses has been driven largely by increases in cash replenishment costs, back office operations, and corporate overhead. The increase in off-premise ATM expenses is due to the same factors, as well as increases in costs of funds and rent payments.

Between 2003 and 2006, per-ATM expenses have increased for both on-premise and off-premise ATMs. Deployers of on-premise ATMs have experienced an average increase of 10% in expenses between 2003 and 2006; deployers of off-premise ATMs have experienced a more significant increase of 21%.

Deployers’ per-ATM expenses vary significantly depending on the size and type of the deployer.

For on-premise ATMs, large banks have the lowest monthly expenses per ATM, averaging $1,131 per ATM. In comparison, large credit unions incur the highest costs, averaging $1,976 per ATM per month. For off-premise ATMs, ISOs have by far the lowest operating costs, with large ISOs spending $680 per month to operate an ATM, and smaller ISOs spending $522. Smaller banks, which have the lowest operating expenses across FI deployer segments, pay around twice that.


Page 25

Per-ATM Expense by Deployer Segment

Figure 1.23

Average Monthly Expense for On- and Off-Premise ATMs by Segment


Large Bank $1,131 $1,736

Other Bank $1,313 $1,256

Large Credit Union $1,976 $2,549

Other Credit Union $1,912 $2,578

Large ISO N/A $680

Other ISO N/A $522

With a much greater transaction base over which to spread their costs, however, FIs incur much lower per-transaction costs than ISOs. Per transaction, ISOs’ costs are almost three times higher than those of banks and credit unions—and credit unions, which have the highest monthly expenses, have the lowest costs per transaction.

Per-Transaction Cost by Deployer Type

Figure 1.24

Average Cost per Transaction for Banks, Credit Unions, and ISOs

$1.40

$0.47$0.53

$0.00

$0.50

$1.00

$1.50

Bank Credit Union ISO

Per-ATM Profitability

Although per-ATM profitability varies from deployer to deployer—with some deployers operating profitable networks—on average, deployers lose $340 per on-premise ATM per month, and $437 per off-premise ATM per month. Only ISO deployers post a nominal positive average profit margin.

As profit margins deteriorate, many FIs are recalibrating their ATM strategies, shifting away from revenue generation and refocusing on meeting the needs of


Page 26

their customers. The value of FIs’ ATMs, from a customer service and delivery standpoint, however, is not accurately reflected in measures of direct financial profitability. As FI deployers’ focus shifts, the concept of ATM ‘profitability’—and what that means for their distribution strategies—must be redefined.

Although an FI’s priorities will vary depending upon the role the ATM channel plays in their broader retail banking strategy, most FIs would benefit from looking at their ATM network as a portfolio of locations. Rather than focusing solely on generating revenue, FIs need to assess the value of their ATMs along two dimensions, in terms of the value derived from non-customers and the service provided to their own customers.

ATM Value Portfolio

Figure 1.25

Matrix of Value Provided to Customers and Derived from Non-Customers

Negative Profit/High Customer Value

Invest Selectively

Negative Profit/Low Customer Value

Phase Out

Positive Profit/High Customer Value

Invest

Positive Profit/Low Customer Value

Maintain

Negative Profit/High Customer Value

Invest Selectively

Negative Profit/Low Customer Value

Phase Out

Positive Profit/High Customer Value

Invest

Positive Profit/Low Customer Value

Maintain

Dir

ect

Pro

fit

Positive

Negative

Low HighCustomer Usage

Although it may not be reflected in reported averages, most FIs have a mix of profitable and unprofitable ATMs in their networks. Those that generate high revenues and are frequently used by customers provide the maximum value to an FI. ATMs that are unprofitable, but that are frequently used by customers are still critically important as part of an FI’s overall distribution delivery strategy. ATMs that are profitable, but are not frequently used by customers, are also important—they ‘pay for themselves’ and provide a cushion that can be used to subsidize ATMs that are unprofitable but customer-critical. ATMs that are not performing along either dimension should be phased out, and the cost of operating those ATMs redeployed to better meet customers’ needs, either in the form of new ATM placements or alternative ATM access options.

As we move into the next phase of the evolution of the ATM industry and deployers focus on leveraging ATMs to acquire and strengthen customer relationships, redefining the ‘profitability’ of ATM portfolios in terms of both financial value and customer value will be critically important for ATM managers. By balancing the costs, revenues, and customer value of their ATM networks, FIs will put themselves in the best position to prioritize ATM channel investments.

2006 atm deployer study 082506_co-op_execsummary

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