Merchants and Consumers
   Cash Over Credit

   Are ATMs
New Pla

are Choosing


by Noah Wieder       

   A cautious economy, the high cost of credit and the growth of the ATM industry have spurred a purchasing revolution. As a natural occurrence, customers are moving from credit card purchases to debit cards as their preferred payment method. According to a MasterCard Consumer Segmentation Study, among people that use both credit and debit cards, debit cards are used more often: 5.9 times per month vs. 5.1 times per month for credit cards.
   In a reverse of financial trends a decade ago, many experts believe the credit card industry is showing stagnant growth. By contrast, the booming ATM marketplace is finding its machines in an unprecedented number of locations. In fact, a recent Nilson Report predicts that by the year 2005, the number of ATMs will double from 1997 numbers. For bankcard ISOs, this presents not only a challenge, but also a significant opportunity.
   EAI (dba USB Merchant Services) was a sales organization exclusively dedicated to the sale of credit card programs. Attracted by the generous per machine commission offered by ATM sales (vs. the average $500 per bankcard placement) and drawn to the per-swipe revenue stream (back-end) generated by ATMs, company president Bob Olsen added ATMs to their product line to give merchants flexibility and added value. "Our ISAs now offer the purchasing power of credit card sales, plus the convenience, pull-through and traffic generation provided by having an ATM on site. With over 15 billion ATM transactions a year, we can't afford not to be in this business!"
   ISOs and merchants alike are finding that ATMs mean sales. Credit union industry experts estimate that more than 60 billion consumer transactions flowed over ATMs in Y2000 and that consumers are using this platform more than any other financial service delivery point. At the same time, trade publications in the restaurant, quick-serve, hospitality and convenience store industries report that ATMs increase foot traffic, boost per visit spending, cut down on check fraud and reduce credit card fees.
   Statistics tell the story. In the restaurant industry, for example, association reports show that:

  • ATMs increase traffic up to 30% and increase per visit sales 10%-20%.
  • Up to 80% of cash obtained at ATMs in host bars and restaurants is spent on-site.
  • At quick serve restaurants we've seen the average check increase up to 58%.

   In addition, experts predict that the demand for kiosk ATMs will grow exponentially as the population of Internet savvy, self-service oriented consumers grows. An August 2000 overview by Dove Consulting observes that consumers under 55 are particularly likely to use ATMs and are "completely comfortable conducting [ATM] transactions."

The Evolution of a Revolution

   On the down side of the ATM "opportunity," even the industry's most ardent supporters admit that it has had its share of unscrupulous dealers. Salesmen with an eye to make a quick buck often promised outrageous returns while failing to deliver on those promises. Other abuses resulted in customer service nightmares through the placement of undependable equipment. While some of those businesses still exist - and need to be warned about-you can find ATM specialist firms that are sophisticated, dependable partners.
   The strongest ATM organizations are those with solid institutional affiliations. The security, financial backing and network capabilities offered by these relationships establish an unprecedented level of professionalism. At the same time, ATM companies with strong ISO support have become increasingly attractive to banks, which recognize the need to penetrate markets and establish quality representation in the field. XtraCash is one such example.
   Business stability and financial reliability within the ATM industry have accelerated the acceptance of merchant ATMs as has the proven recurring income stream generated by ATMs. However, recognizing the competitiveness within the ATM industry has increasingly demanded a higher level of ISO accountability, profits, service and support. Electronic Benefits Transfer (EBT), Internet accessible transaction reports, fast lease approvals and equipment installations, as well as capabilities to accept cards from major networks, are common expectations. ISOs have had to rely on solid corporate relationships in order to deliver on these demands and still generate significant returns.
   ATMs have also proliferated because manufacturers have built machines to be easy loading, secure, reliable and virtually maintenance-free. In addition, the size of the equipment has decreased and lease/purchase costs have come down; the newest machines have footprints smaller than two square feet and pay for themselves with as few as four swipes per day!

ISO Opportunity

   While ATMs have boomed, experts predict there's still plenty of room for growth. Certainly, independent stores remain a strong ATM market. But you can also expect ATMs to pop up in non-traditional locations �tennis courts to courthouses, beauty parlors to bingo parlors. In addition, there's a growing interest in system branding, where companies such as McDonald's, major hotel chains, American Express, Safeway and Winn Dixie install ATMs reflecting their unique corporate identities.
   At the same time, ATM fees are also becoming widely accepted. Market research tracks that younger users are much more willing to incur charges for the conveniences provided by ATMs. And as technology continues to expand ATM capabilities and deliver new services to consumers, one can easily predict that additional features will translate into additional usage� and additional residual income to boot! For the ISO, ATMs dispense opportunity. Because if cash is king, ATMs are the keys to the treasury.

Choosing the Right Partner

Choosing the right ATM company is crucial to the success of an ISO. Here's a quick checklist to ensure your partner is a strong organization.

Financial Strength

Is your ATM company affiliated with a major financial institution? Has that institution supported technology development and system upgrades?

Track Record

Who are the ATM company's customers? Can you talk to affiliated ISOs and merchants for references?


Are approvals handled in a timely manner, creating a quick turnaround between the time a lease is signed, a machine is installed and when you get paid?

Program Scalability

Can your ATM company provide service to any size merchant, from single locations to hundreds of sites?


Is there a dedicated sales support team for distributors? Are problems handled promptly? Are machines kept operative?


Will you have ongoing Internet access to daily activity reports? Are detailed statements provided? Are residuals tracked and paid in a timely manner?

ATM Factoids

  • The typical ATM customer spends 20%-25% more than a non-ATM customer.
  • 40% of regular ATM users use the ATM an average of ten times per month.
  • 60% of Americans 25-34 years old and 51% of Americans 25-49 years old use ATMs eight times a month and withdraw an average of $55 each time.

Source: MasterCard Consumer Segmentation Study

How Much Does it Cost?

The average cost of various payment methods (based on time to make payment, back room time to prepare deposits, bank charges and other charges such as collection fees) are as follows:

Electronic Benefits Transfer$0.15
Food Stamps$0.16
Debit Cards$0.29
Electronically Authorized Checks $0.37
Credit Cards$0.80

Source: AT&T; Global Information Solutions

Noah Wieder is Vice President of Sales and Marketing for XtraCash ATM. Founded in 1995 as an independent ATM company, XtraCash ATM is the ATM Division of Amicus Financial. Contact XtraCash ATM by phone at 1.888.712.1600 or visit their website at