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The number of ISOs participating in the ATM business has shrunk by nearly a third in the last few years, a phenomenon that will likely continue, according to George Albright, chairman of Speer & Associates.

   There were nearly 300 ISOs distributing ATMs only a few years ago, a number that is much closer to 200 now, and could be a little over 100 in a few years.
   The consolidation should be no surprise, Albright said. The ATMs are just following similar trends in financial services, including credit cards. However, there's still room for the small ISO who provides ATMs in a small geographic area and who tightly controls his overhead.

Green Bay, Wis.-based ISO Cash Depot recently licensed TNS Smart Network's Smart Processing Suite, enabling the ISO to switch its own ATM transactions.

   By being able to switch transactions itself rather than going through a third party, Cash Depot will be able to offer its own customers better speed, efficiency and value while controlling costs, providing customers with better discounts, said Dave Charles, Cash Depot president.
   "This enables us to be more competitive and to control our own destiny," Charles added. "There's a lot of consolidation in the industry and this helps insulate us from that. This becomes a good base for us to start making our own acquisitions."

Large ISOs remain optimistic about new deployment opportunities and expect to nearly double their ATM fleets in the next two years, according to a recent Dove Consulting study.

   Gas stations/convenience stores will remain the most popular channel for retail ATM placements, followed by supermarkets, schools and malls. Other study findings:

  • The average surcharge for an off-premises cash withdrawal rose from $1.36 in 1998 to $1.48 in 2001, or about 9 percent. Some ATM providers can be expected to increase fees again in an attempt to produce greater income to offset their costs.
  • For off-premises ATMs, large credit unions have the highest cost structure, incurring a cost of $1,624 per ATM per month. ISOs with fewer than 1,000 ATMs tend to have the lowest costs, averaging $732 per terminal per month.
POS terminal hardware and software makers have high hopes for high-tech terminals first unveiled in the spring.

   NCR Corporation hopes a POS terminal with a 1 GHz Pentium III processor, as well as new high-speed thermal printers and advanced multimedia displays will address retailers' need for quick processing.
   The NCR RealPOS 7456 is designed for high volume retail locations, according to NCR officials. The devices also features consumer advertising and inventory inquiries and other options.
   Trintech Group expects open source technology to attract users to its PayWare OpenPOS terminal architecture for secure PIN-based card payment applications.

The battle between PIN and signature-based debit cards is moving beyond a question of which is more secure (see Transaction World, April 2002) to which version is less costly for merchants and consumers.

   PIN-based debit tends to carry lower interchange fees, and therefore, lower revenue for the banks, while signature-based debit has higher interchange fees and higher revenue for the banks, according to Tony Hayes, director of financial services practice for Dove Consulting, Boston, Mass.
   The reason for the difference, according to Hayes is that the interchange for signature debit is most similar to the payment vehicle it most represents, credit cards, with the rate established by Visa and Mastercard.
   PIN debit, by contrast, has come from the world of the electronic funds transfer networks, like Pulse, Houston, Tex., and Star Systems, a unit of Concord EFS, Memphis, Tenn. PIN debit was originally seen as a lower cost alternative to checks, so the interchange rates reflected this, though they have risen over time. Stan Paur, president of Houston-based Pulse EFT, said the rates are likely to go up again this year because they are long overdue for an increase. The networks currently charge 10 to 45 cents per transaction, depending on the network. Pulse charges 13 cents per transaction.
   Even with an increase, the PIN-based transactions are likely to continue to trail the signature-based transactions in terms of revenues to the issuing banks, according to Hayes and Paur. The PIN-based transactions are inherently less risky because they access the customer's account immediately rather than the next day, yet the higher losses on signature-based transactions are still less than the additional revenue, according to Hayes. Merchants prefer the PIN-based debit due to the lower fees.
   To make up the difference in revenues, some banks are imposing fees as high as $1.50 on PIN-based debit transactions.
   According to Dove Consulting, however, a fee as little as 15 cents per transaction would bring in enough additional revenue to make PIN-based debit transactions as profitable to issuing institutions as signature-based debit transactions. According to a Dove Consulting study, Fleet Bank charges as much as $1.50 on online debit transactions, while other institutions may have stated fees but waive them for "preferred" customers (e.g., those with large or numerous accounts with the bank). Still other financial institutions don't charge anything for PIN-based debit or incent customers to use signature-based transactions rather than charging for the PIN-based transactions.
   In 2001, there were about 5.2 billion PIN-based debit transactions and 6.8 billion signature-based debit transactions, according to Hayes. Though Paur expects PIN-based debit to eventually overtake signature-based debit, Hayes points out that the totals for both types of transactions has been growing for the last few years, with the gap in the numbers remaining about the same.
   The totals for both types of debit transactions will be largely impacted by the retailers class action lawsuit against Visa and MasterCard, an outgrowth of Wal-Mart's refusal to pay increased fees sought by Visa's Interlink network. The parties are awaiting a trial date.

You can now find NACHA operating rules online at

   The ACH Rules Online is an electronic version of the printed book and contains everything the print edition features, including the NACHA Operating Rules in its entirety, New Rules for 2002, Corporate Guidelines, a Quick Find Section, Regulation E and the Electronic Fund Transfer Act.
   To access the ACH Rules Online, you must have purchased a print edition of the 2002 ACH Rules or the 2002 ACH Rules Corporate Edition. The member price for the 2002 ACH Rules is $33; the non-member price is $55. A Corporate Edition is $17 for members, $37 for non-members.

POS shipments are expected to rebound in 2002 after falling off 7 percent in 2001, according to the 2002 North American Retail POS Terminal Study by IHL Consulting Group, Franklin, Tenn.

   While mass merchants, warehouse clubs, convenience stores and gasoline stations added POS terminals at a faster pace in 2001, that was more than offset by declines in department stores and other retail sectors as retailers put off purchases due to economic uncertainties, according to IHL. But the economy, and POS shipments, should pick up this year.