Banks have options when developing their ATM channel strategies -- they can deploy in-store or stand-alone ATMs, and ATMs that basically are cash dispensers or devices with all the bells and whistles, such as image deposit capture. Traditionally, a bank's strategy needed to consider maintenance costs -- until now. A new business model offers financial institutions an alternative distribution method that puts a twist on the surcharge-free ATM network.
King of Prussia, Pa.-based Select-A-Branch (SAB) introduced a service that allows banks to expand their ATM networks without purchasing machines or worrying about their upkeep. SAB's ATMs allow several financial institutions to "reside" inside each machine simultaneously. The SAB-branded ATMs are placed in high-traffic locations, such as highway rest areas and restaurant chains. When consumers insert their cards, the machine recognizes whether they are from participating banks. Consumers are provided with surcharge-free ATM transactions, just as if they were using a machine from their particular bank.
"Our ATMs recognize the financial institution associated with an ATM card that's swiped at a machine," says Dan Sterchow, SAB's COO. "If the card is from one of our bank customers, the transaction screen switches to resemble the screen of [that] financial institution."
According to Sterchow, participating banks essentially pay the ATM fees for their customers. The service is paid for on a per-click basis, he adds, allowing institutions of all sizes to take advantage of the offering. "There are absolutely no other fees," Sterchow stresses, pointing out that while there are other surcharge-free ATM networks available, such as CO-OP and Allpoint, they do not allow the FIs to maintain their brands at the machines.
The SAB ATMs, Sterchow continues, provide cost efficiencies to large banks while leveling the playing field for smaller institutions. "People are making banking choices based on access to ATMs," he says. "Owning and operating an off-premise ATM is an expensive proposition and can only be handled by the largest of national brands. SAB can give small banks a level of competition they couldn't attain in the past."
While acknowledging the unique distribution model, however, Dana Gould, a senior research analyst with Framingham, Mass.-based Financial Insights, questions the long-term value of the SAB ATMs. The unique offering "is a good move," he says. "It will enable a lot of banks to get out there."
But small banks "don't have a large number of customers to begin with," Gould notes. "I can understand them using SAB within their footprints, but I don't see this being worth their while to spread much beyond that." And large banks are likely to continue their merger-and-acquisition activities, he adds, allowing them to expand their ATM networks without investing in new machines.
SAB's Sterchow says the one-year-old company has expansion plans of its own, though it is taking a very deliberate approach to growing its network. "We don't want SAB everywhere," he asserts. "Just in the highest traffic locations where ATM cardholders tend to travel."
SAB ATMs already can be found at some high-traffic locations, including the Pennsylvania Turnpike Authority rest areas and McDonald's franchises in New York City. So far, according to Sterchow, about 15 banks and credit unions have signed on, including TD Banknorth (Portland, Maine) and PNC (Pittsburgh). Deals with other banks and retailers are in the works, he says.