Banks hit jackpot with casino ATMs as resurgence in gambling spreads.

As betting becomes big business, banks are winning their share through automated teller machine networks.

Automated teller machines are replacing cashier lines in casinos and other gaming locations, giving gamblers instant access to their money and banks a stream of noninterest revenue.

Following a trend that started five years ago in Las Vegas ATMs are showing up at all sorts of casinos, from Mississippi riverboats to Indian reservations, as more and more states move to legalize gambling.

'Significant Proliferation'

To date, riverboat gambling has been legalized in Illinois, Indiana, Iowa, Louisiana, Mississippi, and Missouri. The Pennsylvania legislature is considering the idea, as is New York. The 1988 Federal Indian Gaming Regulatory Act allows tribes to operate gaming operations on reservations, regardless of state law.

"There's a significant proliferation of ATMs in this area," said Mary Brown, director of marketing at Pulse Electronics Funds Transfer Association, the Houston-based operator of the Pulse regional ATM system.

Although Texas state law still prohibits ATMs in such establishments as casinos and racetracks, other southern states are attracting ATMs in a big way.

Meeting Need for Cash

The multistate Pulse system serves many banks with ATMs in gambling vessels, including United Mississippi Bank of Natchez and First National Bank of Vicksburg, Miss.

"Casinos tend to be a natural fit," said John Hall, spokesman for the American Bankers Association. "As long as there are people who need cash, bankers will look into where to place ATMs."

While ATM transactions have been growing at a pace of 11.5% per year over the past five years, and experts project this growth to continue for the next five years, banks are running short of new locations for the machines.

Saturation Seen

With many bank branches and other traditional sites taken up, some observers have described the ATM-placement business as nearing saturation.

First of America Bank has been posting steady returns from its two ATMs at the Vegas Kewadin Casino on the Chippewa Indian Reservation in Sault Ste. Marie, Mich.

"From day one they're been making money," says Maria Zielinski, senior teller at the bank.

The First of America Corp. unit's first casino ATM was installed almost two years ago, and the second followed on Feb. 5 this year. Transactions average about 1,400 per week on each machine, which is below the nationwide ATM average of 6,876 per month.

Like other owners of machines frequented by noncustomers, First of America makes a bonanza from its "foreign" ATM fee: It charges $1 for each transaction.

ATMs away from bank premises have become a growing source of fee income. Surcharging can run from $1 to $2 per transaction, on top of network interchange fees that average about 43 cents.

According to Reed Hancock, president of Dallas-based Value Added Cash Systems, off-site ATMs and the associated surcharges are directly linked to the advent of ATMs in Las Vegas casinos.

Rise of Surcharges

"The cost of trying to support foreign transactions of an ATM network in the casino environment triggered surcharges industrywide," he said.

Mr. Hancock added that Las Vegas establishments began charging customers to support the risks associated with high cash volumes, including pilfering, ATM malfunction, and fraud.

"Every bank details with slippage. That liability increases when your inventory is $100 bills as opposed to twenties," he said.

But banks aren't always making a killing on ATM revenues. In Las Vegas, many casinos collect 75 cents of each $1 surcharge. The bank receives 25 cents plus the cardholder bank's interchanging fee.

Often, says Mr. Hancock, banks see ATMs as a loss leader for other traditional bank products offered in casino hotels, such as merchant services and vault services.

"They used to give away toasters with new accounts; now it's ATMs," he joked.

ATMs are also an instrument of cash control for travelers and casinos, because ATMs limit the amount of money the gambler can access, usually $300 to $500 per day.

In addition, ATMs effectively control the losses casinos face from acceptance of personal checks.

According to industry estimates, over $300 billion per year escapes from consumer pockets to gaming coffers - on everything from state lotteries to casinos. With millions of tourists flocking to the new casinos, these profits are expectd to increase. Banks seeking fee revenue as well as customer relations advertising, and goodwill, see the gaming connection as a natural asset.

"It's a real good service because, obviously, cash is the name of he game in a casino, and readily available cash in important to the management and patrons of the casino," said Michael LaVigne, president of Grand Marais State Bank in Minnesota, which recently installed an ATM at the Grand Portage Lodge & Casino on the Chippewa Indian Reservation.

"An ATM in the casino is like a drive-up in a new branch," said Cathryn Bond, an ATM consultant. "I don't think it has the uniqueness it used to have. People are starting to say, 'Where's the bathroom, where's the ATM?' They expect it."

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