L.A. Thrift to Put Green in Americash Teller Machines

A small Los Angeles thrift plans to service a national network of automated teller machines, a sign that niche business opportunities can be found in the ATM market.

Fidelity Federal Bank, a $3.5 billion subsidiary of Bank Plus Corp., has agreed to supply money for the terminals of Americash LLC, a new ATM deployer that installs machines in nonbank locations like hotels, malls, and retail stores. Brink's Inc. will distribute the money to the machines.

One unusual aspect of the arrangement is that Fidelity will own the money it provides to Americash. Typically, nonbank ATM deployers borrow cash using a line of credit.

Americash, a New York-based company founded in 1996, plans to deploy more than 800 Diebold and Fujitsu ATMs by yearend. Fidelity Federal will be responsible for providing cash for the ATMs, and will earn fees based on the number of cash withdrawals.

"Americash's core competency and expertise is providing the site and the physical hardware, and our core competency and expertise is providing the cash," said Richard M. Greenwood, chief executive officer of Bank Plus.

Bank Plus said it has taken a 5% stake in Americash, an investment it said cost less than $1 million.

By owning the ATM money, Fidelity executives said, the thrift will avoid federal regulations that limit lending to any one party to 15% of the lender's risk capital.

For instance, the executives said, if Fidelity lent the money to Americash, federal requirements would force Americash to look for other lenders once the inventory demand for cash at its machines reached the limit. The restriction would have curbed Fidelity's main source of revenue in the deal: fees based on transaction volume.

The fees, which Fidelity said will increase with transaction volume, are meant to replace the income the thrift would have received from lending the money.

Americash typifies the small outfits that have jumped into the ATM business since surcharging took off in 1996. Its machines surcharge from $1 to $2.

In June, Americash signed a deal to install 300 ATMs at retail outlets owned by the Simon DeBartolo Group, an Indianapolis-based real estate firm.

Bippy M. Siegal, co-president of Americash, said the arrangement with Fidelity is essential to the company's plans.

"Fidelity's management team has supported our strategic vision, and has been very creative in responding to our needs," Mr. Siegal said.

Michael A. Strada, president of Electronic Commerce Strategies Inc. of Atlanta, said the agreement gives Fidelity "a creative way to deploy ATMs without really deploying them-without the pain and maintenance."

Mr. Greenwood said Fidelity will use the ATMs to attract customers for iBank, the Internet Web site it plans to launch in November. Customers of iBank would pay a lower surcharge fee, he said.

"Internet banks are having a hard time gaining customers and deposits," Mr. Greenwood said. "There is a need for physical locations."

But lower surcharges are unlikely to prompt a migration to Internet banking, Mr. Strada said: "I'd be very surprised for it to be a significant enough incentive for customers to use the Americash machines."

Fidelity said the discount would be based on the prevailing surcharge in the area.

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