Banc One Plans A Nationwide Network of 20,000 ATMs

Banc One Corp. is planning an unprecedented nationwide expansion of its automated teller machine network.

Anticipating significant surcharge revenues, the Columbus, Ohio, company expects to increase ATM installations tenfold, to 20,000, within three to five years.

This year alone, Banc One plans to add 6,000 machines, the majority in retail stores and other nonbranch locations. Its total of 8,000 would be 1,000 more than BankAmerica Corp., the No. 1 bank deployer, has today.

The eventual 20,000 would be comparable to one of the larger regional electronic banking networks. The California-based Star System, currently No. 1 in that category, has 23,000 machines.

Greg Ford, national convenience banking manager at the $102 billion- asset company, said the strategy was prompted "by our desire to be within arm's reach of our customers no matter where they are."

That means in all 50 states, Mr. Ford said in an interview.

Banc One will help fuel an ATM-expansion trend that has escalated with surcharging-the practice of ATM owners' collecting a fee from noncustomers.

ATMs are mushrooming in convenience stores, gas stations, restaurants, hotels, casinos, airports, and other nonbank locations. The total number of ATMs grew by 17% last year to 132,358, according to Mentis Corp.

Banc One said more than 4,000 of its machines this year will go into Mail Boxes Etc. offices, Diamond Shamrock gas stations, and BP Oil convenience stores. More deals will be announced soon, the bank said.

The installation rate is expected to reach 45 machines per working day.

"I don't think this type of growth has ever been seen in the industry," said William G. Raymond, senior vice president, Bank of America. But he added, "This type of revenue from ATMs has never been seen by the industry either. Banc One wouldn't have been doing this two years ago."

Mr. Raymond was referring Visa's and MasterCard's decision to drop surcharging bans in their Plus and Cirrus networks just over a year ago.customers ATM fees.

The majority of Banc One's new ATMs will be low-cost cash dispensers; all will assess a $1.50 surcharge on noncustomers.

Even Banc One customers will be charged an "access fee" of $1 in areas where the bank has no branch presence. For example, Banc One cardholders vacationing in Hawaii would pay $1 to use a Banc One machine, which is "much less than paying a surcharge and a foreign fee," Mr. Ford noted. He "hopes convenience would offset the fee."

"Charging your customers at some off-premises machines is the first step toward charging your own customers all the time," said Edmund Mierzwinski, consumer program director, U.S. Public Interest Research Group. The Washington-based consumer advocate said Banc One is "simply trying to gouge consumers with high-priced ATMs."

Mr. Ford estimated conservatively that Banc One machines will average 1,500 transactions monthly. Surcharge income for 8,000 machines could reach $21.6 million annually. New "dial-up" telecommunications technology, which eliminates the need for dedicated phone lines, "drives our break-even volume to significantly lower levels," Mr. Ford said.

The Diebold and NCR machines with color screens and coupon-printing capabilities will dispense stamps and prepaid phone cards, hiking revenues further. The bank will share proceeds with the retailers.

ATMs nationally average 6,000 transactions monthly, but surcharging, along with the proliferation of machines, is expected to reduce per-unit volumes. Electronic delivery of government payments such as welfare and Social Security, may be a booster.

Mr. Ford predicted households using ATMs will grow by 50% over the next five years. Even so, an American Banker survey found that between 1994 and 1996 ATM card penetration was flat, at 66% of consumers with bank accounts.

Dale Dentlinger, senior vice president, Electronic Data Systems Corp., said most of the choice ATM locations are already taken. EDS, the second- largest deployer after BankAmerica, operates 6,000 ATMs, mainly in 7-Eleven convenience stores.

Mr. Dentlinger said Mail Boxes Etc., one of Banc One's retail partners, "doesn't get enough traffic to fit the model of successful locations."

He said it is "dangerous to build business plans dependent on surcharge revenue." With increased competition for locations, "over time the retailer gets a bigger and bigger piece of the surcharge."

"The number of ATMs is meaningless," said Mr. Raymond. "It's the number of transactions that makes a network."

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