At a cramped delicatessen on New York's Lower East Side, a small automated teller machine is wedged next to a display case for meats.
"I didn't want the machine at first," said Alex Safa, owner of Sambas Deli, who installed it a few months ago. "But when I saw the guy across the street get one-I had to have it. They are getting very popular."
Not long ago, a small retailer might not have dreamed of buying an ATM, or leasing one as Mr. Safa is doing. But prices have come down to where cash dispensers are affordable at places that lack the heavy foot traffic of prime locations.
The growth may present opportunities for banks that want to pursue off- premises ATM placements and had considered the market saturated. Most banks do not consider want to pursue off-premises ATM placements and had considered the market saturated. Most banks do not consider it worthwhile to pursue the mom-and-pop end of the ATM business, but shifting economics may change their minds.
Perhaps the bigger victors from the trend are the independent sales organizations and ATM makers who perceive new life being breathed into their businesses.
"Dropping the cost of ownership by a big notch just opens up a whole new layer of these locations where these machines can go," said Ernest Burdette, president and chief executive officer of Triton Systems Inc.
A few years ago, that Long Beach, Miss., company was a footnote in the ATM industry standings. By pumping out low-cost machines, it has become the nation's third-largest maker in terms of units shipped annually.
Prices have not come down for the type of full-service ATMs that banks put in their branches, which can run $20,000 or more each. A high-end machine might go for as much as $40,000.
ATMs would not be viable at small, lighter-traffic merchants unless the cost came way down. To get the basic cash dispenser cost down as low as $5,000, manufacturers have scaled back the processing capacity and functions a device can handle, reduced the number of parts, and tried to minimize the need for service calls.
Because some of these stripped-down units have small cash canisters, merchants can simply replace the money with bills from their cash registers, eliminating the cost of armored cars or other support.
In the past, the ATM was "a very complicated machine," said Hansup Kwon, president of Cross International Technologies, the ATM subsidiary of Hysong, a Korean computer maker. "I am trying to make it a very simple thing."
Other costs associated with ATMs are coming down. Monthly lease payments on a $5,000 piece of equipment can be as low as $110, Mr. Kwon said. That compares with $300 for the average ATM, according to a recent study by Dove Associates Inc. of Boston.
Cash dispensers also tend to use dial-up telephone lines, which generally run $40 a month or less. A dedicated leased line for full- function ATMs costs about $120.
Because consumers have grudgingly accepted ATM surcharges, they have become less likely to balk at using remote machines. Surcharges are what support them, but they can rise only so high.
"What we see is a lot of flattening out of acceptable surcharge levels," said Robert Nemens, marketing manager at Diebold Inc. "The only way to jump the curve is to reduce costs and add other revenue streams for the provider."
Diebold of Canton, Ohio, is selling a $5,000 unit, the Cash Source Plus 100.
Mr. Safa of Sambas Deli said he makes money on each transaction but more important is the chance "to offer another convenience" to those who flock to his 99-cent, egg-on-a-roll special.
Many supermarkets, shopping malls, convenience stores, and other types of retail outlets have for some time bought into the convenience idea. In New York and some other cities, ATMs are starting to become familiar sights in pizza parlors, neighborhood bars, and newsstands.
Manufacturers shipped 47,333 cash dispensers-which do not accept deposits-nationwide last year, down from 48,901 in 1997, according to The Nilson Report, an industry newsletter in Oxnard, Calif.
Some experts said that was a temporary blip and pointed out that cash dispensers represent a growing percentage of all ATMs sold. Cash dispensers-which primarily provide cash withdrawals, as opposed to multiple banking and payment functions-represented 77% of units shipped in the United States last year. In 1994, 21,400 cash dispensers were sold, nearly 50% of total shipments.
To increase sales, some companies are continuing to whittle down prices. By the end of May, Triton expects to be selling its Mako, which costs 25% less than its currently cheapest machines, which range from $6,000 to $7,000. Depending on the distributor's markup, that means $4,500 to $5,250.
Triton and Diebold have emerged as leaders in cash dispenser shipments, but several newcomers are trying to muscle in.
Lipman USA Inc., a point of sale terminal maker based in Syosset, N.Y., is testing the Nurit 5000, a cash dispenser it plans to sell wholesale from $3,500 to $4,200, translating to an average retail price around $5,000.
Cross International Technologies, which has sold 2,000 cash dispensers since entering the North American market last June, has recently brought its prices down to the same level.
"Merchants are putting demands on manufacturers to add new features and to make sure the machine is up and running and reliable," said Diebold's Mr. Nemens.
The pressure is forcing some banks to rethink deployment strategies, experts said. The merchants who are now being courted are ones who have historically fallen outside the radar screens of banks considering ATM partners.
"Banks come with a set of historical standards that maybe haven't been pushed for a while," said Alanna Kellogg, president of the Kellogg Group, an electronic consulting firm based in St. Louis.
The wider array of cash dispensers enables banks that have ATM contracts with retail chains to install cheaper machines in low-volume locations, Mr. Nemens said.
But lower sticker prices also mean less processing power: most of the basic machines use the same communications technology as point of sale terminals, which send bare-bones information over dial-up telephone lines.
Conversely, more expensive ATMs that use leased lines and higher-powered computer chips deliver a "fire hose of information" for each transaction, Mr. Nemens of Diebold said.
Extra horsepower means machine owners have the ability to add fee- generating features such as on-screen advertising and noncash items.
But potential advertisers are not interested in places with low foot traffic, said Brett Mansdorf, national sales director of Lipman USA, a subsidiary of Lipman Electronic Engineering Ltd. of Tel-Aviv, Israel.
Lipman is combining its Nurit point of sale terminal with a De La Rue cash dispensing device. A metal casing gives the unit the look of a regular ATM.
"This is going to open up a whole different marketplace," Mr. Mansdorf said. "We see the market for this being the low end," with cash dispensers that are "maintenance free."
Not all independent sales organizations-payment-service agents known as ISOs-that sell and lease ATMs to small merchants are eager to sacrifice functionality for lower prices. Card Capture Services of Portland, Ore., has elected to include more sophisticated cash dispensers in its product line.
"It is a balancing act we are carefully weighing," said David Grano, president of Card Capture Services, which services more than 7,000 ATMs nationwide. "We don't want to sell a Bic lighter to someone who wants a high-end ATM with functionality,"
Cross, the U.S. arm of the Korean company, is taking the opposite approach, marketing an extremely basic cash dispenser. The Minibank 1000 holds only one cash canister; Mr. Kwon described it as a "cash recycler for the merchant" rather than a cash dispenser.
He predicted it will be popular. ATMs have become "standard equipment" for many merchants, Mr. Kwon said. "If you don't have one, it will be a disadvantage."
