First Union Corp., which owns the sixth-largest automated teller machine network, is expanding that business in partnership with an outsourcing specialist.

The outside company, Card Capture Services, has installed half the 500 ATMs it will manage for First Union and plans to install the rest by Feb. 28.

First Union would own the machines, which are being placed in stores, and supply their currency. Card Capture is to service the machines, including maintenance and processing, and brand them CCSExpress. The outsourcer also is to manage armored car delivery and accounting.

Card Capture of Portland, Ore., said the deal is the biggest of its kind by a major U.S. banking company and comes as ATM servicing is becoming more of a commodity business.

Adding to the program's significance is that First Union has a reputation for technology leadership. The Charlotte, N.C., company has prided itself on driving and maintaining its 3,700 ATMs, which carry the First Union logo.

First Union executive vice president Al Sale said the outsourcing is a growth tactic.

Card Capture "offered a cost-effective way for First Union to quickly expand an ATM network without the corresponding infrastructure costs typically associated with ATM management," Mr. Sale said at the Bank Administration Institute's Retail Delivery Conference, where the deal was announced.

Mr. Sale said the bank can add to its network faster through partnerships.

David Grano, president and chief executive officer of Card Capture, said the increasing competition and narrowing profit margins on ATMs make outsourcing a good move.

"We're working to drive down the costs of maintaining the terminal," Mr. Grano said. "Our role is as an integrator." First Union's "appetite and vision" are much in line with his company's, he said.

The contract with First Union came as ATMs appear to have become as common as mailboxes. The proliferation of cash dispensers at nonbank sites has driven down the average volume per machine.

The average monthly operating cost of an off-premises ATM is $1,090, according to a recent study by Dove Associates of Boston. Card Capture said ATM management firms can get that down as low as $605.

Instead of having to deal with the demands of convenience store retailers, Mr. Sale said, he likes the option of working on developing new ways to distribute products through ATMs. Mr. Sale said plenty of opportunities remain despite market saturation, especially when ATM contracts with retailers come up for renewal.

Mr. Sale compared the bank's new tactic with ATMs to how it expanded into the credit card merchant-acquiring business. When First Union bought a stake in Nova Corp., a leading nationwide processor, it tapped into a new revenue stream without having to build a business from the ground up.

He hinted that First Union could expand the same way in the ATM business.

"We believe today there is a consolidation going on in this industry," Mr. Sale said. "If I don't look to acquire something, I don't get paid."

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