America's Community Bankers' exclusive deal with the Allpoint surcharge-free automated teller machine network highlights the advantages of using ATMs that are not in rival banks' branches.
There are several surcharge-free ATM networks and several different models. The one most commonly used operates as a consortium of banks that use one another's machines. Another, the agent bank model, has smaller banks paying fees to large banks to use their larger ATM networks.
Such arrangements help smaller banks compete with larger ones, which often have hundreds or thousands of ATMs. But William W. Zuppe, the chairman of America's Community Bankers and the chairman and chief executive of Sterling Savings Bank of Spokane, said there is a downside to both the consortium and the agent bank models - his customers use his competitors' branches and are exposed to their marketing.
The Allpoint model avoids this because it uses only merchant ATMs. Instead of charging consumers a fee to use the machines, ATM National LLC of Washington, which operates the network, charges banks a flat rate for letting the bank's customers use the machines.
Under the five-year ACB deal, Allpoint will offer the trade group's member banks a discounted rate. That rate was not disclosed and Mr. Zuppe did not say how many of the 1,200 ACB banks he expects to join the network.
The Allpoint ATM network has about 31,000 ATMs nationwide, including 6,000 from a deal with the online bank NetBank Inc. announced Monday (as was the ACB deal). Though the NetBank deal might seem to clash with Allpoint's strategy of using only nonbank ATMs, the new machines are only at merchants' sites and have very limited customer solicitation capabilities.
Mr. Zuppe said he prefers sending his customers to the merchant ATMs because those machines do not "give information or control or a marketing opportunity" to other banks, something at which many larger banks are especially proficient.
"The nice thing about this system is that our customers would not be subjected to this intrusive marketing," Mr. Zuppe said. "I think bankers in general are very jealous and protective of their customer relationships."
He said ACB's banks are a good fit with Allpoint since they are generally in cities and suburbs served by the network. The trade group's members often vie with much larger banks in these places.
That is partly why the network chose to offer an exclusive rate to ACB members instead of to its rival, the Independent Community Bankers of America. "There's a better overlap of ACB members and Allpoint's ATM coverage," said Ben Psillas, the president and founder of ATM National.
Del Tonguette, the debit card executive at the ICBA's payment services subsidiary, ICBA Bancard of Arlington, Va., said the trade group will probably decide over the next year whether to join a surcharge-free network. It might form its own such network, he said.
Using Allpoint also allows the banks to retain surcharge revenue on their own machines because the network uses only merchant ATMs - the banks' machines are not considered part of the surcharge-free system. A customer from one ACB bank could use an Allpoint ATM for free but would have to pay to use a different ACB bank's ATM.
Seventy percent of ACB member-banks that responded said in a summer 2003 survey by the group that a surcharge-free ATM network was the most important way to benefit customers.
William J. Kroll, the president of America's Community Bankers' for-profit ACB Business Partners Inc., noted that the association, which is based in Washington, wanted to avoid the consortium model because banks would be "giving up revenue on" their ATM networks. Allpoint member banks generally contribute no ATMs to the network and so are free to impose fees on noncustomers, though the NetBank deal is an exception to this policy.
Mr. Psillas said that though the 6,000 ATMs from NetBank are owned or operated by the Alpharetta, Ga., online bank, they are in merchant locations. "Target and Costco are not going to take your customers away from you," he said.
The NetBank machines join the 25,000 that are owned or operated by the Houston independent sales organization Cardtronics Inc., which make up the rest of the Allpoint network.
