A New York credit union that caters to those in the theatrical community has found success in an incongruous niche: placing low-surcharge automated teller machines in McDonald's restaurants in Manhattan.
Actors Federal Credit Union, whose headquarters are located on Broadway in Times Square, has become the city's largest credit union deployer of ATMs. Moreover, customers now seek out its machines, which impose 99-cent surcharges in a market where the going rate is between $1.50 and $2.
"What we've done without intending to is we've created a brand for ourselves," said Steven R. Sobotta, the credit union's marketing director. "They look for and recognize the yellow signs with the 99-cent ATM surcharge."
The machines pay for themselves and spur membership growth, Mr. Sobotta said. "More members means more saving accounts, more checking accounts, more mortgages, and more auto loans. That's how it's growing."
Actors Federal Credit Union - which serves 48 unions within the Broadway and entertainment community - expects to have $72 million of assets by yearend. It now has 85 ATMs - 75 of them in McDonald's franchises - and continues to place two to three more a month in the restaurants, Mr. Sobotta said.
The program started by chance. The credit union's headquarters is located on top of one of the busiest McDonald's restaurants in the country, and the credit union's then-loan manager overheard the restaurant franchise owner express the need for an ATM. Soon, executives from the credit union and the McDonald's met and closed a deal.
Word spread among McDonald's owners, and soon more of them were approaching the credit union about ATMs.
"It has turned out to be a great positive, because McDonald's is always clean, well lit, and they're safe," Mr. Sobotta said.
As for McDonald's, some franchise owners have noticed increases in their average check, but not all. James R. Lewis, who owns the Times Square franchise and is the president of Lewis Foods in Darien, Conn., said that he has not seen any discernable change.
The machines, made by NCR Corp., are like those typically found in convenience stores - they are 18 inches wide and do not accept deposits. "We're not trying to be a full-service bank of any kind," Mr. Lewis said.
Mr. Sobotta said that it would be too expensive today to pick up deposits from all the ATMs. However, the credit union might consider doing so in the future, he said.
In 1998, two years after Visa and MasterCard approved the practice of ATM surcharging, Actors Federal Credit Union joined the Co-op Network, an alliance of credit unions that agree not to surcharge one another. The network's members have 15,000 ATMs.
Gene Polito, the executive vice president and chief operating officer for the network, based in Ontario, Calif., said that Actors Federal is by far the most successful ATM deployer in New York. Most credit unions own only about five or six machines, he said.
"ATM deployment throughout the industry has somewhat leveled," Mr. Polito said. "Credit unions have been historically underbranched, so they are still fairly active in deploying ATMs as delivery points for their members."
The Actors Federal Credit Union machines are sought out not only by credit union members, but by the general public.
Mr. Sobotta told a story of one McDonald's franchise owner who insisted that the surcharge be raised to $1, because the restaurant had just come out with a "Dollar Menu," and he wanted everything in the store to be $1. However, the adjustment put a damper on ATM use, and the surcharge got knocked back down to 99 cents, he said. "Usage has doubled," since then. "It's perception in the mind of the consumer. Ninety-nine cents is a good deal."
Mr. Polito of the Co-op Network said that other credit unions have also had success working with fast-food restaurants - particularly McDonald's. "I think they have great foot traffic. It's the old adage: Location, location, location. They pick good locations."
Other strategies that credit unions have employed to give their members more access points is through grocery stores and check cashing locations. More and more credit unions are contracting with check cashing outfits, particularly where membership might be living, and paying a fee to them so members can still get free access to their funds, Mr. Polito said.
