American Express Co. will be dispensing its travelers checks at automated teller machines through a partnership with Diebold Inc. and Electronic Data Systems Corp.

Under the arrangement, Diebold has created the hardware to upgrade the machines and EDS will send the transaction information from the sites to American Express.

The travel services company is marketing this service to banks as a way to move consumers out of their teller lines and "leverage their investment at ATMs," according to Carl Lehmann, president of the American Express Travelers Cheques Group.

"The travelers check is very rich [for banks] from a fee perspective," Mr. Lehmann said.

The average travelers check purchase is $1,000, Mr. Lehmann said, and banks traditionally charge a 1% fee. The ability to provide these checks to consumers faster and without wasting tellers' time can be profitable, he added.

Testing of the service began at one site -- Comerica Bank-Texas, a unit of Comerica Inc. -- and three other test sites are making this service available this month. Shawmut Bank is due to upgrade machines at locations in Hartford, Conn., and Boston today, and the San Antonio Federal Credit Union in Texas will be up in mid-June.

Customers seem to prefer the faster transaction time using the ATMs as opposed to going to a teller for checks, said Jeff Roesler, the assistant vice president for electronic banking at Comerica Bank.

Bank officials have been walking customers through the new process at the ATM to get them acquainted, he said.

Use of the ATM cuts the transaction time down from 10 minutes for the traditional traveler's check transaction to one minute for the ATM transaction, he added.

Although this new service is expected to elicit greater fee revenue from ATMs, Mr. Roesler said that the bank is providing the service without charge through the test period, ending June 30.

Over the next year, Mr. Lehmann experts that more than 200 locations will make this service available.

The main problem in dispensing traveler's checks through ATMs, Mr. Lehmann said, is the small percentage of transactions that are rejected when the machine malfunctions and the check does not come through the feeder.

Since each document is "unique and specially numbered," the transactions might have had to be reconstructed when they fail.

Through the special bar code readers -- outfitted on Interbold machines by Diebold -- the numbers are read and transmitted to American Express quickly through EDS software.

The new bar code readers were developed specially by

'Moderate Modification'

Control Module Inc. to read the light bar code of a traveler's check, according to Tony Esposito, a senior product manager for Diebold. American Express is overseeing the upgrades on the teller machines.

"All of us are looking for more ways to make ATMs a consumer service delivery mechanism," said Neil Marcous, vice president and general manager for the electronic commerce division at EDS. "And we can do this with moderate moficiation."

The cost of upgrading the machines to disburse travelers checks are not disclosed.

Through on-line links to the card association, EDS transmits the bar code and the dollar value of the checks back to American Express to settle the accounts, Mr. Marcous said.

While this latest ATM capability promises to streamline the back office and to re-emphasize nonbranch banking, acceptance for this service may progress as gradually as ATM usage itself.

"It's going to take a number of quarters before we see much action on this," Mr. Marcous said.

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