American Express Co.'s apparent ambitions in online banking have for some time roughly paralleled its efforts to stitch together one of the nation's largest automated teller machine networks.
So now that Amex is paring down its ATM network, will it also reduce its expectations for the e-banking operation, which, after all, benefits tremendously from easy customer access to cash?
No, according to an executive from the Internet banking business, which it calls Membership Banking. Robin L. Korn, a vice president of the business, said it was "coincidental" that Amex had bulked up in ATMs directly before and after it introduced its stand-alone Internet bank in July 1999.
Further, the sale this month of 23% of its ATMs "is not in any way linked to, or indicative of, our interest in continuing with our banking business," Ms. Korn said in an interview Thursday. "The difference between us and other Internet banks is the fact that we have a brand that people trust and want to do business with. We're very happy and pleased with the way our bank has grown over time. We're very different than a lot of no-name banks that sprang up and went away."
Membership Banking was born at a time when other large companies were experimenting with separately branded banking Web sites, and many entrepreneurs were starting up Internet-based banks with different themes. A lot of the smaller efforts did not survive, and even some of the larger players have pulled the plugs on projects, such as Bank One Corp. (Wingspanbank.com) and Citigroup Inc. (Citi f/i).
Though Membership Banking has endured, American Express has been fairly quiet about it in recent years.
One other company that delved into banking during that era - E-Trade Group Inc. - has been quite vocal about what it considers to be its success in online banking. It has also made a point of acquiring a large ATM base and has explicitly linked its ATM aspirations to its goals in the deposit business.
Some industry analysts said the sales may mean that Amex is simply slowly exiting a noncore business. It may want to retain its share of the ATM processing business while reducing its ownership role.
Transaction processing is "a revenue model, as opposed to a cost-and-risk-based model," said John Gould, the director of consumer credit at the Needham, Mass., financial services technology research and consulting firm TowerGroup. "You know what you're going to charge for the servicing and what you have to lay out for the cash. You know you can run it at a profit, and you don't have the headaches of ownership."
One equity analyst, who asked not to be named, said that Amex's ATM strategy also was meant to help it "touch" the customer more frequently. "That was a big focus. They didn't really care about quality of touch. They cared about quantity of touch. Now the focus is on quality of touch. The kind of touch they're looking for is a lifetime planning. With ATMs, [they said] 'Yeah, we can make money from them, but they don't generate money like a living will.' "
But Christine Elliott, an Amex spokeswoman, said that it does not plan to get rid of all its ATMs and is particularly eager to keep the ones deployed in 7-Eleven Inc. stores, which bear the brand name Axis.
Separately, 7-Eleven has been deploying kiosks called Vcoms, which perform more functions than standard ATMs. Amex processes the traditional ATM transactions at most of the Vcoms, though 7-Eleven owns the hardware.
Two weeks ago Amex sold 1,700 machines to Cardtronics LP, an independent sales organization. That sale "made sense," Ms. Elliott said. "The portion of the portfolio that we continue to hold is quite profitable for us, and we have no plans to sell it at this point."
Amex began buying up large batches of ATMs in late 1998, six to eight months before it introduced its stand-alone Internet bank. By late 2000, with marketing for the online bank in full swing, it bulked up its ATM network to 8,700 - most of them in big retail chain stores - compared with the 165 it owned in early 1997. Most of the early ones were in hotels, airports, and American Express offices.
At the height of its ATM shopping spree, Amex was the second-largest deployer in the country. Its executives gave several reasons for the purchases, saying that it wanted to strengthen relationships with merchants, get into the debit card business, and give its banking and other customers more touchpoints.
In January 2000, a month before buying 4,000 ATMs from Electronic Data Systems Corp., American Express announced a deal with 7-Eleven Inc. to own and operate financial services kiosks in some of the retailer's stores. That arrangement has continued, with Amex largely handling the operations side. Amex executives have touted the arrangement as a way to give more convenient access to its credit and charge cardholders, wealth management clients, and others.
These days, for reasons it will not pinpoint, Amex is in "sell" mode. Last year it sold 600 machines. Other sales since then, as well as losses through attrition, have brought its ATM base to below 5,000.
Ms. Korn said that the ATM purchases were not specifically coordinated with the introduction of Membership Banking. "The two coincidentally probably happened at the same time, but they weren't necessarily a joint effort, but obviously the more ATMs we had, we'd provide customers fee-free ATM access."
The Membership Banking Web site says that free access to cash is available at ATMs that Amex owns and that customers who use out-of-network machines get rebates of up to $1.50 per transaction for up to four withdrawals a month. That offer is still valid.
Amex said its cardholders can get cash advances with their cards at over 500,000 ATMs worldwide.
Ms. Korn said that Membership Banking has enjoyed "a positive, steady growth rate," though she would not say precisely how quickly it has grown.
"Quite honestly, our intentions and strategy are not linked to and are not dependent on the size of the ATM network," she said. "Our customers can access ATMs through all the regional networks. It's not linked or indicative of our intent to grow."
