Banc One Corp. has scaled back its ambitious plan to blanket the country with automated teller machines.

The Columbus, Ohio, company, which in mid-1997 made the bold prediction that it would have a 20,000-ATM network in three to five years, is now saying that machines away from bank premises are not generating anticipated transaction volumes.

Two of the executives responsible for executing the plan have been let go.

With the ATM count under 10,000-still a large number for an individual banking company-"the program is under evaluation," said Patricia Shafer, a spokeswoman for Banc One's retail division.

The pause confirms the growing suspicion that the market for ATM placements is near saturation.

Machine deployments skyrocketed since 1996. In April of that year, with a change in MasterCard and Visa rules, the practice of surcharging ATM cardholders took hold. Banks and nonbanks used the proceeds to put machines into retail stores and other public locations at an unprecedented pace.

Banc One's initiative was more aggressive than most, and if it reached its goal of 20,000, its network would have rivaled those of some of the larger multibank ATM systems.

Banc One made splashy announcements of deals to install thousands of machines in retail chains. So far, it said it has placed 6,000 with retailers such as Kmart Corp., Rite-Aid Stores Inc., Sears, Roebuck and Co., and Mail Boxes Etc.

The bank also has 2,200 full-service machines in its branches and banking centers.

"Our goal is to determine the right number of locations and the right number of machines to deliver the right number of transactions. We are very actively managing the business," Ms. Shafer said last week.

The economics of remote ATMs warranted mention in the 10-Q report for the first quarter that Banc One filed with the Securities and Exchange Commission in May: "Net occupancy and equipment expense increased $17.9 million for the quarter ... primarily the result of rental and maintenance expense for Rapid Cash machines of $7.5 million and an increase in property management fees due to the outsourcing of this function beginning in fourth quarter 1997."

Rapid Cash is the brand name Banc One uses for the off-premises strategy.

David W. Thomas, who had been general manager of electronic delivery, left Banc One two weeks ago. Greg Ford, who reported to Mr. Thomas and ran the off-site ATMs, left in June. The bank said both would "pursue other interests."

Mr. Ford told American Banker in May 1997 that the ATM ambitions were motivated "by our desire to be within arm's reach of our customers no matter where they are."

In June this year, Mr. Thomas said 20,000 was "one of those numbers that kind of went out there.

"Our goal is to continue to build in an aggressive way an off-premises ATM program. The speed with which that program builds and the total number of machines (installed) are dependent upon the ability to find and develop relationships with host retailers."

John Skubik, president of electronic delivery, is now managing the Rapid Cash program. Mr. Skubik joined Banc One in July from First Chicago NBD Corp., which Banc One is scheduled to buy in the fourth quarter.

Ms. Shafer said the existing off-premises ATMs will remain in place. The bank views them as a way to reach customers outside its bricks-and-mortar base.

Citing competitive reasons, Banc One declined to comment on what particular locations or retailers were not meeting expectations or whether it may be costing the bank to be locked into certain sites.

Though Banc One would not provide a breakdown of its ATM costs, observers say installing a cash dispenser can run from $10,000 to $15,000. At that rate, 6,000 off-site ATMs would cost $60 million to $90 million.

Diana Yates, an analyst with A.G. Edwards & Sons Inc., St. Louis, said Banc One's second-quarter earnings suffered at the rate of 2 cents a share- $14 million after taxes-as a result of the ATM transaction shortfall.

"It's early in the start-up phase and we don't know what the true benefit will be over time," Ms. Yates said. But with the bank's ability to monitor the transaction volumes of each machine and the flexibility to relocate them, "the fix is pretty easy."

The lower-than-expected returns on ATM investments can be traced to an industrywide decline in transaction volumes per machine. From midyear 1996 to midyear 1997 that average had declined 13%, to 5,545 a month, according to the Faulkner & Gray newsletter Bank Network News.

Industry experts say that figure has fallen below 5,000. Averages for off-premises machines tend to be much lower, hence the need for surcharge support.

The ATM manufacturer Diebold Inc., a Banc One supplier, announced layoffs in June of more than 600 employees. The company said bank orders were declining.

"There are diminishing returns, and we are well into the beginning stages of glut," said Mark Walter, an electronic banking consultant based in Birmingham, Mich. "The growth rate of machines far outweighs the card- usage growth. The utilization per machine has dropped off and will continue to do so."

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