Colorado National Bank has signed an agreement with Southland Corp. to install automated teller machines in 122 more 7-Eleven stores in Utah and Missouri.

The bank already has 157 ATMs in 7-Elevens in those states.

The deal follows a recent announcement that Electronic Data Systems Corp., Plano, Tex., a unit of General Motors Corp., would install about 4,000 machines in 7-Elevens in other areas.

These moves -- together with Boatmen's Bancshares' deal this year to place 150 ATMs in Wal-Mart Corp. department stores, as well as dozens of other recent cash machine installations by other institutions at hospitals and office complexes -- provide growing evidence of bankers' newfound fondness of out-of-branch ATM locations.

Looking for Opportunities

"Most banks, at least the strong ones that are really working, are looking for new electronic banking opportunities," said Ann Schmitt, vice president of Colorado National Bank's ATM network.

"Off-premise ATMs, if the location is a good one, ultimately make a lot of sense."

According to a recent American Banker survey, the number of off-premise ATMs installed by the top players in electronic banking increased by 18% in 1992 compared to 1991.

And there are indications this trend will continue.

Although experts say branches in the U.S. are virtually saturated with ATMs, the American Banker/Ernst & Young 1993 survey of technology in banking found that banks plan to add 11,000 ATMs by 1996 to the current base of 89,000. The majority of these new installations are expected to be in nonbranch locations.

The attractions are obvious. First, the machines offer bankers a way for banks to extend basic banking services to their customers without the expense associated with adding branch off ices.

Second, off-premise ATMs can be a boon to transaction volume, provided a banker installs the machines in the right locations. Convenience stores are a recent favorite site, and shopping malls and office buildings are also receiving their share of new installations.

Support Can Be Costly

But there are also drawbacks to the off-site locations. Since tellers and branch personnel cannot service the machines as they do in-branch ATMs, off-premise terminals often require a bank to hire a service company to handle such tasks as collecting deposits and replenishing cash.

As a result, off-premise ATMs can be up to three times as expensive to support as in-branch terminals. Many find that the new source of transactions is worth the increased support costs.

Other institutions have found that off-premise ATMs are no more expensive to support than those at branch locations.

"Most of our branch ATMs are drive-ups, so we already use a third party to support them," said John Smith, executive vice president at Hibernia National Bank, based in New Orleans. "It wasn't a very large jump to have the company service off-site machines."

Potential for Savings

It costs $600 to $900 a month to support each of the bank's 94 ATMs, Mr. Smith estimates. But several developments may reduce those costs over time.

The most important is a new generation of teller machines that feature larger cash dispensing cartridges. Since the new machines can be stocked with more cash, replenishment trips become less frequent.

The newer ATMs also typically contain personal computers that streamline the terminals' journaling functions. This speeds the process of balancing the ATM, Mr. Smith said. Hibernia already has almost 20% of its ATMs installed in off-premise locations such as hospitals, and it is in the process of hammering out a deal to install ATMs in a convenience store chain in the New Orleans area.

"All things considered, it's a good way just to get the bank's name out there," Mr. Smith said, noting that many banks try to woo new customers with their off-premise ATMs by printing out coupons for bank services along with transaction receipts.

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