Nowhere are consumers' effects on the banking industry more visible than in the explosion of automated teller machine installations in locations away from bank branches.

Consumers want more control over their time, and today's ATMs enable banking institutions to cater to these consumers anywhere, anytime. In addition, surcharging provides deployers with market-driven fee income, contributing to a boom in ATM placements.

ATMs are in supermarkets, convenience stores, fast food restaurants, sports stadiums, casinos, shopping centers, hotels, and airports- essentially anywhere consumers need cash. In 1995, for the first time ever, more ATMs were sold in the United States for placement in nonbank locations (off premises) than in financial institutions (on premises).

In 1996, manufacturers reported total shipments to the U.S. market of 34,400 ATMs. Of these, about 20,900 were listed as cash dispensers. The total number of units shipped for placement away from bank branches was about 22,000.

This trend shows no sign of slowing down, and the opportunities for financial institutions in the off-premises market are robust. Even so, installing and maintaining an ATM profitably requires an understanding of the existing off-premises market, as well as of the consumer trends that will continue to drive the market.

It is difficult to obtain exact numbers of ATMs for each type of establishment, and sometimes the number of off-premises ATMs includes machines in in-store bank branches. However, according to Progressive Grocer, 55.7% of the 29,700 supermarkets in the United States have one or more ATM. About 4,000 of these stores have bank branches with ATMs, and the majority of supermarkets have off-premises ATMs. More than 85% of the larger supermarkets-those of 40,000 square feet or more-have ATMs. And more than one-third of convenience stores-38,000 out of 93,000-have installed ATMs.

Although the supermarkets and convenience stores appear to have the largest number of off-premises ATM placements, some of the highest average ATM volumes are in casinos, where a number of sites have more than five ATMs installed. Shopping centers also appear to have significant volumes of ATMs; many have multiple machines and higher than average volume per machine.

So where is the best place to install an ATM? One suggestion is to compose a grid of the site types under consideration. In one column list the site type-such as convenience store or supermarket-and in the other columns rank and evaluate each site.

Consider such questions as: Does the site have a low or high traffic volume? How many consumers frequent the establishment in a month? How often do they visit? For instance, the average supermarket gets 46,800 customers a month. However, most consumers go to a supermarket only once a week, but they go to work locations every day.

The need for cash is the next consideration. If the location views cash as its primary payment method, the site may be more valuable than one that accepts credit cards.

Also consider the demographics of the customer base and the degree to which a consumer might need cash in the location. The value of the transaction to the cardholder is particularly useful in determining the surcharge amount, which has a large impact on the profitability of the placement.

How do you determine the value to the cardholder? This is not easy, but the real answer is to put yourself in the cardholder's shoes and ask: Is the consumer using the cash to buy something small-cigarettes, a drink at a bar-or as spending money while on vacation? Is the consumer accustomed to paying extra for goods or services at the establishment? Will a company reimburse the consumer for the expense? How difficult is it for the consumer to find another source of cash?

What sort of ATM volumes are banks likely to achieve in the various sites? NCR is surveying its customers' experiences, tracking volume at 34 different site types. What we have found is that some sites are clear winners in generating high volume; obvious sites are shopping centers, airports, and casinos. Oddly enough, many such sites have just one ATM, despite their high average ATM volume. Convenience store and supermarket volumes tend to have average off-site volumes, which is to be expected because these sites constitute a significant percentage of both our sample and of placements.

How do you predict what sort of volume you will get in an off-premises placement program? This is a blend of art and science. Each site type has its own dynamics with a range of yields-the actual ATM volume achieved divided by the number of consumers who frequent the site. For example, if the average volume of an ATM in a store is 4,000 transactions per month and the average customer count is 80,000 per month, the yield would be 5%.

Though the yield is significant, the actual volume that banks are achieving varies according to many besides customer count, including how often consumers frequent the site versus their need for cash, whether the it is in a city, and what the local demographics are.

Site-specific factors include the visibility of the machine, signage and store promotion, accessibility of the machine, alternative sources of cash, the availability of other ATMs in the area, machine branding, and surcharge amount. The best physical location in the store depends on the flow and layout of each site. Most important, the ATM should be in a clearly visible place, ideally with easy access and serviceability. In every case, signage should be clear and direct, not only at the ATM site but also on the exterior of the site. Remember, you are offering prospective customers an added service, one with the potential to draw them into the site.

Finally, there are factors that affect volume and involve the machine itself. These include the machine format (in a lobby, through a wall, drive-up); additional machine functions (postage stamp dispensing, couponing); the ease of ATM use; and machine presentation.

Given the large number of variables, the best deployers will learn how to use the available numbers, as well as to develop judgment to estimate the volumes they will achieve. The most successful deployers will implement programs that take into account the factors that build volume, such as visibility, promotion, and use of brands.

Surcharging provides banks and other deployers with the incentive to experiment with various ATM locations. While public places like shopping centers, casinos, and airports are generating substantial transaction volumes, a large variety of retail locations are doing very acceptable volumes. ATMs are finally coming of age, providing convenience for consumers and real income for deployers.

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