Cardtronics LP has become the country's fourth-largest distributor of automated teller machines just five years after entering the business, according to ATM&Debit News.
Its buying up batches of ATMs and its courting of banks and retail chains are the main reasons Cardtronics has pushed itself onto the national stage, and this month it announced its two biggest deals.
On Oct. 4 the Houston company took over ownership and management of 1,100 retail store ATMs of McLane Company Inc., a Temple, Tex., food distributor owned by Wal-Mart Stores Inc. Five days later Cardtronics announced a long-term agreement with SSP/Circle K of Corpus Christi, Tex., to install and service 335 ATMs in Circle K convenience stores in Texas and Oklahoma. SSP/Circle K will buy new ATMs from Houston-based Tidel Technologies Inc. through Cardtronics, which will install them and provide processing services.
Cardtronics appears to be one of the beneficiaries of the demise of Credit Card Center, an ATM independent service organization in Philadelphia that went bankrupt after giving too many sweetheart leases to merchants. Industry executives say that merchants are looking for companies that can fill the void.
Last year Cardtronics was not even in the rankings of the ATM independent sales organizations by ATM&Debit News, a sister publication of American Banker. This year, on the basis of data through July, it trailed only E-Trade Group Inc., Access Cash, and American Express Co.
Cardtronics also placed 132nd in Inc's 2001 list of the 500 fastest-growing privately owned U.S. companies. It had sales of $26.2 million in 2000, against $1.3 million in 1996, the magazine says.
Cardtronics, whose national network of 6,400 ATMs had previously been cobbled together one store at a time, rather than in batches, is now planning an aggressive campaign to acquire more merchant accounts.
"Our vision is to become the nation's largest and most well-regarded independent sales organization specializing in ATM products and services," said Ralph Clinard, Cardtronics' president and chief executive officer.
The company was founded in 1989 as a deployer of low-tech scrip machines, which were cheaper precursors to ATMs. Instead of dispensing cash, they dispense receipts that are taken to clerks and redeemed for cash. Cardtronics has a patent on its scrip machine and still deploys some, though they now make up just 10% of its fleet.
The new focus is on sewing up deals with merchants that have multiple locations, said Doug Deitel, an executive vice president at Cardtronics. But the will use these arrangements as a complement to its strategy of putting teller machines in one convenience store at a time, Mr. Deitel said.
"We're in a position to attract both corporate locations and acquisition candidates who are looking to exit the business," he said, and the purchase from McLane was "the first step in this major strategy."
Cardtronics also wants to grow by signing deals with banks to act as their agent in deploying their ATMs in stores. It recognizes that banks see the off-premises market as "outside of their core competency," and wants to help them leverage their ties to their communities, Mr. Deitel said.
Scott Strumello, an associate at Auriemma Consulting Group of Westbury, N.Y. said that in the same way that merchant-acquiring banks began outsourcing their sales forces to independent sales organizations several years ago, banks are now beginning to outsource the servicing and maintenance of their off-premises ATMs. "It provides a service to their customers, and yet the ability to sell the product and service can be left to organizations that are better equipped to do that," he said.
One of Cardtronics' contracts calls for it to maintain off-premises ATMs for Compass Bancshares Inc. of Birmingham, Ala. Mr. Deitel explained that nonbank ATMs are much smaller, dispense cash only, and use dial-up telephone lines, which are less expensive than bank ATMs; transaction volume can be lower but still be strong enough to turn a profit. Bank ATMs are managed through leased phone lines.
"The bank model works with extremely high volume to justify those costs," Mr. Deitel said.
The deal with SSP/Circle K is also good news for Tidel, the manufacturer hit hardest by Credit Card Center's collapse. Credit Card Center had thousands of Tidel ATMs in warehouses, but could neither deploy nor pay for them. Through a bankruptcy court, Tidel has worked out a deal to get back some of its ATMs, but the manufacturer has also had other financial problems.
"We see Tidel as an important partner," Mr. Deitel said. "We don't see any change in service levels with Tidel. They still deliver an excellent product."
