The business model for automated teller machines (ATMs) is somewhat of a moving target. The cost to acquire and maintain the machines has given rise to surcharging so that banks can afford-or even profit from-ATM service. As a

result, banks need to create a different fee structure for each ATM based on its location so that banks can optimize machine use and create the perception of ATM ubiquity. "Bankers need to look at better ways to use (ATMs)," says William Gregor, svp of New Jersey-based Gemini Consulting. "They need to understand their customers, how they use the ATM system, reassess the system and where their machines are located."

ATMs can now do much more than just dispense cash. They deliver postage stamps, mini-statements, even mutual funds, and an overwhelming number of consumers have shown that they are willing to pay extra for these services. The trick is to wed the service or group of services to the right location while charging acceptable fees.

Consumers in highly populated areas with several bank branches are likely to ignore an ATM that tacks on too many service charges, but they will gladly pay up to $3 or more for the convenience of using one in a remote location, mall or casino, according to some sources. "It would be foolhardy to put the same fee (structure) in anywhere," says Joe Majestic, vp of the retail group at Tampa-based Payment Systems, Inc. "It's a question of price elasticity. How much a consumer will pay will vary from market to market. A decision to place an ATM should be based on an analysis of the cost effectiveness of each machine."

Banks like Chase and Citibank are moving to the next stage in ATM usage, replacing whole branches with ATM outlets sporting six or more ATMs at one location and establishing limited service branches with three or more ATMs.

Meanwhile, networks like CIRRUS and PLUS that serve as links between banks and ATMs are expanding their service capacity to include gas stations, retail stores and even homes. "Customers using telephones and PCs can make bank transactions from home using the NYCE system," says Dennis Lynch, president and CEO of NYCE Corp., the ATM network operator serving the Northeast corridor. The networks also are working on electronic benefits transfer (EBT) to distribute government foodstamps and other subsidies through cards that can be used at ATMs or grocers.

Such initiatives are critical to ATM network providers, whose role- and consequently revenue-may diminish in an ATM business model where consumers seek out their banks' proprietary networks to avoid surcharging.

-peterson tfn.com

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