ORLANDO - The top banking executive at E-Trade Group Inc. issued a dire warning to bankers at an automated teller machine conference here Thursday.
Mitchell H. Caplan, chief banking officer of E-Trade Group and chairman, president, and chief executive officer of E-Trade Bank, said his company, which is primarily a brokerage, aims to use its Internet service and its network of 9,600 ATMs to take as much business as possible from traditional commercial banks.
E-Trade's immediate goal is to "penetrate the mainstream banking market" using ATMs in lieu of branches, he said.
"My view is, you do not need branches," Mr. Caplan said in the keynote speech to the fifth annual ATM conference sponsored by Thomson Financial Media, parent company of American Banker. "It costs us the same dollar amount to service 9,000 ATMs as it does to service five branches."
Mr. Caplan had been president and chief executive officer of Telebanc Financial Corp. of Arlington, Va., which operated the Internet-based Telebank, before E-Trade bought his company as its banking arm in January.
This deal was followed in May by E-Trade's purchase of Card Capture Services Inc. of Portland, Ore., which operated the third-largest ATM network in the country and has since been renamed E-Trade Access.
"I sort of drove the acquisition of CCS," Mr. Caplan said.
His online bank has doubled its assets every year since 1997, primarily because its overhead costs have been so much lower than those of banks with a lot of branches, he said.
Last month E-Trade announced that E-Trade Bank had amassed more than $8 billion of assets, which the company said put it among the top 20 federally chartered savings banks.
Mr. Caplan's message was intended to strike extra fear in bankers who are already worried about flagging transaction volumes at the machines they deploy.
A popular theme at the "ATM 2000" conference has been the injection of Internet technology into ATMs, which some banks view as the best way to coax customers to do more business at the machines. Some banking companies - including Bank of America Corp. and Wells Fargo & Co. - have already made broad commitments to Web-enabling their ATMs.
Bank of America runs the largest ATM network in the country, with 14,000 machines; it is followed by Wells, with 12,900. E-Trade comes next, then American Express Co., with 8,600.
Susan Zawodniak, vice president and executive director of NYCE Corp., said that equipping machines with wireless and Internet technology is one of the "next generation strategies" that bank deployers need to examine. These strategies may turn out to save the ATM industry, she said.
Companies with Internet strategies still have a disadvantage, said Ms. Zawodniak, who was chairwoman of the conference. "You can't make a deposit at your PC - well, not yet, anyway," she said.
Mr. Caplan said his company's ATM network makes this disadvantage less relevant. He boasted that his company is the "most widely recognized brand on the Internet today," and he played television commercials that tout his company's high returns and interest rates.
As an extra taunt, he repeated E-Trade's motto: "Sorry bankers, but the brokers should have warned you."
Linda Hill, vice president and ATM channel manager at $9.5 billion-asset First Citizens Bank in Raleigh, N.C., said she is not fazed by companies like E-Trade. The company is strong on e-commerce, she said, "but customer service is still a huge issue."
Ms. Hill said she admires E-Trade's growth but had a message of her own for these companies: "Beware of customers leaving to go back to their banks."
A consumer survey by Dove Consulting showed mixed interest in Web-enabled ATMs.
Eighty-one percent of respondents would use the Web-enabled machines, said Dove director Ann Schmitt. And two-thirds said they would use such a machine regularly, at least weekly or monthly.
"The potential size of the self-service kiosk market is two to four billion transactions annually, nationally," Ms. Schmitt said.
The average consumer would tolerate a surcharge of about $1, the survey found. Customers are "indifferent" to the idea of waiting up to two minutes to use the machines, Ms. Schmitt said. "Surprisingly, consumers are willing to wait in line," she said.
However, respondents "are not as comfortable conducting complex and lengthy transactions," such as ordering medicine or groceries through the machines, as they are performing basic transactions like getting cash and transferring money, she said.
First Citizens' Ms. Hill said she came to the conference "excited about all the movie screens and Web screens" but concluded that "it's pretty clear that customers don't want to see that."
There is room for new ATM technology, she said, but "what customers want are stamps."
