Fees and Off-Premises Locations Spur Surge in ATM Deployment

Lured by the chance to charge new fees, leading banks have sharply boosted their arsenals of automated teller machines.

The top 50 banks in ATMs were deploying 60,778 machines at midyear, up more than 17% from the holdings of the top 50 a year earlier, an American Banker survey shows.

Bankers and observers attributed the leap to surcharging-the practice of charging customers for using ATMs at banks other than their own. Two major ATM networks-MasterCard International's Cirrus and Visa U.S.A.'s Plus- changed their operating rules in April 1996 to allow surcharging nationwide. (Complete tables begin on page 18.)

Banks took the move as a green light to impose fees and put new machines in nonbank locations. By putting more machines off-premises, experts say, banks can offer convenience to consumers and reap more fees.

"With surcharging, what would previously be an uneconomic situation now turns into something you can make a few dollars on," said Alan Pohlman, executive vice president of Carmody & Bloom Inc., a Ridgewood, N.J., consulting firm.

"The ability to surcharge has brought more rational economics to ATM deployment," added Bill Raymond, a senior vice president at BankAmerica Corp.

ATMs at locations beyond branches-at supermarkets, gas stations, and other sites-have been increasing rapidly for several years. More than one- third of the machines of this year's top 50 are at off-site locations, up from about 20% five years ago, the survey shows.

For the 42 banks that provided full data both this year and last, the number of off-site machines surged a stunning 46%, versus a 20% gain for ATMs at branches.

Meanwhile, the banking industry's rapid-fire consolidation clearly gave a lift to the total ATMs of the top 50 banks. As some members of the group merged, others moved into the group and raised the total.

Lower telecommunications costs and cheaper machines also have contributed to the ATM boom, experts said. These factors have lowered the break-even point in monthly transactions per machine.

Overall, BankAmerica led the pack in ATM deployment, repeating its performance of the previous year. The San Francisco-based giant reported having 6,900 ATMs, up slightly from the 6,800 of 1996.

Some other leaders reported far bigger gains.

Banc One Corp., for instance, increased its ATM base by 84%, to 4,014. Banc One, the fourth-largest bank deployer, has articulated one of the industry's most ambitious ATM strategies, saying it plans to have 20,000 ATMs installed in three to five years.

NationsBank Corp.'s ATM base increased 78%, to 5,931 machines, in part because the Charlotte, N.C., company bought Boatmen's Bancshares of St. Louis. These additions helped NationsBank nudge Wells Fargo & Co. of San Francisco out of second place.

A merger also made U.S. Bancorp of Minneapolis, with 3,235 machines, one of the five largest ATM deployers, displacing First Union Corp., with 2,479. First Bank System Inc. bought the old U.S. Bancorp and took its name.

In all, American Banker surveyed nearly 200 bank holding companies. The resulting tables highlight the top 50 in the field and provide geographic data on the top 100.

Thrift holding companies and nonbank deployers were not included; had they been, the largest nonbank deployer, Electronic Data Systems Corp., would rank third, with 5,738 machines at the end of June.

ATM experts predicted installations will continue to rise as banks see overall growth in revenue from the machines. As more banks experiment with dispensing noncash items through ATMs, the experts said, the machines-and the fees-will continue to flourish.

"At some point you're going to have all these little boxes out there dispensing cash, and everybody charging $1.50 to $2," said Rita L. Champ, senior vice president at Fujitsu-ICL Systems Inc. of Dallas.

To differentiate themselves, Ms. Champ said, banks will "reduce fees or do different fee structures."

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