Back in 1997, when banks started getting giddy over surcharge income from automated teller machines, Bank One Corp. made a bold declaration of manifest destiny: Within five years, it said, it would increase its ATM network tenfold, to 20,000 machines.
The company has been retreating from that goal for a while - off-premises machines did not prove very lucrative - and now it is taking an extra step back, shedding ATMs instead of adding them. As of Jan. 1, Bank One had 6,055 ATMs in its network, down from 8,500 on New Year's Day 2000, according to a survey report from ATM & Debit News.
Other banks have learned the same lessons as Bank One and are also whittling their off-premises deployments. Among the top 20 U.S. ATM owners, those that shed machines last year included American Express Co., FleetBoston Financial Corp., KeyCorp, and J.P. Morgan Chase & Co., the survey found.
Bank of America Corp., the largest ATM owner, had the same number of machines this year as last: 12,000.
Bank executives and industry analysts said that banks have been curtailing their ATM deployments as they learn more about how much revenue the off-premises market can produce. In the past, banks deployed ATMs to distribute their brand as widely as possible, but now banks are looking to cut costs, and are quick to remove an ATM with low transaction volumes.
Bank One - which has dropped to fourth place from first among ATM deployers - had pinned its ambitions on a network of off-premises ATMs known as Rapid Cash. Bank One spokesman Tom Kelly said, "We have gone through over the last few years a learning curve with the Rapid Cash, getting to the right number of machines in the right locations."
Bank One has been scaling back its goals for Rapid Cash since 1998. Today, instead of seeking a national reach with its ATMs, the company aims simply to serve its own banking customers at branches around the clock, and to "have off-site locations where they make economic sense," Mr. Kelly said.
Cleveland's KeyCorp, the ninth-largest ATM deployer, has also reduced its inventory, cutting machines with low use. "We're not interested in throwing ATMs out in markets just to support a branding strategy," said Dan J. Neistadt, the executive vice president of KeyCorp electronic services. "It has to make money."
Mr. Neistadt said KeyBank has also been removing ATMs in branches that do not get sufficient use. "Clearly we have an ATM in every Key center location," he said. "The question is, do we need two ATMs? At one time we felt we did, but today maybe we don't."
David Robertson, president of The Nilson Report, said bank-owned ATMs are feeling the pinch because of the ubiquity of cash dispensers in retail stores and the growing popularity of debit cards at the point of sale. "You have too many terminals chasing the same number of transactions," he said. "You have a decline in transactions per machine to the point you can't economically support full-service ATMs."
At Diebold Inc., one of the largest ATM manufacturers, executives say they are thinking global.
"In any given year, some part of the world is doing better than other parts of the world," said Ken Justice, the director of marketing intelligence for Diebold.
Mr. Justice said many banks are upgrading their ATMs - replacing older machines with ones that are Internet-enabled or equipped to serve blind people.
But some banks are content to keep the older models. KeyBank does not plan to install Internet-enabled ATMs until someone finds the "home run application," Mr. Neistadt said. "If that application materializes, we will be a fast follower. But it's not our desire to be out on the bleeding edge."
