banks, nonbanks are making significant strides. In fact, if ATM ownership were a race, BankAmerica Corp. would be running neck-and-neck for first place with the nonbank competition, Electronic Data Systems Corp. Experts agree it doesn't matter which company wins the race. What is more significant is that consumer demand for ATM services has enabled EDS to place thousands of ATMs, in spite of the fact the market was considered saturated. For both EDS and BankAmerica, the tight competition is a matter of access, not excess. And the key to giving consumers greater access has been the deployment of so-called off-premise machines, the ATMs that crop up in shopping malls or supermarkets rather than bank branches. Bank of America operates 6,100 ATMs, including 1,500 off-premise units. The bank plans to have 6,200 terminals in place by the end of the year. Such an extensive network delivers a high degree of convenience and accessibility to customers, says Bill Raymond, senior vice president and manager of interstate retail distribution at Bank of America. It also enhances revenue opportunities. Off-premise machines in states with liberal surcharging rules have the potential to generate significant fee income. Bank of America, for instance, has casino-based machines in Las Vegas where the surcharges can run anywhere from 50 cents to $2. Mr. Raymond says off-premise deployment is the fastest growing segment of the bank's ATM installation strategy. Most of the off-premise installations are concentrated in grocery stores because of the high volume of customer traffic there. "We have found that in stores where a person visits the same location once or twice a week, they tend to generate better transaction volumes," Mr. Raymond said. The bank also has machines at malls, airports, parking lots, and on corporate campuses. It recently signed an agreement to install machines in the Jewel-Osco food and drug stores in Chicago. Bank of America perceives its grocery store sites as more than just a spot to plug in a machine, Mr. Raymond said. "We're looking for partners who believe that installing an ATM or branch in their store is bigger than just a revenue stream for them," he said. One of the strongest pushes for the bank is its partnership with Lucky Stores, a grocery chain in California where the bank plans to make 400 ATM installations. The sites will be a combination of self-service customer kiosks and full-service branches. In the Lucky locations, customer service representatives have the freedom to mingle with customers in the aisles. The two partners also produce cross-promotions that include listing Lucky Store specials as well as bank products on ATM receipts and using the machines to dispense coupons for special purchases. By housing two businesses - banking and food shopping - under the same roof, the bank and the grocer aim to cement ties to their customers. "A customer of both institutions is more likely to be retained as a customer of both institutions," Mr. Raymond said. "It's very easy to cross the street to do your grocery shopping somewhere else but if you're doing your grocery shopping and your banking in the same place, it makes it tougher to make that move." EDS has also been successful in gaining partnerships with large retail chains, including 7-Eleven, Target stores, and Sam's Club. The company now operates approximately 6,000 ATMs, half of which were installed this year. Fred Gumbel, president of EDS' electronic commerce business unit, says if nonbank competitors such as his firm are making such a splash in off- premise deployment of ATMs, it is only because the void was there to be filled six to seven years ago. "We were simply utilizing the infrastructure that already existed," he said. Nevertheless the company says its role in off-premise ATMs is symbiotic, not hostile. "The reality is that we're not competing with banks," Mr. Gumbel said. "We are in the position of facilitating and providing greater levels of breadth in the use of ATM cards, off-line debit products, and by simply providing additional distribution points." In fact, the company is aggressively seeking banking partners to brand the machines it already has in the field as well as those yet to come. "Unfortunately that's not a reputation that EDS has had over the last couple of years," Mr. Gumbel said. After 17 years on the banking side of the fence, where he worked for Citibank and First Bank System, Mr. Gumbel says he hopes his presence as head of EDS' ATM activities will serve to quell distrust among bankers. "Maybe it takes somebody like me to go back and tell the industry that our real objective is to make financial institutions more successful," Mr. Gumbel said. EDS aims to do this by providing the technical means to drive bank ATMs, which Mr. Gumbel says will help deliver higher quality products at lower costs. In fact he maintains that technical excellence is still a key advantage for the company, which supports its ATM operations with its own proprietary network-based application. Despite EDS' growing leverage in off-premise machines, banks don't seem to perceive much of a threat. "Bank of America has a number of advantages that a nonbank competitor can never have," Mr. Raymond said. "One of those is we've got 10 million customers carrying our cards out there that have an incentive to use our machines. This is powerful if you're looking to convince a merchant off-premise that they ought to deploy your machine." By increasing the pool of competitors, Mr. Raymond said, nonbanks are actually helping all ATM deployers. "The more competitors out pursuing locations, the more important the cost efficiencies in pricing for retailers becomes," he said. "The growth of ATM accessibility also increases the benefit for all banks." Mr. Raymond adds that the bank has no immediate plans to brand an ATM driven by a competitor, citing technical and economic obstacles. But he refuses to rule out such ventures in the future. Mr. Gumbel notes that no matter how banks view their nonbank competitors, there is still room for growth for everyone. "We're not even close to saturation in the U.S.," he said. Meanwhile both companies are now testing a number of added features to give consumers more reasons to visit its off-site machines. A limited number of EDS machines now dispense stamps, prepaid phone cards, movie and event tickets, and traveler's checks. Some Bank of America machines dispense stamps, prepaid telephone cards, transit passes, and gift certificates to local stores. Peter Dunn, managing director of the consulting firm Edgar, Dunn & Co. in San Francisco, says ATMs will be made smarter as more functions are added to enhance consumer appeal. The trouble is that too many functions can dilute the bank's identity, raising the question of whether there can actually be too much automation. "Banks are looking at ways to make sure in providing these conveniences they are still able to keep in contact with their customer," Mr. Dunn said. "As customers move through their life cycles, banks have to be sure that their identity has not become just a utility." Another issue is how to keep ancillary functions from slowing down what many consumers view as the ATM's the primary function: dispensing money. Mr. Raymond notes that one factor that will come into play is the ability to ask for cash back in a point-of-sale transaction. "The more that the cash needs of the customer are met by the cash-back feature of POS, the more the opportunity exists to increase the functionality we provide for customers at the ATM." Ms. Monahan is a freelance writer based in New York.

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