teller machines and accepting debit cards. While supermarkets have had these technologies for years and drug stores are quickly catching up, few other merchant categories have been as actively interested in broadening payment acceptance as video stores. The potency of the trend became evident in May when Blockbuster Entertainment announced a deal with Citibank to put ATMs in 3,000 video stores. The bank described the arrangement as a way to bring financial services to nonbranch locations. Blockbuster wants to increase foot traffic and encourage repeat visits. With 380 of the ATMs up and running, the Dallas-based subsidiary of Viacom Inc. announced a deal with Verifone Inc. last week to install 12,000 point- of-sale terminals for debit-card acceptance in 3,400 stores. Three thousand of the devices have already been placed in more than 1,000 stores. The Verifone terminals are programmed to accept Blockbuster's electronic gift certificates but not to give cash back. "Customers start to expect these things," said George Gewinner, vice president of card services at Blockbuster. "They say, 'Oh, you take debit, then you must have an ATM as well.'" Other video chains are starting to think similarly that in-store ATMs will help complete their transformation into one-stop entertainment shops for movies, candy, or even cash for a night on the town. The retailers are also eager for a cut of the ATM revenues. Mark Walter, an ATM consultant based in Lake, Mich., said video stores without these technologies may find themselves failing to keep pace with progress and with competition. "In some of the upscale suburbs, you've got four video stores within one mile," he said. "They are trying to differentiate themselves from the store across the street." On the other hand, he said, the ubiquity of cash machines may tend to diminish their importance. Mr. Walter considered it unlikely that video- store ATMs would be used by a large percentage of customers or would draw in many extra people. He doubts there is market research to support that expectation. "It's like putting them in at McDonald's," he said. "Are you going to eat three Big Macs instead of one because you have more cash?" Nonetheless Hollywood Entertainment Corp. jumped on the bandwagon last month, saying it would place 500 ATMs in Hollywood Video stores nationwide. It is viewing the investment as a way to gain revenue through advertisements on the Diebold Inc. machines' color screens. Mark Wattles, founder of Portland, Ore.-based Hollywood Entertainment, called the machines "an initial step toward fulfilling a vision to provide customers with an on-line link to the world from our stores." Card Capture Services Inc., an ATM service and transaction processing company in Portland, is handling the maintenance and advertising upkeep for Hollywood Video. Saul Caprio, the firm's director of marketing, said, "People tend to buy more when they have extra cash in their pocket." Despite attempts to push debit cards, "there is still a lot of cash flying around." With the two largest video-rental companies-Blockbuster and Hollywood- installing ATMs, the rest will follow, Mr. Caprio predicted. West Coast Video of Langhorne, Pa., the fifth-largest chain, said it is reviewing proposals from three ATM companies and will start testing machines soon. Many of West Coast Video's 503 stores are also upgrading point of sale terminals for debit cards. "We've been looking into (ATMs) after seeing other success stories," said a West Coast spokesman. "This can not only provide a value for our current foot traffic, but could add to it." A spokesman for Video Update, a rental chain based in St. Paul, said it, too, is preparing to install ATMs with advertisements on them. Its POS terminals in all 750 stores will accept debit transactions by yearend. Industry experts said debit card acceptance is relatively inexpensive to install and customers expect it. "Debit has become not a competitive advantage but a competitive necessity," said Christine Harland, a spokeswoman for Verifone, a subsidiary of Hewlett-Packard Co. based in Santa Clara, Calif. Some observers said debit availability might pull customers away from the ATMs and their surcharges. Mr. Walter said many in-store ATMs have fallen short of transaction volume and revenue expectations. "We weren't really looking at this as something for people to get the cash to pay for a movie rental," said a spokesman for Citigroup, the parent of Citibank. "We are looking to give people banking services without having to go to a branch." Alanna Kellogg, an electronic banking consultant based ipn St. Louis, said the Blockbuster-Citibank deal differs from others. She said Citibank hopes to use Blockbuster's name recognition and popularity to play up its own brand, particularly in states where it does not have branches. By contrast, it is essential for Hollywood Video "to make enough transaction fees to generate the rate of return they want to get. If they don't make that, then they're not achieving their objective."
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