The rate of deployment of point of sale terminals that accept debit cards will far outstrip new automated teller machine installations over the next four years, a Cleveland-based analyst projects.

The prediction, by Freedonia Group Inc., supports assertions by electronic banking executives that debit point of sale - in which a consumer makes retail purchases using an ATM card - will soon be a lucrative source of revenue for financial institutions.

"You've heard a lot of talk over the years about the cashless society, and now we're seeing the cornerstone of that vision - namely the POS terminal - being installed on a widespread basis," said Stephen Cole, president of Chicago's dominant electronic banking network, Cash Station.

Fast Growth Expected

According to Freedonia Group, retail merchants in the United States have currently installed about 320,000 POS terminals that accept debit cards, including about 25.000 terminals that can authorize both debit and credit transactions.

By 1997, the number of debit POS terminals is expected to grow by more than 30% to 1.1 million.

The terminals have thus far been installed mainly at supermarkets, gas stations, and convenience stores. But as consumers begin to use their cards at these locations, observers feel that POS debit will soon make inroads into other types of retail businesses, including department stores.

Yet despite the fact that debit POS is accepted as the most promising electronic banking product of the |90s, ATMs still clearly have their place.

Room for Expansion

According to Freedonia Group, the number of ATMs will grow over 20% in the next four years from the current 87,000 terminals to over 110,000 in 1997. This prediction is surprising, given that many experts feel the U.S. market is already almost saturated with ATMs.

However, Freedonia Group said that banks are increasingly looking to install ATMs away from their branch offices. This is supported by American Bankers Association figures. According to a 1992 ABA automation survey, about 14% of banks that do not currently operate off-premises ATMs plan to begin doing so by the end of 1994.

In addition to new ATM installations, Freedonia sees a healthy market for replacement machines over the next few years. In the past two years alone, two of the nation's largest financial institutions, Bank-America Corp. and Chemical Banking Corp., have announced plans to replace almost 2,500 older ATMs with new models.

Brisk Sales Expected

"We think the combination of replacement machines and additions to new locations will keep ATM sales at a consistently high level over the next few years," said Edward Hester, an analyst with Freedonia Group.

Mr. Hester emphasized, however, that the rise of point of sale will force banks to be creative about where they place the ATMs in the future. He said that debit POS will probably begin to reduce consumers' need for cash at shopping malls and other retail-oriented locations.

Thus, banks should begin installing their ATMs in places where it will not have to compete with POS terminals for transactions. Such locations include workplaces and college campuses.

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