Or so many thought. Most bank branches featured an ATM, and many bankers thought that they had pretty much satisfied consumer demand for the machines. In the years that followed, however, it became clear that the the United States market could support well over 100,000 terminals. Banks and nonbanks alike discovered that ATMs placed in shopping malls and convenience stores would often get as much or more transaction traffic as terminals placed in branches. And as the number of ATMs grew, so did the number of transactions per terminal. These unexpected developments convey an important lesson to bankers: Do not underestimate the America consumer's appetite for convenience. Cognizant that many ATM growth predictions in the past have proven inaccurate, some experts again are stating that the ATM market is reaching some sort of saturation point. But, taking into account the last few years' consumer demand for the terminals, many experts believe that the number of ATMs in the United States can continue to grow - if the range of transactions they provide expands. The most popular function of an ATM is cash dispensing. But if the definition of the ATM expands to include a full range of functions, then its usefulness opens up and the notion that we may be reaching a saturation point evaporates. What types of added functions are in vogue? Bill payments, split deposits, and statement printing, to name a few. The new functions are driven at the same goal that bankers hoped the ATM would help them reach two decades ago, experts said. "Bankers are serious about getting 15% to 20% of customers out of branches," said John B. Benton, president of Benton International, Torrance, Calif. To do this they are putting ATMs in more creative, off-premises locations and adding new functionalities to the machines. But as the less-cash society begins to look more real - with debit point of sale and stored-value cards gaining wider acceptance - many believe that the ATM must provide more than cash if it is to continue to be useful. In the next three or four years, the ATM population should continue to expand at a 3% to 5% clip, according to Richard Robida, senior executive vice president of Speer & Associates, an Atlanta-based consulting firm. Estimates on the size of the installed base of ATM in the United States vary, but most place the number of terminals at over 100,000. Mentis Corp., a research firm based in Raleigh, N.C., found that banks and thrifts owned 84,300 ATMs at the end of last year. The balance of the terminals are owned by nonbanks, such as Electronic Data Systems Corp. Mentis also found that the number of new ATM installations, which hovered around 7,000 in 1989, 1990, and 1991, has risen significantly in recent years. Last year, there were 13,000 new installations. Despite this growth, the coming four to five years will be a transition period for ATMs, according to Anne Morgan Moore, president of Synergistics Research Corp., Atlanta. "Eventually as we have more stored-value cards, we'll use less cash," she said. In the nearer term, consumers will load value onto the chips on smart cards at an ATM, but longer term they are likely to do this through a personal computer. The most attractive of advanced ATM applications are those that are not easily done by some other method today, said William Adcock, Synergistics' chairman. He said the number of customers using ATMs for simple cash dispensing is reaching a plateau. "ATMs will have to be repositioned as sales and information machines," he said. He referred to research by his firm that indicates 61% of ATM users - both light and heavy users - employ the machines to obtain cash less frequently than in the past. William Randle, senior vice president of marketing and strategic planning at Huntington Bancshares in Columbus, Ohio, acknowledged the trend towards advanced functions at ATMs. "I think we'll see an absolute rush for new applications at advanced functioning ATMs over the next five years, especially among the under-35 group," he said. Based on such reports, Speer & Associates' Mr. Robida said that ATMs will continue to be the core of electronic banking through the turn of the century. "I've seen people get up at shows and say that there will be no more ATMs in 10 years. I don't see this happening," he said. "Some uses for ATMs will be home runs, some base hits, but the (amount of) services you load onto your ATMs will be critical," he said. Pricing is likely to affect the way ATMs are used in the future. Many banks, pointing out that the ATM has largely failed in its promise to reduce branch costs, are charging large fees for ATM transactions. In fact, many institutions now view the terminals as revenue producers rather than cost cutting tools. However, several influential institutions, including Citicorp, First Chicago Corp., and Huntington, are trying to make the ATM and related self- service products fulfill their original cost-cutting role. This is done by introducing sanity into transaction pricing, bankers said. Transactions that carry high cost for the bank - those at the branch - incur charges, while lower-cost electronic transactions, even those involving accounts at other banks, do not. "We don't charge any fees, not even for not on-us usage; we eat this cost," said Mr. Randle. "It's cheaper than building branches." Fees could have a negative effect on ATM usage, some experts said. "If the surcharge goes unregulated and continues to be allowed by network switches, putting in ATMs as revenue producers will ultimately affect their continuing growth," said Mr. Robida. Ron Alkire, technical support manager at Downey Savings and Loan in Newport Beach, Calif., agreed. "If these surcharges are abused they will affect ATM usage. But, if consumers need cash for traveling and find using ATMs convenient, they don't seem to mind the charge." Robert Hill, senior vice president at First American Bank in Chicago, said that off-premise deployment is a critical part of his institution's strategy. "Eighty percent of ATM users are not our customers," he said. "ATMs are a line of business to us." Mr. Hill added that there are still plenty of new locations available. "Banks are being creative in placements and in adding services onto ATMs. Only 60% to 65% of our customers have cards - there's still a great deal of work to do." Addressing itself to those that do not use its ATMs, First American is putting instructions in seven languages besides English and working with ethnic organizations to market directly to people who are uncomfortable with ATMs because they cannot read English. It is perhaps moves like these that have prompted Mr. Benton to predict that the ATM market will be 50% bigger in the next five years. He believes this will be the case, even as home banking proliferates. "For the masses, the real volumes will be at ATMs. What we're going to be seeing in the next few years is banks upgrading their ATMs, modernizing their fleets: increasing features and improving policies and procedures; in all doing a much better job of handling electronic banking," he said. "For example, the machine will handle a split deposit and give cash back as well as know who I am in terms of relationship marketing," he said. "This is all possible today - banks can do this at this hour. They just haven't done it." Ms. Fioravante is a freelance writer based in New York

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