Tuesday , September 18, 2018

Cash Favoritism Still Benefits Cardtronics, Especially in the Wake of Payment-Network Failures

Cardtronics plc may have been one of the few companies to benefit from Visa Inc.’s June 1 outage in Europe. It notched a record high volume in the United Kingdom, Edward H. West, Cardtronics chief executive and director, told analysts during a conference call Thursday to discuss the ATM deployer’s second-quarter results.

The 10-hour disruption in Visa payment card acceptance caused 5.2 million transaction failures, which apparently prompted many European consumers to visit an ATM to get cash.

Cardtronics didn’t benefit from cash use solely in Europe in the quarter. In the United States, same-store withdrawal transactions increased 8% from a year.

“Clearly, new payment technologies and consumer adoption have taken some market share from cash, but we believe there’s opportunity in this environment where consumers have multiple payment options,” West said, according to a SeekingAlpha.com transcript of the call. “Our network-based platform and franchise is uniquely positioned to take advantage of not only the shifting dynamics of consumer behavior but also banks’ actions as they look to enhance their customers’ access to convenient cash transactions while ensuring customer experience efficiency and security.”

A Cardtronics UK ATM sits in a grocery store as a consumer walks by. (Image credit: Cardtronics plc)

Meanwhile, plans by Link, the U.K. ATM network, to reduce interchange paid by banks to ATM operators prompted Cardtronics to remove more than 2,000 ATMs from service. Link says Cardtronics has more than 16,300 U.K. ATMs as of May 30, making it the largest U.K. ATM deployer.

In January, Link announced a phased 20% reduction in interchange rates over four years, but in July canceled the third reduction scheduled for January 2020. This happened because ATM transaction volume fell 6% on a yearly basis, Link said. The fourth reduction, set for January 2021, has been put on hold.

“Link is committed to maintaining the U.K.’s extensive coverage of free-to-use cash machines for many years to come,” Link chief executive John Howells, said in a July press release. “However, many consumers are turning to alternatives to cash more quickly than expected and usage of ATMs is now dropping at 6% per annum. LINK will therefore adjust interchange to maintain free-to-use coverage in line with our commitments to the public and to our participants. LINK will continue to monitor the cash machine network carefully and will not hesitate to make further changes as needed to protect UK consumers.”

Cardtronics said it converted more than 500 ATMs from free-to-use to pay-to use. As of May 30, Cardtronics had 4,942 pay-to-use ATMs, Link says.

West called the Link moves progress. “While we are pleased with the recent progress, it is just that, progress,” he said. “We continue to evaluate our fleet in the context of this latest development and are continuing to convert certain ATMs … from free-to-use to pay-to-use where the lowered interchange rates no longer support the free-to-use model.”

In financial results, Cardtronics had $341 million in revenue, a 11.5% decrease from $385.1 million a year ago. Its net income of $3.8 million is 75.1% less than $15.2 million a year ago. Cardtronics took a $10 million impairment loss in the quarter from a fleet of ATMs removed from 7-Eleven Inc. locations that the company now says are not likely to be deployed. In 2017, 7-Eleven began moving its approximately 7,800 ATMs off of Cardtronics’ system to that of an affiliate of 7-Eleven’s Japanese owner.

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