Cardtronics Seeks Greater Volume on Deposit-Taking ATMs Through New Links to Allpoint

By Jim Daly

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The surcharge-free Allpoint ATM network will begin offering deposit-taking services to customers of U.S. member financial institutions at 2,500 ATMs in 7-Eleven Inc. stores and other locations, Allpoint owner Cardtronics Inc. said Wednesday.

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The deal represents a new way for Cardtronics, which owns or operates more than 82,700 retail ATMs in the U.S. and abroad, to get transaction volume on its network and involves no new capital investment, according to Bill Knoll, executive vice president of the financial institutions product group at Houston-based Cardtronics. The 2,500 imaging ATMs already accept envelope-free check and cash deposits. While operated by Cardtronics, they bear the brands of banking giant Citigroup Inc. or some members of the Co-Op Financial Services network for credit unions. Cardtronics bought Citi’s 7-Eleven ATM fleet in 2007.

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Those ATMs will be open to deposits by year’s end from customers of other financial institutions that join the program. Besides generating new transaction volume for Cardtronics, the deal will enable Allpoint’s members, most of which are small and mid-sized banks and credit unions, to extend their ATM footprints. Allpoint has 1,300 financial-institution members and 43,000 ATMs in the U.S. Knoll would not say how many institutions plan to participate, but he says “we have a number of folks that we have signed up for pilots. We’re pretty pleased with the response.”

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Knoll also says various retailers have expressed interest in having imaging ATMs placed in their locations. “We are in discussions with a number of our retailers, and a lot of them believe being able to offer image deposits … is a great differentiator.”

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All of Allpoint’s ATMs are so-called off-premise machines placed in retail locations, even those with financial-institutions brands. “There is no need for [consumers] to go to a bank to make a cash withdrawal, or now a deposit,” says Knoll.

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One way Cardtronics hopes to generate volume is through its pricing plan. Allpoint’s interchange rate for the program will be 25% or more lower than rates from competing surcharge-free networks, according to Knoll. At ATMs, transaction revenues known as interchange flow from card issuer to ATM owner—opposite the way they do in point-of-sale transactions in which merchants pay interchange to issuers.

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As in cash withdrawals at Allpoint ATMs, a consumer with a debit card issued by a network member will not have to pay a fee for making a deposit.

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Once a customer swipes his or her debit card at a 7-Eleven or other participating machine to make a deposit, the screen will display Allpoint branding, says Knoll. But if the customer’s financial institution is not a participant, the cardholder “will not see the deposit option,” says Knoll. “We’re able to manage the experience and make sure there is no confusion.”

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ATM consultant Sam M. Ditzion, president and chief executive of Tremont Capital Group Inc. in Boston, says deposit acceptance “creates a potentially significant opportunity for Cardtronics to both increase transaction volume and revenue using existing locations.” He adds that “the value proposition for financial institutions would be particularly impactful for smaller institutions, which are the majority of Allpoint’s customers. This would open up additional points of presence, if you will.”

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Indeed, many community banks and credit unions haven’t yet deployed high-tech imaging ATMs that don’t force the customer to put a check or cash into an envelope for a deposit, says researcher Ed O’Brien, director of the banking channels advisory service at Maynard, Mass.-based Mercator Advisory Group Inc. And the placement of such ATMs in stores could generate more traffic for retailers.

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“The retailers could have higher volume, Cardtronics could have more usage on their machines or network, and potentially the financial institutions could get more exposure to expand the brand where they don’t necessarily have the exposure,” O’Brien says. “Potentially this could be a win-win across the board.”