Coming Soon to Cardtronics Vcom Kiosks: Imaged Deposits

Non-bank ATM network operator Cardtronics Inc. has been trying to pump up transaction volume on its advanced-function Vcom machines ever since it bought them last July from 7-Eleven Inc. as part of the 5,500-machine ATM fleet the convenience-store giant unloaded for $137.3 million. Next week, part of that strategy takes effect when the 26 million members of credit unions belonging to the Co-Op Financial Services network will be able to make envelope-less deposits at the machines. The 2,200 Vcoms, manufactured by NCR Corp. and located in 7-Eleven convenience stores, are capable of imaging checks, sparing the depositor of the need to enclose checks in and fill out a deposit envelope as is required for a traditional ATM deposit. Jack Antonini, president and chief executive of Houston-based Cardtronics, revealed the pact this morning at Cardtronics' first-quarter earnings conference call. He also mentioned Cardtronics' previously disclosed deal with another credit-union network, Financial Services Center Cooperatives Inc. “Between the two of them, 30 million customers will now be able to make deposits 24 hours a day,” he said, adding that “we've got another very large bank in the queue.” Jim Hanisch, executive vice president at Rancho Cucamonga, Calif.-based Co-Op Financial Services, tells Digital Transactions News that the Cardtronics deal helps put credit unions at the forefront of a new banking service in which most of the headlines have gone to giants such as Bank of America Corp., Wells Fargo & Co., and JPMorgan Chase & Co. Co-Op first began testing an image-capable ATM at California Center Credit Union in November 2005 (Digital Transactions News, Dec. 7, 2006). Some 150 of the network's 5,400 ATMs now offer imaged deposits. “We're beyond test,” says Hanisch. Co-Op and Cardtronics did not disclose revenue arrangements, but the credit union to which the depositor belongs will pay interchange to Cardtronics as the ATM owner, according to Hanisch. The Vcoms are Citibank-branded, but Citi won't be a party to the transactions. While there have been some reports of imaging ATMs not working as they're supposed to, Hanisch says Co-Op's members have had few problems. The advantage for consumers is faster deposit verification and access to funds. For deployers, imaging ATMs need less servicing than traditional models. Hanisch says deployers typically send couriers to pick up checks from imaging machines only once or twice a month compared with daily for regular ATMs. “The hardware is relatively expensive, but it also changes the service dynamics for the ATM and it also makes it substantially more viable to place an ATM in an off-premise location for deposit taking,” he says. Co-Op also is working on a home-based deposit-capture service. Cardtronics will be promoting image deposit as it seeks more business from financial institutions. “It's an area that has a lot of banks very, very interested because it's a cost saver and it's a significant convenience improvement for their customers,” Antonini said. The underperformance of the Vcoms contributed to Cardtronics' first-quarter loss of $4.59 million, up from $3.45 million in the 2007 period. The Vcoms generated operating revenues of $1.24 million but had expenses of $2.27 million. Cardtronics is trying to reverse the Vcoms' losses through cost reductions from contract renegotiations, bringing outsourced service functions in-house, and replacing low-volume Vcoms with traditional ATMs in some 7-Eleven stores. To build transaction volume, the company will concentrate its Vcom advertising efforts in about 15 major cities. Marketing efforts will highlight the Vcoms' functions, which, besides imaging, include electronic bill payment. Co-Op recently signed deals giving its 2,800 credit-union members' depositors surcharge-free access to 350 Cardtronics machines in Costco Wholesale Corp. stores and all Walgreen Co. drug stores in Florida. Meanwhile, boosted in large part by the 7-Eleven deal, Cardtronics today said its average number of transacting ATMs increased to 32,475 in the first quarter from 25,228 a year earlier. Some 3,674 machines are in the United Kingdom and Mexico. Total transactions grew 87% to 83 million from 44.4 million. Monthly cash-withdrawal transactions per ATM grew to an average of 553 from 412 in 2007's first quarter, good for a gross profit of $290 per machine compared with $224 last year. More than 9,500 machines sport bank brands, Antonini said. In those branding deals, the bank and Cardtronics work out revenue arrangements to replace the surcharge fees?Cardtronics' chief revenue source of revenue?from surcharge-free transactions initiated by the partner banks' customers. In all, Cardtronics reported first-quarter revenues of $115.1 million, up 61% from $71.7 million in the year-earlier quarter. While it is still profit-challenged, Cardtronics doesn't plan to raise its surcharges to $3 as some big banks have. “We have not made any moves that extreme; we'd be concerned about our transaction counts being negatively [affected] if we did that,” said chief financial officer J. Chris Brewster.