Page 18 - GS190801

Views

Insider’s report

on payments

ATMs and debit cards 50 years on

By Patti Murphy Allowing banks to install ATMs in stores freed grocery
ProScribes Inc. staff members for other tasks and created new revenue
streams for stores: rental income from the machines.
he summer of 1969 was a momentous time in
America. On July 20, the United States realized At about the same time, banks and other financial institu-
its goal of landing the first manned-spacecraft tions began entering into compacts – first local, then re-
T on the moon. A few weeks later, half a mil- gional and national – that allowed their ATM cardholders
lion concertgoers converged on a farm in upstate New to use other financial institutions' ATMs, for a convenience
York for the now famous Woodstock Festival. And a few fee.
weeks after that the first ATM was installed at a branch of ATM cards curb consumer check writing
Chemical Bank, a large New York bank that eventually was
acquired by what is known today as JPMorgan Chase. The emergence of ATM networks was perhaps the first nail
in the coffin of widespread consumer check usage. Absent
Space travel hasn't progressed significantly since 1969, and easy access to their cash, many consumers carried check-
no music festival has captured the mood of a generation books, which they took out to pay for purchases when they
the way Woodstock did. But that first ATM, which at the were short on cash, or simply to obtain cash. (I recall, for
time was nothing more than an extension of a Chemical example, often cashing checks at hotels, as I never seemed
Bank branch, led to a sea change in banking and payments. to bring along enough cash when traveling.)

Eight years later, when I began my career in banking, ATMs The next nail in the coffin came when some enterprising
were still a novelty. In fact, they weren't universally called networks and retailers decided to test the concept of us-
ATMs. In some circles they were still referred to as CBCTs ing ATM cards for POS payments. It began with grocery
(for customer communication banking terminals). Back stores, primarily in the southwest, which was served by the
then, state and federal laws placed strict limits on how and PULSE ATM network (a bank-owned network eventually
where banks could set up branches. CBCTs were seen as a acquired by Discover), and in California, served by STAR,
low-cost option to branch banking (like depositing checks which today operates as a unit of First Data Corp.
and obtaining cash) during non branch hours, which gen-
erally ran from 9 a.m. to 3 p.m. A few large bank card issuers, working with Visa and Mas-
tercard, already had tested the concept of allowing credit
My first job – at the Office of the Comptroller of the Curren- cardholders who also had checking accounts with those
cy, the U.S. Treasury Department agency that regulates na- banks to use their credit cards for checking account debits
tionally chartered banks – entailed copyediting and proof- as well. But it was a clunky process, and that play never re-
reading a new handbook for CBCT examinations. It was a ally caught on. Using ATM cards for POS payments was an
boring and tedious set of tasks, but it piqued my interest in easier sell since consumers were accustomed to using ATM
banking, particularly in the application of technologies in cards to obtain cash for purchases. Using those cards to
banking. pay for purchases saved the time and hassle of going to the
ATM first, and paying ATM convenience fees.
By the early 1980s, ATMs were catching on. Although most
remained tethered to branches, some enterprising banks The only downside of these early POS debit programs was
had started deploying free-standing machines. Some of the that they were constrained by the ATM networks' regional
earliest free-standing ATMs were placed in grocery stores. footprints. A rash of network mergers removed that con-
Grocers had a long tradition of cashing checks for custom- straint by creating national networks that allowed card-
ers. Publix, the Florida-based supermarket chain, at the holders to access their cash pretty much anywhere.
time claimed it cashed more paychecks for Florida workers
than did any bank in the state.

18