By Ray Varcho
WRG Services Inc.
Now is an excellent time to be in the automated teller machine business. For you, as payments industry ISOs and merchant level salespeople, ATM placement is a logical, seamless extension of your services (and portfolio), especially in locations that enjoy high-volume foot traffic.
ATM installations are appropriate for convenience store, gas station, restaurant, vending, hotel, building management, supermarket, nightclub, discount store and casino vertical markets, as well as a variety of other businesses and services. Thus, the possibilities for ATM placement are limitless. Additionally, the low cost of today's ATMs can be recouped in a relatively short time, presenting merchants with a significant investment opportunity and offering you an additional revenue stream.
Since the mid-1990s, when the ATM surcharge ban was lifted, the growth of the ATM industry has been phenomenal - from approximately 150,000 ATMs in 1996 to an estimated 400,000 ATMs in the United States today.
About half of the units in place are operated by financial institutions, with the other half operated by ISOs. The most significant growth has been in the ISO sector.
In the ATM industry, an ISO is an organization responsible for deploying ATMs and entering into a contractual relationship with ATM owners and operators in order to facilitate the processing of ATM transactions. This is done through a unique relationship with a financial institution (a bank) that sponsors the ISO.
So why is it an excellent time to be in the ATM business? Depending upon which analysts you listen to, the forecasts for ATM growth range from average to aggressive.
WRG Services Inc. not only manufactures and sells ATMs, it is one of the larger ISOs in the United States. Our experience as a manufacturer strongly supports the latter forecast, particularly as it relates to the typical, well-known variety of ATM that dispenses cash in multiples of a single denomination, such as $20.
For an investment of less than $3,000 and the use of less than four square feet of space in a retail, commercial or office environment, an ATM can be installed. Also, if a phone line or digital communications line is not conveniently available, wireless communication technology is a low-cost, readily available alternative for data transmission.
Imagine that you are one of your merchant customers, and consider the following scenario:
Let's assume you load your ATM with $1,200 in $20 bills, and you decide to charge a $1 fee per cash withdrawal. If your average customer withdraws $60, your ATM is able to dispense 20 withdrawals of $60 each.
And if your ATM dispenses all $1,200 in one day, you will realize a return of $20 on your $1,200 investment. That is a whopping 1.67 percent return on your investment in one day. And, should you decide to charge $2 per transaction, your return on investment would double.
Let's further assume you take that same $1,200, which is deposited to your bank settlement account the following day (as replenishment of your cash dispensed to customers), and restock your ATM every day.
Now, your $1,200 will result in a return on your investment of 11.67 percent per week. Compare this to your rate of return if you leave that $1,200 in your bank account or invest it in your favorite stock or certificate of deposit.
And, at the rate of 25 transactions per day, your initial $3,000 ATM investment can pay for itself in just 150 days, or five months.
Your ATM investment can also take advantage of branding opportunities. For example, if you operate in an area where a new or small bank has opened its doors, that bank will be looking for ways to make its services more convenient for its customers.
Even if the bank owns and operates its own on-premise ATM, you can offer it to service its customers via off-premise ATMs in your location, with the bank's name and marketing identity displayed on the ATM and on the ATM screen.
Through simple programming, the ATM will identify customers that use the bank's card, and will dispense cash without surcharging them. In turn, the bank will agree to compensate you for the surcharge fees that were waived for its customers.
The ATM industry has continually pushed the envelope for security enhancements, ranging from the movement to the triple data encryption standard (3DES or triple DES) to improved standards for PIN entry devices on ATMs.
Older single DES ATMs need to be upgraded to 3DES capability or risk being shut down by the processing networks. This, in turn, has created a sales opportunity in the marketplace for replacement products that meet industry standards. The emphasis in the ATM industry on security and compliance effectively results in increasingly robust products and enhanced product value for ATM operators, resellers and investors. Easy as pie Consider also the ease of installing and operating an ATM. An ATM can be shipped directly to the intended site and, once received, can be installed and activated in a matter of minutes.
Manufacturers' service staff can either preprogram an ATM prior to shipment or guide you or your merchant through programming the ATM after delivery. Or, should you prefer, the manufacturer can send a service technician to perform installation and startup services for you.
Also, merchants can choose to load cash into the ATM themselves or make arrangements with a third-party service provider. The possibilities discussed in this article are just a few of the reasons why it is a superb time to be in the ATM business. To learn more about this promising sphere, why not attend an upcoming ATM industry tradeshow?
Partnering with an established, reputable ATM industry ISO will allow you to focus on your merchant accounts, while taking advantage of the industry knowledge, compliance expertise, portfolio management tools and day-to-day processing services that are available.
Ray Varcho is the General Counsel for WRG Services Inc. He can be reached at aduplago@wrgservices.com. For information about WRG, visit www.wrgservices.com.
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