Remember the days of writing a check to yourself, going to the bank and cashing it in order to fill your wallet with the “green stuff?” Seems archaic, doesn’t it? With the advent of the ATM, consumers can conveniently access their cash from thousands of locales. But that’s not all. With proper management techniques, c-store owners and operators are turning today’s state-of-the-art ATMs into true profit centers.
One reason retailers consider incorporating ATMs into their operations is primarily to reduce large merchant fees paid to Visa/Mastercard/American Express and other credit card companies.
“Retailers doing large volumes of credit card transactions end up paying thousands of dollars each month to the credit card companies for the privilege of taking payments with credit cards,” said Mike Luther, president and owner of Convenience ATMs, Inc in Orlando, FL., a one-stop-shop for all aspects relating to ATMs. They provide ATM servicing, portable ATMs for events the link for ATMs to connect to the banking network (processing), and they provide consultation to prospective ATM owners on the best ATMs for their situation and the best way to utilize their ATMs for maximum profits.
“An ATM on the premises significantly reduces the number of credit card transactions, increases cash usage while at the same time adds an extra means of monthly profit from ATM surcharges,” Luther said. Additional benefits include offering convenience for your customers, reduction in bad check issues, attracting more customers and an increase in impulse sales. “Studies have shown customers using in-store ATMs spend an average of 20-30 percent of the money withdrawn from the ATM at that store location,” Luther said.
It’s important for c-store retailers to remember that consumers look at c-stores as destination points that have ATMs. “Over the past 13 years, it has become known that if you need an ATM, the c-store should have one,” said Wes Dunn, director of business development Tranax Technologies in Hayward, Calif. Tranax is an ATM manufacturer who works with distributors that provide the turnkey solution to the c-store operators. They manufacture mostly the low-cost varieties that are ideal for the c-store environment.
“You can expect that a certain percentage of the money that is taken out of the ATM will be spent inside the store,” Dunn said. “Theories range on how much that is, but it can be significant.”
Dunn added that there also is residual income on the ATM. “Surcharge is typically $1 to $2 and the c-store owner can share in that profit based on how involved they are in the operation of the machine,” he said. “For instance, if they are loading their own cash in the ATM, you can expect they would make more money than someone that is just letting an ATM company place the ATM in their store.”
ATM Best Practices
The best practices include keeping the ATM surcharges below the competition, keeping the machine immediately visible upon entering the store, having good signage, and making sure the machine is rarely, if ever, “out of order.”
In fact, industry experts agree that it is good to seek out the competitors' ATM surcharges and be sure yours are lower or at least in line with any other ATMs in the vicinity.
“Location is very important; ideally the machine should be immediately visible to the entering customers but not in such a position that it might invite a ‘smash and grab’ type of robbery,” Luther said.
Dunn agreed. “The best location used to be in the front of the store, so people saw the machine when they entered, but with smash and grabs and security threats, we now recommend putting them further into the store, and putting signage to let people know where the machine is,” he said.
Of course, when incorporating an ATM into your service offerings, there are some key “best practices” that you need to instill in your ATM operations.
Darren Smith with ATM USA in Morrisville, N.C. said that, from the merchant’s standpoint, the most profitable way to operate an ATM is to buy the machine and load one’s own cash. “This allows them to keep 100 percent of the surcharge that the customer pays,” Smith said.
“When business gets busy, store retailers are often too busy dealing with customers to tend to their ATM, which has just run out of cash,” Luther said. “But an empty machine is not profitable and may drive customers to the next retailer down the street that has their ATM up and operating.”
Common mistakes that Smith sees retailers make that can affect the profitability of their ATM include not placing the ATM machine in a visible area within the store or having the proper signage, not properly cleaning the machine, not conducting routine maintenance and not keeping it properly funded with cash.
Luther said if filling the machine becomes too tedious and/or time consuming then it might be beneficial to your bottom line to have an ATM company, such as Convenience ATMS, to place a machine in their business and taking care of ongoing maintenance, including stocking it with vault cash. “Surcharge commissions are less but the headaches are reduced so the owner can concentrate on running his business,” Luther said.
The choice of machine is also a key factor in making an ATM a profit center within a retail business. “If the retailer chooses the wrong type of machine for his location, long-term maintenance expenses can dig into any profits that might have been realized,” Luther said.
Of course, paying attention to the ancillary fees is paramount to making your ATM as profitable as possible. And retailers need to consider the surcharge that they establish on their ATM machine.
“Setting the surcharge too high relative to competitors—this not only rubs customers the wrong way, but also may drive the customer to their competition,” Luther said. “If a $.25 reduction in ATM surcharge will keep a customer coming back to that retailer for his or her ATM needs, then they will also be making their impulse buys while they are there.”
Smith added that fees should be set to be competitive in the market where the machine is located. “The majority of machines are charging $2.50 in today’s market if you are a c-store, mall, etc.,” Smith said. “However, if you have a captive audience, for example an entertainment location, hotel, casino, event, bar or club, you can go higher on the surcharge ($3 - $10).”
That said, Dunn said that there is an ongoing debate within the ATM industry about the fees charged to consumers. These opinions range from:
• Setting fees low and get more volume (which if you are trying to get people to spend money in your store, Dunn thinks is the best approach)
• Having a larger fee because your volume will be there no matter what.
“It really is a bit of an art form that most ATM distributors have a good feel for,” Dunn said.
Ancillary Service Offerings
There have been many new ancillary service offerings in the ATM industry, including bill paying, check cashing, cell phone card recharging to name a few. “Many are in their testing phases, but expect to see them more commonplace as time goes on,” Luther said.
ATM machines are now commonly used for other services, such as printing coupons, marketing or advertisements, and accepting deposits (at bank ATMs).
“We have been manufacturing and selling ATM equipment since 1996 and also manufacture self service kiosks and check scanners,” Dunn said. “The kiosk business with bill pay, check cashing and money transfers is the newer part of the business and one that we feel c-store operators/owners might be interested in as well.”
In addition to proper placement and ongoing maintenance of ATMs, c-store owners and operators need to pay attention to the big picture surrounding ATMs—namely, trends within the ATM industry that can affect this specific profit center.
“Today’s big trend within the ATM industry is price. Currently a retailer can buy a high-quality multipurpose stand alone ATM from an ATM distributor for under $2,000,” Luther said. “Just five years ago a similar ATM would have cost $3,000 or more. The quality and reliability of today’s machines are also far better than they were a few years ago.”
Dunn’s advice is that if you want to make your ATM a profit center, get one of the nicer models. The newest models offer ATMs with big color screen that look more financial in nature. “Consumers want to feel comfortable at their ATM and the more it looks like a bank machine (without the bank machine price of course) the more they will be willing to use the machine,” Dunn said.
Also, don't discount advertising. An ATM can be fitted with a video topper that can display full motion ads, print ads on the receipt and put ads on the screen.
“There are many opportunities to brand an ATM so take advantage of the captive audience standing in front of an ATM,” Dunn said.
Another new innovation, which is making life easier for ATM owners, is the introduction of the "wireless" ATM connection. “CDMA and GSM cellular routers are growing in popularity and these routers eliminate the need for a dedicated land line to your ATM,” Luther explained. They use regular cell phone networks to connect the machines to the bank processors, making it possible to place a machine anywhere a wireless signal is available.
“Having the ability to connect or communicate to the processor via TCP/IP opposed to an analog phone line, will provide faster transactions and save on the cost of a phone line if you use your existing TCP/IP connection in the store,” Smith said.
And as many retailers are trying to take advantage of their retail space, Dunn said that advertising, digital signage and putting kiosks next to the ATM seem to be the “hottest” trends that are working the best.
“There are other financial services that are being sold in conjunction with ATM that the c-store owners should be aware of,” Dunn said. ‘They should be asking their ATM distributors about these products. If you don’t know about them, question your provider.”