Team Oil Travel Center’s ATM is one of the Spring Valley, Wis. Store’s best profit margin items per square foot.
This wasn’t the case back in 2005, when the c-store’s ATM was contracted out.
“We realized we weren’t making any money on it, so we decided to buy it,” said Tony Huppert, Team Oil CEO. “Ever since then, it has been a magnet to bring people into the store.”
Although the retailer is responsible for keeping it stocked and serviced, the unit has proved its worth, despite the extra time and effort in monitoring.
“The key is to make sure it’s always stocked and running, since it only takes one unsuccessful visit for a store’s ATM to get a bad reputation,” said Huppert.
With 60 c-store locations blanketing the Mississippi Delta, Double Quick Inc. found that it was easier to contract out its ATMs rather than operate and service the machines in-house.
“We owned our own for a long time,” said Howard Hyche, vice president of information technology for Double Quick. “About a year and a half ago, we brought in PAI (Payment Alliant International), which owns and manages our units. We have very high ATM volumes, so now we don’t have to load them or deal with the stress of keeping large sums of cash on hand.”
As part of the deal, Double Quick shares revenue with Louisville, Ky.-based PAI.
While ATMs are often thought of as providing money for customers and extra income for retailers, modern functions being built into ATMs means the future of technology promises to entice even more patrons into c-stores, where additional sales are just around the corner.
According to the ATM Industry Association (ATMIA), an independent, non-profit trade association based in Orlando, Fla., between 55-60% of ATMs are managed by independent operators.
“It’s an exciting time to be in the ATM business,” said David Tente, ATMIA’s executive director-USA. “We’re seeing a lot of functionality come to ordinary ATMs as far as connectivity. Everything is Windows-based, and we’re getting away from dial-ups and into internet connectivity.”
Also, wireless technology has helped expand ATMs into more rural areas where Wi-Fi or internet service tends to be spottier. Some providers predict this type of hookup will eventually be the norm for faster, more dependable service.
Wireless technology has been implemented in other ways with ATMs, as well. As one of the largest independent ATM deployers in the country, PAI has partnered with Sionic Mobile, a cloud-based mobile commerce firm, to implement beacon technology. The solution enhances the PAI ATM network with iBeacons across the 74,000 terminals in the U.S.
This allows advertisers to engage and connect with millions of mobile app users by enabling proximity-based mobile ads and cardless cash redemption of earned mobile loyalty rewards. Users are sent a welcome message through mobile ads and offers, then invited to redeem a reward for cash at a nearby ATM. They also can opt for cardless transaction by tapping the mobile rewards app button or three-digit code to withdraw cash from a participating ATM.
This type of technology may not be feasible for c-stores with less than 100 ATMs, said Tente. “It probably isn’t worth the expense, but the sweet spot is about 500 terminals for independent ATM deployers.” With most ATMs not being phased out until 2023, it could be five to six years before upgraded functionality is implemented, Tente added.
Prineta, an Overland Park, Kan.-based ATM vendor that provides full-service ATM placement and service in the U.S. and Canada, also offers merchant services in addition to sales, processing and cash loading.
Using Near Field Communication (NFC) technology, customers can use their smartphone instead of a debit card at the ATM. It’s not widespread yet, but may be a good option for high-traffic locations in the future, according to Conner Morton, Prineta’s director of marketing.
Prineta offers remote ATM monitoring. With this technology, retailers can download an app to see cash levels, transactions and error reports in real time.
C-stores are not typically taking advantage of the new technology, although Team Oil’s Huppert likes the idea of monitoring money amounts remotely.
“We haven’t implemented anything new in terms of technology,” said Double Quick’s Hyche. “Some of the newer features, like bill pay, are where we see ATMs headed, but we haven’t added any features like this yet.”
According to Shrewsbury, Mass.-based Mercator Advisory Group’s 2016 ATM Market Benchmark Report, less than one-quarter of ATMs in the U.S. are owned and operated by leading financial institutions, which means there is plenty of opportunity for progressive independent deployers—including convenience stores—to create income by offering ATM access.
Houston-based Cardtronics Inc. deploys and operates ATM terminals under two arrangements with its retail partners. The first is the turnkey arrangement, in which the company handles ATM placement and management. Cardtronics is responsible for all aspects of the ATM’s operation, including ownership, transactions, cash management, supplies and maintenance. In this case, the company and client share in the ATM revenue.
Its other service is tailored to merchants that prefer to own the ATM gear. In this arrangement, typically more popular with single-store owners and small chains, the merchant ATM owner is usually responsible for providing cash and performing simple maintenance.
The primary considerations for c-store owners are to decide on how much income they expect from the ATM, and how much time they want to spend, or have store staff spend, on managing the machine.
With the merchant-owned program, convenience store owners will usually receive more income up front.
More ATM providers such as Cardtronics offer ATM units with the technology and services that transform ATM screens (and receipts) into delivery devices for interactive customer communications by financial institutions, as well as advertising space for retailers, third-party advertisers and independent ATM owners.
With any ATM program, there are built-in benefits for c-stores. Cardtronics’ 2016 Health of Cash survey found that respondents were twice as likely to have used cash as credit in a convenience store, and 33% were more likely to use cash than a debit card. The survey also showed that 75% of consumers used cash for impulse purchases of items such as candy, gum, snacks and beverages.
Then there’s the issue of fraud protection. Cardtronics and the payments industry as a whole have focused on upgrading existing point-of-sale (POS) and ATM terminals for EMV, the chip card technology that enables more secure transactions, and named for Europay, MasterCard and Visa.
Morton confirmed that EMV technology has been the biggest industry innovation, yet there are still many ATMs operating without a chip card reader, which increases the risk of fraud.
It’s the ATM loader who is at risk and covers the loss if fraud occurs.
Lastly, while it’s related to the transformation in how financial services are delivered rather than technology, adoption of the non-bank, surcharge-free ATM network is burgeoning. This can help retailers gain access to consumers who otherwise would have avoided their ATM due to service charges.
Tente predicted ATM technology will soon offer additional denominations other than $20 bills and person-to-person payment or transfer of money to another person.
This will allow those convenience stores with ATMs that are not affiliated with a bank more opportunities for transactions.