There was a time when the only place an American consumer would see an Automatic Teller Machine (ATM) was outside a bank. As the ATM turns 50 this year, that’s no longer the case.
Now people are likely to find ATMs nearly anywhere. And when they do, they’re certain to find fees to use those ATMs. Transaction fees. Surcharges. Everybody has to pay them, right? Not necessarily.
First, let’s get the terminology straight. Transaction fees are what a bank charges to an ATM user who is not one of its customers. That’s distinct from a surcharge, which is what the owner of the ATM charges for supplying the unit that dispenses the cash.
Still, there’s a growth trend in surcharge-free ATMs. It’s driven by big banks as well as large, non-bank ATM networks who pay the largest store chains to host their machines. Smaller c-store chains aren’t part of their balance sheet.
For those businesses, installing an ATM on premises requires an upfront purchase of a machine, new or refurbished, that could run several thousand dollars. Then there are the ongoing costs – a data line, parts costs if there’s a breakdown and/or maintenance contracts, signage, receipt paper. Then there’s the additional labor hours to refill the withdrawn cash, track transactions and increased insurance premiums.
The surcharge is how the independent ATM owner pays for all those things and makes a little bit of profit, too. So, why would a convenience store merchant decide to not charge that fee?
Increased foot traffic.
An ATM can attract what are being termed ‘surcharge avoiders’ – folks who will go out of their way to not pay an extra fee to use a machine. When those customers use an ATM in a convenience store (or any store), they spend more money. Actually, around 23% more, according to industry news outlet ATM Marketplace.
It also reports that an ATM will average 800 transactions per month at $60 per withdrawal. That’s nearly $50,000 every month funneling through a well-stocked store with product waiting to be purchased. That may explain why stores that install an ATM see a 20% increase in sales.
That’s the benchmark for the industry. C-stores with an ATM can plug their own numbers into that formula to calculate the potential upside from an on-site cash machine. Should they forego the surcharge, they’ll also have to figure the loss of revenue to cover the ATM overhead as well as any extra income derived through that surcharge.
The question for c-store proprietors who own an ATM at one or more of their locations is: Will the surcharge-free ATM attract enough new business to offset the loss of revenue? Unfortunately, the math isn’t simple. It’s still a gamble.
And even after crunching the numbers, an operator may still be forced to base the decision on whether the store across the street already has a surcharge-free machine. That may leave little choice for a c-store in a competitive location.