The primary disadvantage credit unions confront in survey
after survey is the lack of physical convenience. One of the
primary ways credit unions are trying to overcome this perception
is through increasing deployment of ATMs and joining with
other credit unions to network ATMs.
As this strategy unfolds, recent data suggest that there may
be a third component that would make ATM management even more
successful. Moreover, even though credit unions own only a
small fraction of ATMs, their networked approach may place
them in a better position to add this capability than some
of their competitors.
The State of ATMs Today
The total number of ATMs in the US today is approximately
273,000 which is up from 80,000 in 1990 according to ATM &
Debit News. The credit union share of this total is approximately
18,200 machines, or 6.6% of all ATMs, based on surveys by
However, credit unions do not individually deploy ATMs in
large numbers. If a credit union owns more than 50 machines,
that is sufficient to place them in the top 50 of credit union
ATM owners. The five leading credit union ATM operators at
State Employees Credit Union, North
|Navy Federal Credit Union, Merrifield,
|The Golden One, Sacramento, CA
|Pennsylvania State Employees, Harrisburg,
|San Antonio Federal Credit Union,
San Antonio, TX
The recent Callahan survey of branch and ATM
deployment intentions showed that the average number of ATMs
to be added by credit unions over $30 million is under 3 machines
per year (see graph, p. 4). Obviously, larger credit unions
will deploy more, but the numbers suggest that ATM purchase
and deployment is a very small part of day-to-day operations.
As a result, most credit unions have very little in-house
expertise about ATM operations or deployment. Unlike branch
decisions involving much higher levels of fixed investment,
using external consultants is not practical.
Building Coop Networks
To overcome this small scale, credit unions have combined
their ATMs in cooperative networks to process transactions
from a credit union's members through a common switch. This
networking has given each individual credit union the ability
to advertise ATM access at hundreds or thousands of locations
even though the credit union does not own the machines.
Credit union cooperative networks have become even more vital
in the last five years as surcharges on "foreign"
machines have emerged as a major source of income for ATM
owners. By keeping credit union networks surcharge free for
credit union members, this helps deliver value and distinctiveness
to the credit union delivery system.
In addition to deploying ATMs at the credit union level,
expanding credit union networks has been the primary means
of enhancing credit union ATM strategy. Recently, the CO-OP
Network of Ontario, CA announced an agreement to merge with
the Member Access Illinois (MAI) coop to create a total network
of 12,000 ATMs in 49 states. The CO-OP Network is the largest
of seven or eight credit union ATM cooperatives and has used
its clout to negotiate surcharge free access with other non-credit
union owned networks such as Access Cash.
In New Mexico, many of the larger credit unions created a
CUSO that owns, deploys, and manages ATMs on behalf of the
credit unions. This CUSO, Anytime Network, takes the pooling
model a step further by creating a common operational capability.
The Third Leg of Strategy
Even though credit unions own a very small share of ATMs and
rarely manage large numbers, transaction volume per ATM is
significantly higher than national averages.
The average transaction from the branch survey is reported
as 7,888 per full service, whereas the national average is
3,833. The average transaction per cash dispensing machine
Even though these numbers may suggest that credit union ATM
deployment is more productive, the logic may not be correct.
What appears to happen is that credit union costs of operating
ATMs, to the extent these can be estimated, are so high that
deployment is actually limited to those situations that have
the best chance of meeting the breakeven levels required.
In conducting a study of ATM management at credit unions late
last year by Callahans, the best documented estimate we received
from a major operator of cash dispensing machines was that
the average cost per machine per month was $750. At the same
time independent service operators (ISOs) were approaching
credit unions offering to deploy cash dispensing machines
in employer locations for surcharge free member access (non
members would pay a surcharge) for $350-$450 per month. This
fee covered machine lease, cash servicing, all reconciliations,
complete servicing, 24-hour monitoring and communication charges.
Additional research showed that most credit unions cannot
accurately track and therefore do not know the full costs
of operating their ATM locations. Not only are different departments
involved, often there are three or four external providers
supporting the machines. The result is that there are very
few operational benchmarks available to determine efficient
machine management. Most credit unions rely on and manage
strictly with activity indicators such as number of transactions.
The assumption is often that no matter what the cost is, the
electronic transaction must be less expensive and certainly
more convenient than live teller service.
The Changing Role of Networks
The rate of credit union deployment continues to be high.
In the Survey above, the responding credit unions indicated
they would expand their networks by 24% over the next two
years, down from the 40% expansion rate in the prior two years.
But the role of ATMs is changing as machines are Internet
linked and technology continues to bring new transaction capabilities.
Both Diebold and NCR have announced the ability to take "envelope
free" cash and check deposits at ATMs in which the check
images are digitized for immediate posting to the member's
Banks or other ATM owners with large numbers of old machines,
are not anxious to convert to new technology and write off
their earlier investment. Credit unions, not as heavily invested
in older technology, are better positioned to add new capabilities
and not write off prior equipment.
But even more crucial is the networked learning that could
be provided by helping credit unions manage their existing
ATM operations more efficiently. Whether the technique is
outsourcing with local ISOs, operating machines under network
contracts, or helping to construct operating templates for
comparing costs, credit unions have a chance to operate much
The gain is not just saving money. ATM deployment decisions
are often exercises in breakeven analysis. How many transactions
do I need to justify a new machine? If the costs are too high,
then the number of possibilities in sponsors or other locations
will be correspondingly reduced. The view will be that "all
the good locations are gone."
Putting the Third Leg in Place
Credit unions will continue to buy more ATMs, that is clear.
Cooperative networks will expand. The challenge is to get
smarter about our operations. The information exists, the
expertise is out there, the competitive benefits are clear-who
will take the lead?
Larger Credit Unions
for Full-Service ATMs
(181 responding credit unions)