Bank of America Makes ATM Withdrawal

Pulls cash machines from hundreds of gas stations, including Valero sites

Angel Abcede, Senior Editor/Tobacco, CSP

CHARLOTTE, N.C. -- Targeting $8 billion in expense cuts, Bank of America (BofA) reduced its ATM network almost 9% this year by yanking most of the devices deployed at U.S. gas stations and malls, according to Bloomberg. Many of the ATMs were in stations run by Valero Energy Corp.

Bill Day, a spokesperson for Valero, said its contract with BofA ended in 2011. It had ample notice and dealt with the transition by using a temporary provider. Day told CSP Daily News that San Antonio, Texas-based Valero will soon announce the name of its new long-term provider.

BofA's total number of ATMs fell by 1,536 in the first half of the year--a record decline--leaving it with 16,220 as of June 30, the Charlotte, N.C.-based firm said last week.

The financial institution did not renew deals to place its machines at sites owned by Simon Property Group Inc., a U.S. shopping mall owner, and Valero, said Anne Pace, a bank spokesperson.

Brian Moynihan, CEO of BofA, is shrinking the bank's footprint to focus on its most profitable clients after regulations squeezed fees and he aborted plans to charge debit-card users $5 a month.

Moynihan shuttered 108 branches this year and plans at least 30,000 job cuts in a reversal of the expansion led by his predecessor, Kenneth Lewis.

"It's going to be a smaller platform," Moynihan said at a conference last November. "We have 42 million retail customers; many of those don't contribute or overcome their cost-to-serve."

BofA chose to pull most of its ATMs at malls and gas stations because those devices only dispensed cash and some were not available 24 hours a day, Pace told the news service. Customers want to be able to deposit checks at an ATM, she said.

"It's about convenience and access, that's what the customers are looking for," Pace said. "People aren't banking 9:00 to 5:00, they are banking when it's convenient for them."

The move stems from Moynihan's "Project New BAC," an efficiency plan that seeks to cut $8 billion in annual expenses by 2015. The number of ATMs should not change much more, she said.

It costs banks an average of $1,700 per month to run an ATM on someone else's property, compared with $1,100 at a branch, said Tony Hayes, a partner at consulting firm Oliver Wyman in Boston. The difference stems from rental costs and fees for armored couriers to refill machines with cash, he said.

"There are very real expenses to owning and operating ATMs, and since banks don't charge their own customers to use the machine, the costs are borne entirely by surcharges paid by non-customers," Hayes told Bloomberg. "In the current environment, banks are unable to support the cost structure they have historically."

Valero, a large U.S. refiner-marketer, manages about 1,000 retail locations mostly in Texas, as well as in Louisiana, Arkansas, New Mexico, Colorado, Arizona, California and Wyoming. Another 5,000 independently run sites that include other states were not covered by the bank's deal, Day said.

"Our contract with Bank of America expired at the end of 2011 and they chose not to renew," Day told CSP Daily News, adding that the need to find a new provider was "not a surprise."

He said, "Our customers have said overwhelmingly that they want ATMs in our stores. It's part of our customer service; it's a convenience for them."

Simon Property had 325 retail locations across 41 states and Puerto Rico as of April, Les Morris, a spokesperson for the Indianapolis-based company, told the news agency. The number of mall ATMs has not changed, though the provider has, he said, without specifying who replaced Bank of America.

Moynihan said during the November conference that his strategy is to sell more services to BofA's 8 million "preferred" clients, who had about three-quarters of retail deposits and are 1.5 times as profitable as the lower-tier group. The bank gives incentives by removing monthly service fees on checking accounts for those who use its credit card, have a mortgage or Merrill Lynch brokerage account.

The CEO had touted the reach of his ATM network last year when saying why the proposed debit fee was fair for those with less deposits or who have mortgages or credit-cards with other lenders. He dropped the fee in November after a public backlash.

"The issue is when people split their relationship and use our convenience and our access and our 18,000 ATMs and our no-foreign ATM fees and our online banking product and all that, and yet have their relationship elsewhere," Moynihan said in October. "That is tough for us to afford to provide."

In related news, BofA has announced that it is rolling out chip technology on many of its consumer-credit cards. The new chip technology will increase acceptance and security of the cards for international travelers.

Credit cards with chip technology, which is also known as EMV (EuroPayMastercard Visa), are embedded with a microprocessor chip that encrypts and stores the account information. Many countries outside the United States have already converted from magnetic stripe to EMV chip technology.

The bank's new chip-enabled credit cards will continue to prompt customers to sign for transactions just as they would today. The cards also include the traditional magnetic stripe, which is the current standard here.

"The new chip-enabled cards will improve convenience and security of customers' transactions when traveling abroad," said Susan Faulkner, BofA's consumer and small business products executive. "We want our customers to have the best possible experience while making purchases with their credit cards anywhere in the world."

Angel Abcede, CSP/Winsight By Angel Abcede, Senior Editor/Tobacco, CSP
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