Free Money

Retailers consider new ATM strategies: elimination of surcharges, music downloads.

Angel Abcede, Senior Editor/Tobacco, CSP

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Jaime Pukylo is in a predicament: The two-store test eliminating surcharges from his chain’s ATMs is proving to be a formidable traffic builder.

Pukylo, sales manager for Country Fair Inc., a chain of more than 70 stores with headquarters in Erie, Pa., cringes at the thought of losing the surcharge fees. “That’s a lot of money,” he says.

From “free” cash to music downloads, retailers are evaluating their ATM strategies as technologies, affordability and consumer preferences change.

“Convenience-store chains continue to evolve,” says Bob Tramontano, vice president of marketing for financial services for NCR Corp., Duluth, Ga. “[They’re] creating reasons to make their stores a destination.” In addition to reconsidering surcharges, other areas of ATM change include:

Lottery. Strides in technology and business partnerships are bringing the possibility of lottery into the ATM space.

Digital downloading. As music downloads become more popular, ATMs may find a new use.

Loyalty. Developing ways to track ATM users and send promotional messages through display screens may prove to be popular. Security. Both in protection of personal identification numbers (PINs) and the actual security of the cash in the machine, developments are occurring.

ATM strategies at c-stores appear to be in flux as technology and the business relationships surrounding the devices continues to change. Ultimately, Tramontano says, consumers care about convenience, so the need for accessible cash continues to grow. “C-stores are the location of choice,” he says.


For some chains, eliminating ATM surcharges has been standard for a while. La Crosse, Wis.-based Kwik Trip Inc. has had free ATMs for about four years.

“It’s a big thing for us,” says Don Zietlow, president and CEO of the 366- store chain, which advertises its no-fee ATMs on billboards all along I-90. “We asked ourselves, ‘What irritates the customer?’ And what irritates the customers is that they have to pay $1 or $2 to get money from their own bank account through the ATM.”

Of course, Kwik Trip did make money on surcharges—$2 million a year, according to Zietlow. But after removing the fee, transaction volumes rose 300%. Through a simple theory that 60% of customers spend a portion of their ATM cash inside the stores, gross-profit figures could cover the lost surcharge revenue in a little more than a month, he calculates. Today, the chain has many locations with two ATMs.

While Kwik Trip has made its internal case for free ATMs, the move can be a burden for some. John Miller, president of the 11-store Colonial Pantry chain, based in Champaign, Ill., currently contracts his ATMs out to a third party that pays him a portion of the proceeds.

“What’s the price of free?” Miller asks. Depending on what he ultimately has to pay per transaction, “what and [how much] do [customers] have to buy to make up that cost?’

Others believe c-store operators are well positioned to tack on surcharges. “As long as you can offer the consumer value and can articulate that value, consumers will pay,” says Tramontano of NCR. “It has to be a win-win for both parties in order to see that service is delivered on a consistent basis.”

People buy a can of soda at a Costco, a c-store, a vending machine or a bar— where it’ll cost the most—for different reasons, Tramontano says. “As consumers look to live their lifestyles, they’ll be willing to pay different amounts for different services,” he says. “It’s a losing scenario if you have to take that service away because you can’t pay for it.”


The question of surcharges is pivotal because cash dispensing has become a fundamental convenience offer. But for many years, the true promise of ATMs has revolved around what it can do beyond dispensing cash. Options such as prepaid calling-card top-offs, financial services and even stamps have surfaced in the past few years.

What has happened to that promise? Largely nothing, because the viability of any additional service hinges on a number of logistics, including customer demand, processor certification and coordination among transaction partners.

Take the example of prepaid topoffs. Part of the reason top-offs, whereby customers can take their prepaid cards and add calling minutes, have not become a dominant service is processor cooperation and that elusive critical mass, according to James Phillips, vice president of sales and marketing for Triton, Long Beach, Miss. Prepaid top-offs had to run through a processor, but phone carriers had to attain certification from each of the different processors to move forward. These parties never achieved that goal on a large scale, nor did they agree on any processing standards.

With those same challenges in place, Phillips says that one service, quick-pick lottery at ATMs, appears to be overcoming initial hurdles. He points to one company, New Yorkbased Linq3 Technology, that appears to be making strides, negotiating with state lottery commissions and developing processing agreements to bring quick pick to ATMs.

What may further motivate retailers and third-party ATM suppliers, also known as ISOs (independent selling organizations), to try the new offering is the company’s softwarebased model, says Wayne Dalton, senior vice president of sales for Linq3. “You don’t have to purchase additional hardware,” he says. “That was the problem in the past, with [ATM options such as] prepaid-gift cards and check cashing.”

Retailers may be seeing the option soon, because the quick-pick-lottery software will be made available on any new Windows-embedded compact or CE models, according to Dalton. Field upgrades will be available as well for those models already installed, he says.

“If there’s a long line at the counter, [retailers] can route people to the ATM,” Phillips says of the lottery potential. “It can also be a benefit for the consumer who can go to the counter or the ATM.”


Developments with ATMs continue on many fronts. Bob Douglas, vice president of engineering for Triton, says that over the past several years, ATM transactions have steadily become more secure. Requirements on personal identification number (PIN) pads from credit-card companies and the growing use of high-speed connections at the store have allowed for the influx of greater security measures. Today, most c-stores have the capability of encrypting data through at least a portion of the transaction, with the future moving toward even greater levels of security. Options for thicker plating and more formidable physical security of cash are also evolving, he says.

Beyond issues of security, the future of ATMs continues to be one of optimism and speculation. Certainly issues of logistics and demand will continue to be barriers, but many believe competitive pressures will continue to force retailers to evaluate all aspects of their business, including ATMs.

Retailers have yet to unlock the marketing and loyalty potential of ATMs, according to Tramontano of NCR. A simple prompt that asks a customer to enter his or her phone number or e-mail address prior to receiving cash can suddenly add loyalty to the ATM functions. Every time a customer gets cash, a retailer can offer promotions or cents off gasoline in accordance with the store’s loyalty strategy.

 In the future, music downloads are also a possibility. NCR is currently operating music-download kiosks in eight U.S. airports, with plans for 35 airports by this fall.

“So we went from one ATM transaction [with cash dispensing] to now, where you’re selling additional [products],” Tramontano says, citing how the future will be about developing these new profit centers. “It allows [retailers] to maximize the value of their ATMs.”   

ATM Stats  

Evaluating ATMs, especially when it comes to issues such as surcharges, is a matter of numbers. Here are a few that might help retailers make key decisions:

$2,000 to $8,000 Price range of a typical c-store ATM, depending on features   

$10,000 to $20,000 Cost range of a high-end, multifunction ATM

$2.22 Average surcharge rate, according to 

Surcharge Cap Diverted … For Now

Efforts to put a cap on ATM surcharges failed this summer, but industry observers believe it’s an issue that will return.

This past spring, Sen. Tom Harkin (D-Iowa) tried to insert an amendment that would limit ATM surcharges into the recently passed financial-reform package, but his colleagues did not support the measure and the amendment failed to pass.

“Surcharging is under attack,” says James Phillips, vice president of sales and marketing for Long Beach, Miss.-based Triton, pointing out how the demise of Harkin’s amendment does not signal the end of the debate. “If companies were not able to surcharge, many would not exist, [and customers] would not be able to access their accounts.” 

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