ATM Buyer's Guide

ATM introduction

While credit, debit, and smart card use is exploding, cash is still king. Cash remains the fastest and most effective way to make purchases at retail locations like food courts, convenience stores, and nightclubs. Automatic teller machines (ATMs) ensure that cash is easily accessible, whenever and wherever someone needs cash.

You have probably noticed ATMs popping up all over – they are no longer found only in banks. In fact, according to ATM Marketplace about 70 percent of ATMs are now located at non-bank locations, such as shopping centers/malls, airports, grocery stores, gas stations, restaurants, and other places large numbers of people gather. Is your business ready to join this trend?

Installing an ATM can be good for your business. An ATM can reduce credit-card processing fees, increase visitors, and eliminate bad checks. And, if your business has enough traffic, you can even make money with an ATM.

This BuyerZone ATMs Buyer’s Guide will get you up to speed on your ATM options, provide tips on how to select an ATM supplier, and tell you how much you can expect to pay for one.

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Do you need a cash machine at your location?

The best way to judge whether your location warrants a cash machine is by measuring foot traffic. You should be in a location where hundreds of people will either see the machine or a sign for it every day. With this much traffic, you should be able to generate enough ATM card transactions to make the multi-thousand dollar investment worthwhile.

Even if you do not have overwhelming foot traffic, you may want to get a cash machine anyway. Retail locations that rely on cash may need an ATM to ensure that prospective customers do not walk away because their wallets are empty. And stores that rely on small-dollar credit card transactions may find that the reduction in credit card processing fees offsets the costs of a cash machine.

Not every business should get an ATM. If you fail to meet the basic criteria and are not interested in having an ATM as an ongoing expense, take a pass. And if there are already other ATMs nearby or if most of your purchases are less than $5, installing an ATM is not likely to make sense.

Choose the right cash machine for your location
ATMs come in three basic types. The model you should choose depends on your space constraints. Freestanding models are the most popular design, since they provide the most flexibility in placement, but they require a two-foot by two-foot footprint, plus space for a person to stand. For locations short on floor space, countertop ATM models can be the right solution. Finally, through-the-wall cash machines take up no floor space but require significant construction work during installation.

If your after-hours foot traffic is significant, you may want to invest in an outdoor through-the-wall ATM model that can generate supplemental income for your business 24 hours a day. Compared to indoor models, outdoor cash machines have more security and environmental risks. For example, they require more lighting and physical barriers to deter theft and vandalism. Also, outdoor models are more susceptible to weather damage, such as from rain or snow. Of course, addressing these risks with a weatherized ATM drives up your overall costs.

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Money machine features

Money machines all share the same basic features: a card reader and keypad to enter PIN codes, a screen to guide the user through the process, a cash dispenser to dole out the cash, and a printer to generate receipts.

Cash dispenser
By far the most important consideration is the cash dispenser. Most dispensers feature single-denomination cash cassettes that can hold 700 to 1,000 bills. Using $20 bills, this translates to a stash of $14,000 to $20,000 – enough to handle approximately 300 average transactions.

Most retail money machines sold these days come equipped with a removable cash cassette, allowing you to reload the cassette from the security of a back office. Non-removable cassette designs have recently been introduced, which helps reduce ATM costs, but raises potential security risks as it requires you to stack replacement bills into the cash box in an open environment.

High-traffic locations like casinos, malls or airports may want to look into larger cash cassettes that hold up to 2,000 bills and multiple denominations. This can help reduce how frequently the ATM needs to be restocked.

Connectivity
Most ATMs sold these days run on Windows-based PCs. To do their work, they need to be plugged into a power outlet and connected to ATM processing networks.

Usually, ATMs dial into these networks via a basic 56 kbps modem connection, which requires a dedicated phone line. However, if you have an existing computer network at your location, you may want to look into TCP/IP compatible and wireless ATMs. Advantages of this design are that it can result in faster transactions since it is always on, and it eliminates the need to pay monthly phone charges. Wireless ATMs have also begun to emerge, which gives you greater flexibility in placing the money machine anywhere you want, not just against a wall.

Money machine basics
The rest of the machine is fairly straightforward with little in the way of choices. Basic cash machines use a 5.7 inch black and white screen. Some money machines offer color screens as large as 11 inches that can be used for advertising. Larger screens can also be useful if your ATM will offer more than just cash dispensing, such as the option to buy stamps and tickets. Expect to pay two to three hundred dollars more for the color version of the same size screen.

Most retail ATMs feature dip-style card readers that read the card without pulling the card into the machine.

ATM keypads do not vary much either. If making your ATM accessible is important to you, check if it can be accessed via Braille or voice. Current American Disability Act requirements specify the height at which the PIN pad must be located to ensure wheelchair access, but do not yet specify other requirements.Touch screen money machines are available, but at a cost in the thousands of dollars, many retail locations opt for standard keypad entry instead.

Finally, make sure that it is easy to load paper into the printer. Receipt printers are highly reliable, but still rank as the component most prone to breakdown.

Non-cash features
The trend towards convergence has not escaped the ATM industry. As a result, you can now wire money via Western Union, add minutes to prepaid wireless phones, and even cash checks. A few suppliers offer ATMs that issue not only cash, but also movie tickets, hotel reservations, and even ski lift passes.

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ATM security

Keeping your cash secure is a critical component of any ATM purchase. Given the fact that most of the time, it will be your own cash that will be stocking the machine, it makes sense to pay special attention to this consideration.

Cabinets & locks
Underwriters Laboratories, an independent product-safety testing organization, has come up with a standard for ATM security known as UL 291. For models designed to store cash only during business hours, it says that an ATM should be able to withstand a physical attack for a minimum of five minutes. This should be enough time for the store clerk or manager to call the police. A business-hour cash machine that meets the UL 291 standard weighs about 250 pounds.

Weighing in at 700 lbs., more sturdy UL 291 Level 1 ATMs, also called 24-hour safes, can hold cash unattended and withstand up to 30 minutes of attack. This comes at a price though – expect to pay about $800 more for an ATM with a vault-class safe.

Locks to open the cabinet are available as combination or electronic locks. Combination locks may cost less, but electronic ones are preferred because the code can be entered in faster than manipulating a mechanical lock. Plus, the code can be changed whenever required for security purposes. Some electronic locks have a five-minute time delay to deter thieves who can not wait around for the machine to open after entering the code.

No matter what type of ATM you purchase, they should be secured to a surface – ideally, a concrete floor – with 3- to 4-inch bolts. Having a surveillance camera to monitor activity can also help make the ATM more secure. (Get free quotes for video surveillance systems.)

GPS
Newer machines are often equipped with satellite tracking devices. These GPS (Global Positioning System) units make the machines easier to track should they be stolen.

Dye packs
Your ATM can be equipped with an exploding dye pack to mark the money, as well as startling the thief. Check with the vendor for this popular feature.

Scrip machine
An alternative to a cash-dispensing ATM is the scrip machine. This ATM-like machine deducts the requested withdrawal from the customers’ bank account, but does not dispense any currency. Instead, customers get a printout or “scrip” to take to the counter, where the business supplies the money out of the cash register. This method reduces the need to restock the ATM and ensures the security of the cash, but it can hold up the line and deplete the register’s cash supply. State regulations prohibit scrip machines in some states, including much of the Midwest.

If an ATM company sells you a scrip machine and says you can accept credit card cash advances with it, do not believe them. Scrip machines can only legally take checking account debit cards. Unscrupulous vendors will trick the processing networks by signaling the processor that the device is an ATM when it is actually a scrip machine. This can get your ATM quickly shut down.

Triple DES
Make sure that the ATM you purchase is Triple DES-compliant. Triple DES (Data Encryption Standard) is a method of protecting customers’ personal identification numbers that is required to be in effect for all ATMs by April 2005. If your ATM is not up to spec, it will not be able to connect to the necessary processing networks. Owners of older cash machines will need to pay $600 to $1000 to upgrade their models – or purchase a replacement.

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Comparing ATM sales sources

Back on April 1, 1996, the ATM sales industry changed completely. On that date, the two largest national ATM networks, Cirrus and PLUS, lifted the long-time national ban on ATM surcharging. That created a surge in the number of independent ATM sales companies, and helped lower the costs of owning and maintaining ATMs for small and medium-sized businesses.

Thanks to that change, you will probably get your ATM from an independent vendor. These vendors are either authorized distributors for ATM manufacturers or ATM sales agents for these distributors. Although some banks still provide ATMs, they are extremely selective and usually place them in locations where they can expect at least 1,000 transactions each month (the national average is 6,400 per month).

ATM vendors will sell, install and service your cash machine. They will also manage the transaction processing. Choosing a vendor is a matter of finding one that offers the product you want at a fair price and can deliver the ongoing support you need.

Like all equipment dealers, ATM sales dealers tend to sell models from a limited set of manufacturers. This allows them to stock the right parts and have the expertise necessary to support them effectively. You should try to select your machine from the main brands the company supports.

Don't overlook customer service. Although ATMs are highly reliable and will last for years, they are often subject to user error and can break down from time to time. Once your ATM sale is completed, does your vendor have a call center that will help troubleshoot problems? Are there local technicians available to fix your machine when it breaks down? How quick is their turnaround? It makes sense to visit the vendor’s location to see how well the operation runs.

Any ATM company you work with should be open about their relationship with manufacturers and processing networks. Find out if they have direct relationships with them as a registered Independent Sales Organization (ISO) or if they resell products for another ATM distributor. If they are a reseller, find out which ATM company they represent and check that company’s reputation, as they will probably be processing your transactions and servicing your account.

Watch out for companies that are so intent on closing ATM sales that they offer deals that are “too good to be true.” This can signal that the company is simply amassing a portfolio of clients to boost the value of their company for a future sale, or that the company does not have enough financial strength to service your account well. Either way, steering clear of tempting deals that demand long-term contracts is the wisest choice.

You can be more assured of an ATM sales company’s long-term prospects if they have been in the business for two or more years. That way, they should be able to generate enough revenue from their installed base to be viable. Checking Better Business Bureau records and speaking with references also help ensure you make the right decision.

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ATM pricing

Because of competition and falling technology prices, ATM prices have come down by more than half since the ATM boom that began in 1996 – but they are still a major investment. Now, they run anywhere from $1,500 to $30,000, with the typical standalone or countertop ATM for the retail market for $3,000+ and through-the-wall ATM pricing in the $5K and up. At the high end, which ranges up to $10,000 for retail ATMs, you will find models that can hold more cash, are made of heavier gauge metal, and feature vault-class safes that allow you to leave the ATM unattended.

Ongoing costs include a phone line (~$30 per month), power, professional cash loading service if you do not want to do it yourself (about $50 per trip), and replacement receipt paper. Other optional costs include an additional cash cassette (required if you will be doing business with an armored car service), and extended warranty or service agreement.

Some vendors also charge monthly fees. These non-mandated fees can turn an ATM that is $750 less than the other options you are considering into less of a bargain in a hurry: at $15 per month over 5 years, that would add $900 to your total price.

Making money from ATMs
To offset these expenses, you can make money with your ATM via surcharges. Determining how much to charge is up to you – surcharges range from one dollar to nine dollars depending on the location with an average surcharge of $2.00. At the average surcharge, if you were to process 300 transactions per month, your ATM would generate $600 per month or $7,300 per year in revenue.

The percentage of that surcharge revenue you take depends on how involved the vendor is in managing your machine. If the ATM provider does nothing but install the machine and process transactions, you can earn up to 100% of the surcharge. If the supplier underwrites the cost of the machine, maintains it, and/or stocks the machine with cash, your percentage drops accordingly.

Do the math and you can see that the revenue earned on each transaction, between 35% and 100% percent of the $1 to $3 surcharge, can add up. A good rule of thumb is that the ATM should be able to pay for itself in a year. Plus, there are the soft benefits: on average, ATM users spend 20 to 25 percent more than customers who do not use an ATM, according to research from ATM Marketplace.

Free ATMs
Many ATM vendors offer high-traffic businesses the chance to place ATMs at their locations at no charge. The vendors offer turnkey placements where they install, service and operate the ATM for free. The business simply provides the electrical power, and some floor or counter space, and in return they receive a specified – but small – percentage of the surcharge collected. Not all locations qualify for these free ATMs. the Tremont Capital Group estimates that about 19% of ATMs deployed by non-banks are under this type of agreement.

Keep in mind, however, that nothing is truly free. You still need to troubleshoot for customers who have problems with the machine, so make sure the ATM supplier’s customer service meets your needs. Also, if you do the math, you may find that paying for a machine upfront is worth gaining more of the long-term payoff.

Watch out for aggressive sales techniques. With a dwindling number of viable locations to place a cash machine, ATM suppliers can fight ferociously for your business. While you may think you have negotiated yourself a good deal with a “free” machine, the fine print can say otherwise.

Double check your contract
The details of the contract should specify how much the ATM costs, the term of the agreement, who pays for the phone line, who stocks the ATM with cash, who sets the transaction surcharge, how the transaction revenue is to be divided, service and maintenance agreements, and the conditions for contract termination.

Pay special attention to the contract term – you may find yourself inextricably bound to your provider. Some suppliers may have you sign a perpetual agreement that prevents you from removing a cash machine from your location, meaning you are stuck with the machine until the supplier decides to remove it.

Similarly, auto-renewing agreements are common, and require you to notify the ATM provider that you no longer want to have a cash machine within a narrow window of time before the contract term is over. Make sure you book these renewal dates into your calendar. Contracts can vary from being month-to-month to up to seven or eight years in length, with an average of five years.

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Best ATM buying tips

• Remember to add the ATM to your general business liability insurance. Purchasing a separate insurance plan for your ATM usually is not necessary.
• For security purposes, enact an open-door policy when you leave the premises: Empty the ATM and leave the door open to show that there is no money inside.
• Place prominent signs around the ATM to warn customers of common ATM-related scams, including theft of cards and PINs.
• On a more positive note, make sure you put up a few very visible signs to let customers know that you have an ATM.
• Make sure your machine comes with a 1-year warranty that covers parts, starting from the time of purchase.

You do not need to stock an ATM with all the money it is capable of holding. Stock only as much cash as you need.

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