The Benefits of an ATM in a Business & Options for the Business Owner

The presence of an Automated Teller Machine (ATM) in a business can be extremely beneficial in retail businesses that require or prefer that their customers pay with cash. Unlike vending machines or toy machines where a proprietor benefits solely from the rental of the space or from the direct profits of the machine, ATMs provide a host of other benefits to the proprietor. Here is a summary of those benefits:

Increased Sales. Studies show that an ATM can increase a business' sales as much as 8%.

Cash Retention. 25% of the cash withdrawn from an ATM is spent on the premises. This number can be as high as 75% for nightclubs and bars!

Control Bad Debt. Cash does not bounce. When a customer uses cash from an ATM it cuts down the charge backs, disputes, returned checks, and the stress associated with these incidents.

Security. By having an ATM there is less risk of robbery and employee theft.

Reduced Costs. By directing your customer to the ATM, you can greatly reduce the credit card fees you are currently paying. Credit card transactions cost between 2% and 3% of a purchase. Instead of paying Visa and MasterCard, make money instead when a customer withdraws cash.

Save Time. An ATM can save customer embarrassment and your employees time. An ATM also deposits funds directly into your bank account, which saves time and work.

Improved Image. By providing new and unique services for your patrons, your image is improved. One reason people patronize your store is value. An ATM only adds to the overall value to your store.

Increase Customers. Your customers will no longer need to stop at a competitor's establishment to get cash (and spend it there). Customers will instead stop at your place of business because you can accommodate their cash needs.

Added Source of Revenue. With surcharge fees, you can earn more then enough to cover the cost of the ATM. The real profit comes from the additional sales from the hundreds of extra dollars available in your customer's pocket.

Additional Facts & Figures

• ATM customers spend an average of 20% to 25% more than non-ATM customers
• 40% of ATM users go to the ATM machine an average of 10 times per month
• Placement of an ATM machine is the second most requested service for retail stores
• ATM users are "habit"-driven, using the same ATM repeatedly
• ATM customers prefer the convenience of a retail store to a bank

With these benefits in mind, there are a number of options a proprietor has when going about getting an ATM into his/her business.

Buying

The most profitable choice for the business owner, this entails owning the equipment by purchasing the ATM outright and owning the equipment. Typically the proprietor gets to retain 100% of the $1.50 - $3.00 surcharge that is collected per withdrawal. Cash replenishment is the proprietors responsibility. So, this arrangement works best for the hands-on owner who is often present at the business and has enough disposable cash with which to replenish the machine.

Cost of ownership of an ATM has dropped dramatically over the years, so this option has become much more affordable. New ATMs targeted for the retail market range in price from as low as $2,200 up to $6,000 for a Through-The-Wall unit. Most ATM vendors require that you sign a processing agreement. This is standard in the industry because the ATM vendor usually only profits off the backend processing while making little to no money on the actual sale of the equipment. A proprietor can expect a full return on the equipment investment from as little as 3 months to as long as 18 months, depending on the transaction volume of the location.

Leasing

This carries all the same responsibilities and profit benefits as buying an ATM. The fundamental difference is that the payment for the ATM is spread out over time. This can be especially beneficial if a proprietor has a tight cash flow situation and doesnt have the capital to buy outright. In addition, whereas an ATM would normally be depreciated over 5 years when purchased, each lease payment can be written off as an operating cost, providing a tax advantage.

A lease term typically runs anywhere from 1- 5 years, depending on your arrangement with the leasing company. A business owner must keep in mind that the Annual Percentage Rate (APR) will ultimately make the purchase price much greater. The proprietor can expect to pay between 10%-12% APR. The business owner must beware, however, as this is where a vendor can hike up the machine price with out the business owner realizing it. Many people have a difficulty in understanding finance, so a business owner should enter into the finance agreement with caution.

Placement Programs

For the business owner that wants no involvement with the ATM, ATM vendors will sometimes offer to place an ATM in a business for free and operate it entirely. This means no maintenance headaches, no concern with loading the cash, just the need to provide space for the machine and reap the benefits of its presence in the establishment. Usually the proprietor will even be entitled to part of the surcharge revenue, though the commission can vary greatly depending on the transaction volume of the ATM.

Often the ATM vendor will require a contract with the proprietor, but this is not always the case. When choosing an operator under this arrangement, keep in mind the quality of service. The ATM business is very competitive, so often an operator will give you anything to get their foot in the door. In the long run, however, this can be a mistake, as the number one service problem is that the ATM will run out of cash. Often independent operators are subcontractors who are part-time investors with a network of ATMs. It pays to shop around, but its important have an idea of what kind of service an operator will provide. References are a good way to ensure this. In the long run, if you get a bit less of the commission yet a more capable operator and better service, it pays.

Vito Mazzarino is Vice President of ATM Global, based in Los Angeles. He has been involved with ATM Global since 2001 and has expertise in both the marketing and operational aspects of the ATM industry. He is also author of the E-book The ATM Beginners Book, a guide on how to get started in and own an ATM business.

For more information, please visit http://www.atmglobal.net

You may also contact Vito directly at v.mazzarino@atmglobal.net

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