Cardtronics goes straight to consumers with ATM memberships

ATM owner and operator Cardtronics, looking for ways to boost visits to its machines, recently launched its first direct-to-consumer product.

ATMpass is a membership program that gives users access to thousands of surcharge-free ATMs. Consumers can buy monthly, quarterly or annual memberships.

Surcharge fees are levied by ATM owners. Consumers may also pay additional fees, those that many banks charge their customers for using ATMs not in their networks. ATMpass waives surcharge fees but doesn't eliminate fees charged by banks.

The membership program is part of Cardtronics' efforts to increase transactions at its ATMs and to drive spending in stores where its ATMs are located. Last year, Cardtronics surpassed $1 billion in annual revenues and processed more than 1 billion transactions at the more than 110,200 ATMs it owns or operates globally. It has more than 90,000 ATMs in the U.S.

"We're trying to do anything and everything" to get people to use the company's ATMs, said Justin Upton, vice president of product development at Cardtronics. That's why it launched a direct-to-consumer product. Traditionally, it has offered surcharge-free services by working with retailers, banks and prepaid card programs.

"By creating a product that they're able to select what ATMs they will use surcharge free, it gives them more freedom of choice," said Tom Pierce, chief marketing officer for the Houston-based company.

According to Bankrate.com, the average surcharge fee was $2.77 last year, while the average fee banks charged customers for using outside ATMs was $1.58. Combined, consumers paid an average of $4.35 each time they used an out-of-network ATM, according to a Bankrate.com survey of the 10 largest banks and thrifts in 25 of the nation's biggest markets from July 10 to Aug. 6, 2014.

There are more than 5,000 ATMs at CVS/pharmacy and Walgreens stores that ATMpass members can use surcharge free. Houston proper has 126 participating ATMs and the Houston-Galveston metropolitan area has 334 ATMs. Cardtronics plans to add ATMs to the program in more retail locations throughout the year.

Frequent ATM user

Omer Chadha, a 34-year-old resident of the Galleria area, said he'd be open to a service like ATMpass as he goes to an ATM about 10 times a month, racking up a lot of fees - which he doesn't always keep track of.

Cardtronics' service is timely as banks nationwide shutter branches, Pierce said. For example, JPMorgan Chase & Co. recently announced it will close about 300 of its 5,600 branches nationwide by the end of 2016.

Cardtronics' program may make sense for some consumers who visit ATMs frequently and are close to eligible ATMs, said Sam Ditzion, CEO of Boston-based Tremont Capital Group, a consulting and merger advisory firm that specializes in the ATM industry. Calling the idea creative, he noted that Cardtronics is using a model like Netflix or Amazon Prime does in offering monthly or annual fees in exchange for "all you can eat." But the return on investment isn't as practical for others.

"Unless you're paying $10 a month in surcharges, it probably doesn't make sense," he said.

A one-month ATMpass membership runs $9.99. A quarterly membership is $25.47, which equates to $8.49 a month, and a one-year membership is $83.88, which equates to $6.99 a month. A three-month free trial is available.

Even today as many consumers go cash-free, Pierce said: "ATM usage overall is still growing both nationally and globally."

$700 billion in cash

U.S. ATMs are expected to dispense nearly $700 billion in cash in 2015, according to statistics released by Tremont and the ATM Industry Association.

James Bexley, who holds the Smith-Hutson Endowed Chair of Banking at Sam Houston State University, said he doesn't think the membership program can compete with ATM networks provided by banks.

Bank ATMs are free, Bexley said, and larger banks have vast networks that span the country. ATMpass could be useful for consumers using smaller banks with smaller ATM networks, but those banks often have arrangements with larger banks to use their ATMs.

"I just don't see it as being something that's going to be big," he said.

Nick Pappathopoulos, a Cardtronics spokesman, said ATMpass isn't trying to compete with banks. In fact, it partners with financial institutions through some of its other initiatives. The ATMpass, he said, "is another way for people to get surcharge free access to Cardtronics' ATMs."

Acquisitions part of the plan

As the company looks to growth, both domestically and globally, it is not only focused on new products, but on acquisitions and market expansions.

Cardtronics recently completed the acquisition in the U.K. of Sunwin Services Group; which provides cash logistics, ATM maintenance and other services; and closed the acquisition of Welch ATM, an ATM operator of about 26,000 ATMs, in the U.S. And earlier this month Cardtronics announced its expansion into Poland.