ATM Users Fickle

Online banking, debit cards taking bite out of cash machines

Published in CSP Daily News

TOLEDO, Ohio -- Automated teller machines (ATMs) revolutionized the banking business when they were introduced nearly 40 years ago, but today's customers are proving to be fickle, said The Toledo Blade.

A growing reliance on debit cards for such everyday purchases as a fast-food lunch, coupled with the ease of online banking to track balances, means use of the machines in dollar terms has declined locally and nationally, said the report.

But rather than abandon the machines, banks are seeking new places for them and are experimenting [image-nocss] with sophisticated equipment to make transactions easier, the report added.

People still want them and they still want them where they need them, Paul Meinerding, senior vice president of KeyBank in Toledo, told the newspaper.

The United States had 396,000 terminals last year, up from 324,000 five years earlier, according to the Blade, citing ATM & Debit News. But, the newsletter said, the value of transactions handled by the machines dropped 23% to $877 million last year from the amount in 2000.

What we're hearing is that clients are getting cash back at the supermarket and using their debit cards for purchases, so they have less cash needs, Mark Swinehart, vice president of electronic banking for Sky Financial Group, Bowling Green, Ky., told the paper. Volume is flat at Sky Bank's 70 ATMs in northwest Ohio and southeast Michigan, he added.

Elias Awad, banking professor emeritus at the University of Virginia who has expertise in the machines, said banks will never give up on the machines. I think the trend is bound to be growing because customers continue to demand convenience, he told the paper.

Although many consumers who discovered the ease of direct deposit for paychecks and how simple it is to use debit cards, which deduct transactions immediately from checking account, walk around cashless, some have discovered that they were spending too much money. Now, we go to the ATM to take out the cash that will be our discretionary allowance money for the month, said a consumer interviewed by the Blade.

Phil Talmage, group product manager for National City Bank, which has 35 ATMs in the Toledo area, said, If it hadn't been for debit cards and online banking, we would definitely see growth in transactions. But more and more merchants are accepting small-value sales, like McDonald's, so that customers don't have to pull out cash.

The cost of ATMs was once as high as $70,000, but the newest, smaller models cost about $7,500, industry sources told the paper.

In a survey of owners of gas stations and convenience stores, 44% reported that the average number of ATM transactions per month, per store, is $201 to $400.

One sticking point with customers is the fee a bank charges for using another bank's ATM, the report said. The foreign bank charges a fee and the user's home bank usually charges a fee of $2 to $2.50 per transaction. Some banks offer waivers of those fees.

Not all financial institutions are convinced ATM use is on the wane, added the report. Joe McCool, operations manager for CU-up LLC, which is owned by four area credit unions, said his group had a 6% increase in the number of ATM transactions last year, with cash withdrawals up 9%. The firm is owned by Glass City Federal Credit Union, Erie Shores Credit Union, Toledo Area Community Credit Union and Sun Federal Credit Union. It has 30 ATMs in Sterling Milk Co. Stores, Sunoco stations and In & Out Marts.

The company has heavily promoted the machines, which likely has helped keep use levels high, McCool said.

Fifth Third Bank plans to refresh the technology on existing machines, adding touchscreens and more message functions, such as alerts if a balance dips too low, Karen Fraker, a local senior vice president, told the paper. The bank has more than 90 ATMs in northwest Ohio and southeast Michigan. Customers this year will be able to set up preferences for ATM use, such as the language and dollar amount typically withdrawn, she said.

A test program in Cincinnati allows customers to make deposits without an envelope. The machine, she explained, counts the cash, looking for counterfeiting, and then gives a report to the customer. Such machines have been well received, she said. In the areas where they've been used, we've seen a 400% increase in ATM use.