ARLINGTON, Va. – Despite a national market for ATM deployment that industry observers consider saturated, credit union ATM deployment and use has still not matured and credit unions stand poised to experience strong growth in both, according to both credit union and non-credit union executives. Industry sources largely agreed with a February 2002 study, conducted by the Dove Consulting Group on behalf of Co-Op Network, NYCE Corporation, PULSE EFT Association and STAR Systems (STARsm) that reported the number of ATMs in the U.S. at roughly 324,000 and that the market for the machines was largely saturated. The study reported that some financial institutions with extensive off-site ATM networks have begun withdrawing their machines from many previous positions and redeploying them to other sites that, they hope, might turn out to be more profitable. But because credit unions have largely been slow to deploy ATMs, and because they frequently have a relationship with their members that nurtures ATM use, Gene Polito, executive vice president with the Co-Op Network said the Network does not consider the credit union market for ATM deployment "mature" and said that it expects further growth in the years ahead as more credit unions expand their use of the machines. Because of the crowded market, credit unions wishing to deploy ATMs benefit first by having a place to put them, Polito said. The waves of growth that the ATM industry experienced in the 1990′s has meant that most of the first choice, prime locations have been taken, he explained. Now anyone wanting to deploy an ATM in a public space is looking at second or third tier positions, he added. But because many credit unions have room to expand their use of ATMs, they have the branch space to support more machines. He added that credit unions can also have an entree into other venues for their ATMs through their SEGs. These groups can either control private space where a credit union can place a machine or they may have a connection to a landlord or building management firm that the credit union can approach to place a machine, Polito said. Credit unions' relatively late arrival in the ATM market has meant that they can also benefit from the advent of newer, less expensive technology, according to Todd Hannon, vice president of ATM Management for eFunds, the single largest Independent Sales Organization (ISO) ATM deployer (see sidebar). According to the Dove study, the average monthly cost to run an off-site ATM had dropped since 1998, from $1,090 to $1,016, and Hannon said that number can be reduced further through contracting out support for the machines, a service that eFunds provides. Credit unions can also be expected to deploy more ATMs as financial institutions gradually switch from seeing their machines primarily as revenue generators back to seeing them as ways to offer greater customer service and avoid more expensive branching costs, which is how they were first understood, according to the Dove study. Hannon agreed with that and added that credit unions that were interested in not attaching fees to their ATM use would find the policy made the greatest sense at the machines they placed in branches. With the overall rates of surcharges rising, ATM deployers have become more conscious of market realities in their surcharges, Hannon explained. E-funds had found that when surcharges reached $2 in convenience stores the usage fell off, but added that surcharges in different venues, like hotels or bars, could bring more. "It's a convenience," Hannon said. "Just as people expect a loaf of bread to cost a little more in a convenience store than it might somewhere else, so people expect to pay a little more for the convenience of getting cash without having to go to their bank or credit union." Both Polito and Hannon said their companies were prepared to use the new technology that ATMs were beginning to support but both said that, after the first flush of excitement had passed, most financial institutions and ISOs had not yet decided exactly which additional services and products to add to their machines. Polito suggested that a lot would depend on the members a credit union had using its machines. A credit union with a lot of members that used public transportation might find it useful to offer transit passes through it ATMs, Polito said. Another credit union might not offer them or might offer something else. Polito also said that he doubted many credit unions would face a large additional cost from having to switch to higher security, so-called triple DES, machines. These machines have technology which enable to them to triple encrypt their transaction information and thus making it more secure. VISA and MasterCard have mandated that all ATM accepting their cards have to be have the security features by May of 2005 and Polito said this long lead time was allowing most credit unions enough time to absorb the cost of updating or replacing their outdated machines. Both men agreed that point of sale (POS) pin based debit card transactions were about the only competition ATMs faced for cash dispersal, but Hannon said eFunds considered them an entirely different sort of transaction. "Retailers want an ATM in their stores because they want cash in their customers' pockets to help drive impulse sales," Hannon said, "but point of sale transactions rarely include any impulse purchases." By definition, after a point of sale transaction the customer is usually on their way out the store, he said. [email protected]