ARLINGTON, Va. – The advent of new security and regulatory requirements for ATMs has meant that many credit unions across the country have had to, if possible, upgrade their current automated tellers to meet the new requirements or completely replace their machines. At prices ranging from at least $15,000 and up for most of the ATMs that are going to attract credit unions, the cost of replacing a third or even a half of an ATM fleet can represent a significant expense. But many credit unions that have a number of different ATM needs report that they have found it more cost effective to purchase older, refurbished, ATMs than to go with the higher cost, newer, machines. "For us it was definitely a price issue," said Katy Jett, vice president of marketing for the U.T. Federal Credit Union, a $108 million dollar CU based in Knoxville, Tennessee. The credit union, which serves primarily the faculty, staff and students of the University of Tennessee, belongs to a surcharge free local network that effectively prevents it from earning income from even the small number of foreign transactions at most of its machines. "ATMs are not profitable because they don't experience anywhere near enough surchargeable foreign transactions, but we provide them as a service to our members," she said. The credit union maintains 12 ATMs at different locations across the University of Tennessee campus, ranging from 16,000 transactions per month at the busiest location to 1,400 per month at the credit union's newest machine. Eight of the 12 machines are refurbished machines, purchases from ACG ATM remarketers, an Atlanta, Georgia, based firm that specializes in purchasing previously deployed automated tellers and refurbishing them. "We save between one third and one half the price of a new machine by going with refurbished ATMs," Jett said. "We recently bought a one-year-old ATM with new Triple DES compliant software," she added. "It looks like new and our members certainly don't realize its not." Woody Alderman, president of ACG, said that the increased interest in machines that are capable of handling the new encryption security standard (Triple DES) along with the regulations attached to the Americans with Disability Act have led more financial institutions to look at refurbished machines as an option. Sometimes people imagine buying a refurbished ATM to be like buying a used car, Alderman explained, but they are surprised when they see the machines come from, said Alderman. The company recently moved into a larger space to be able to handle the volume of the machines coming in for work and moving out again. "Most of our machines come from turnover in the banking world," he chuckled. Mergers and consolidations often mean closed branches, he explained. Or maybe the bank taking over only works with one brand of machines or maybe the bank buys so many machines at a time that they get a price break that makes it possible for them to sell relatively young machines – machines that still have a lot of life in them, he said. Once ACG has the machines, the firm replaces worn out parts, upgrades things that the customer wants upgraded and then resells them, usually for about half the price that the machines would have cost new, he explained. Tulsa, Oklahoma-based Energy One Federal Credit Union does not surcharge foreign users to its ATMs on the instruction of its board, according to John Hughes, vice president of information technology for the $120 million dollar institution. The credit union has nine ATMs, six NCR machines and three Diebold, Hughes reported. Fifty percent of the credit unions' ATMs make money and the other half do not, Hughes said. "For us, refurbished NCR machines are price and performance competitive," Hughes said. "They cost $2,000 less than new machines. And when margins are squeezed, $1,000, $2,000 can make a difference." Hughes in particular reported that the credit union has found the service and warranty provided by ACG to be very competitive with that provided by manufacturers for new machines. Refurbished is Not for Everyone? Although he definitely considers his company the best of the estimated six or seven that provide his type of service, Alderman conceded that a refurbished ATM is probably not for all credit unions. "We all know that a two year old car is probably a better value for your money than a new car," Alderman noted, "but there is still a good market for new cars." Alderman said the new machines often have the newest bells and whistles that, by definition, his refurbished machines are not able to include. Further, he said the style of the new machines might be different and more to a credit union's tastes. Jim Hanisch, executive vice president and chief information officer for the Ontario, California-based CO-OP Network, listed four things that credit unions who are thinking about buying either a new or refurbished ATM need to make sure are included. First, he said, credit unions need to be certain that their new ATMs, whether new from the manufacturer or refurbished, are capable of supporting Triple DES transactions, that they have keypads that will support the encryption and the software to enable the secure communications. Second, the new ATM should be able to support the audio jack that the ADA regulations are going to require by the end of the 2003, and the software to support the downloaded audio files. Third, it would probably be good if the new teller could support check imaging at some point, Hanisch said and noted that there is a "small quiet movement" going on where more financial institutions are switching from running their ATMs on an OS/2 operating system to a Microsoft Windows based package. "It's much like buying a new ATM," Hanisch remarked. "A lot depends on where the credit union wants to put the machine and what it wants it to do. A credit union needs to look at volume for the location and how long it wants the machine to be in use there. If a credit union plans to have the machine in place for two years or less at a given location, then a refurbished machine might be appropriate," he added, "but a refurbished machine might not be right for a credit union that wants five or seven or 10 years service from a through-the-wall machine at a new branch." One thing seems certain, both Alderman and Hanisch agreed, the market for refurbished ATMs is growing and will continue to grow. Alderman noted that the ATM manufacturers themselves have picked up on the trend and started offering deals on refurbished machines. ATMs are a commodity in a lot of ways now, he said, and in a commodity situation a lot of things are interchangeable. [email protected]