CU ATM Difference is Cooperation, Not Competition When it Comes to Deposit-Taking ATMs

ONTARIO, Calif. – The spirit of cooperation, versus competition, marks the willingness of credit unions to accept other credit unions’ member deposits at their ATMs, according to Jim Hanisch, executive vice president with CO-OP Network. CO-OP Network is the largest credit union-owned ATM network in the country with more than 17,000 machines across the country. The issue of banks accepting deposits from other banks’ customers has been in the media recently after Chicago-based Bank One announced that its Chicago based machines were no longer going to accept deposits from other banks’ customers. A number of the larger banks inherited bank ATM deposit-taking relationships when they consolidated and bought up smaller banks, Hanisch explained. He added that these relationships were very popular in the Midwest and that, in the wake of the consolidations, banks had standardized their operations without allowing for accepting deposits. “What I believe happened is that a lot of merging banks inherited these network and deposit arrangements,” Hanisch said. “Among the things you have to do in a merger of any size, resolving the ATM networks is probably not really high on the list, so the banks are having to reconcile those arrangements now,” he added. Sometimes there were regulatory requirements behind taking the deposits of other bank’s customers. That was the case in Illinois where Bank One is headquartered, which mandated taking deposits from other banks’ customers in 1979 but which has changed its regulations since. It is still the case in some states, like Connecticut, that mandate banks that take deposits at ATMs take them from both its own and other banks’ customers, according to the American Bankers Association. Significantly, smaller banks often take a view more akin to credit unions’ and continue to take deposits from other banks’ customers and ATM networks like STAR, owned by Concord EFS, and NYCE, owned by First Data, continue to allow its members to have the option of taking deposits. NYCE recently mandated its members pay a higher interchange rate, $2.50, for customers who use foreign ATMs for deposits. Given the degree of difficulty and trouble sometimes presented by taking the deposits, Hanisch said he was not surprised that some banks had begun to back away from the service. Contrary to what many in the general public might believe, Hanisch explained that the banks taking the deposits from other institutions actually take responsibility for the deposit and are stuck with the problems if the deposited check does not clear – and sometimes the loss if the check was bogus. These problems generally make taking the deposits more trouble than they can frequently be worth, he added. While it is true that taking deposits through an ATM usually carries a significantly higher rate of interchange, the number of the transactions generally does not collectively make the bank enough money at the bottom line, he added. By contrast, the interchange rate on cash withdrawals is generally much lower, but a well placed ATM can make money for the bank on its flow of so-called “foreign” ATM users. Credit unions often take a different approach to taking other credit union members’ deposits because the credit union will generally have a different attitude toward its entire ATM network, Hanisch said. Where a bank will likely see an ATM network in purely a proprietary way, a credit union may be more inclined to take a broader view. Under the typical bank approach, allowing other banks’ customers to make deposits over the network means essentially subsidizing another bank’s operations, but a credit union is liable to see taking deposits over the network as providing a service to credit union members overall. Generally the credit union attitude is more one of making the entire credit union movement better and stronger, as opposed to one credit union against another, Hanisch added. More than 95% of CO-OP Network’s member credit unions accept other credit union member’s deposits primarily because credit unions are not has sensitive as banks are about other credit unions sharing the benefits of their networks. “It’s really about choosing cooperation over competition,” he explained. [email protected]