ARLINGTON, Va. – For many outside the ATM world, the U.S. ATM industry can appear as one of constant change. New types of cards, new types of machines, new networks with new payment strategies can make even the hardiest financial executives throw up their hands. But despite some recent developments that have garnered a lot of headlines, industry and analysts maintain that the industry's fundamentals have not changed much at all. “Financial institutions, including credit unions, still have to tailor their ATM fleet and policy to meet their own needs,” said Tony Hayes, a Managing Director for Dove Consulting. “And since none of those needs are precisely the same, none of the strategies to meet them will be either,” he added. All these changes merely mean credit unions have more options than ever before, he maintained, but they still face the same task. Two developments that have received a lot of press are the start-up and growth of ATM National's Allpoint network and one major bank's statement that it would take its ATM surcharge-free policy nationwide. But Hayes and industry executives called those two developments “singular events” rather than the harbingers of industry trends. Hayes and other executives said that the rise of prepaid or so called stored value cards promise a more sustained, industry wide change that will likely only make ATMs better money makers than they have been. Ben Psillas, President of the Allpoint Network, wouldn't comment on whether Allpoint represented an industry trend, but reported that 20 credit unions have joined the network since it got started earlier this year and that the company had met its goal on credit union sign-ups. “We have been very pleased with our credit union progress,” Psillas said. “But less so with community banks.” Psillas attributed Allpoint's different growth among credit unions and banks to the different executive cultures found in each type of institution. “We are seeing a lot more word of mouth among credit union executives,” Psillas reported. “When we make a presentation to a credit union group the word gets around as the executives talk about it. But bank executives keep the news to themselves, like it's their competitive secret,” he added. Aside from its own growth, the chief way Allpoint could set trends in the industry is in its different way payments move between ATM cardholders, ATM card issuers and ATM deployers. In the dominant ATM model, ATM deployers receive income from both the cardholders in the form of surcharge interchange and from card issuing institutions on a per-transaction basis. But under the Allpoint approach, ATM deployers receive income from card issuers in an amount based upon the number of ATM cards the issuers wish to enroll with Allpoint. In the Allpoint model, it doesn't matter how many transactions the cardholders make, since the card issuer pays a fixed amount each month which Allpoint then distributes it on a pro-rata basis to its ATM deployers. Some have wondered whether the Allpoint payment model might come to dominate the industry since it takes the surcharge burden off the cardholder, but Hayes and industry executives predicted that Allpoint's model would remain a niche in the industry, even if the network proved a great success. “That model may remain very popular with some institutions that have relatively small ATM fleets on their own, and a geographically diverse cardholder base,” Hayes argued. “But a lot will still depends on whether there are any Allpoint machines, or enough machines, close enough to where the cardholders need them to be. What will work for one credit union may not work for another.” Jim Hanisch, Executive Vice President with CO-OP Network, the largest credit union owned surcharge free ATM network, based in Ontario, California, and arguably the network which stands the most to lose from Allpoint's success, agreed. “We definitely don't think that the Allpoint payment model fits for every credit union or even most credit unions,” he said. “But,” he added, “every credit union has to craft its best ATM strategy.” Hayes and executives also doubted that Washington Mutual's recent announcement that it will not charge ATM fees on any of its ATMs nationwide would start any trends, though they conceded it will draw attention. Hayes called it a “singular event” rather than a movement. “If you look at a list of the 25 top banks in the U.S. and see all surcharge at their ATMs except one, that's a singularity and I don't expect many will follow them,” he said. Washington Mutual is the seventh largest bank in the U.S. and, according to spokeswoman Sheri Pollock, has never surcharged its ATMs, even as it was a founding member of one of the nation's very first shared ATM networks. “We don't know if other banks will follow us,” Pollock said, “but we have found that we make more money on the relationships that we gain from people choosing us because of our fee-free ATM policy than from the ATM income.” Hayes said he understood the bank's position, but added that you could find a dozen executives with different institutions who would argue that Washington Mutual was leaving money at the table. He and industry executives also noted that the fact that Washington Mutual has never charged for its ATM services is likely to keep it from setting a trend. “They never got used to the money so they won't miss it much,” said Jim Hanisch, “But the banks that have gotten used to it will find it a hard revenue stream to abandon,” he added. Hanisch said that the firm was keeping a competitive eye on the rise of the different surcharge free models coming into the industry, but that the question of those different models wasn't causing too much concern. Instead, Hanisch said that CO-OP Network had joined other firms in the industry in focusing on the growing pre-paid or stored value card market, a phenomenon that he acknowledged many in the industry “did not see coming.” Prepaid or stored value cards are those which are purchased with a preset value on them and which can often be recharged or refilled with more money later. Retailers began issuing and using them first, but now the major card associations have begun to market them under their brands and, in their latest incarnation, they are being accepted at ATMs and retailers who have point-of-sale card terminals. Hanisch wouldn't get specific, but said that CO-OP Network was confident that it would have a variety of different cards ready for its credit unions to offer their members in 2004. Other networks, such as the Pulse network, are also getting involved after interest in the cards grew among its institutions. “We have held information sessions about the stored value possibilities recently and they have been very well attended,” said Cindy Ballard, Executive Vice President for the ATM association whose member owners include both credit unions and banks. Hayes said the rise of the prepaid cards is very good news for the industry since, in many ways, its growth had begun to slow. Prepaid cards, he pointed out, put more cards in the hands of more people which lead to more transactions and more interchange. But he said the real excitement in the cards arises from their relatively inexpensive cost to develop and produce, and also in their versatility. “If you put your mind to it, you can find hundreds of different ways to use these cards,” Hayes said. There are business applications, family applications, gift applications, anything where payments need to be made in way that the money can be easily spent have a role for these cards, he argued. “As more people become familiar with these cards and used to them, their role is only likely to grow,” he said. Hayes also clarified a notion prevailing in the industry that argued that banks are retreating from off-premise ATM deployments and that credit unions might be filling their spaces. “I think there are adjustments going on, rather than retreats,” Hayes said. He argued that, if anything, credit unions are still under deployed when it comes to ATMs and that banks were probably over deployed. [email protected]