Branded ATMs become billboards for banks

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A raft of deals by some of the nation's biggest banks to place ATMs in drug stores and gas stations isn't just about customer service. The automated teller machines are akin to a billboard.

This summer alone, Chase, BankOne, Commerce and PNC have all announced plans to bust their ATMs out of the branches and into retail environments like Walgreens and CVS. Perhaps the highest-profile deal was Chase's move to get its machines into New York City's 216 Duane Reade locations, adding to its lead in Gotham. Similarly, BankOne said it will add ATMs in all 220 Walgreens stores in Arizona by year end. (BankOne branches and machines will be rebranded as Chase later this year as part of the 2004 merger with JPMorgan Chase.)

Without exception, the banks cite customer convenience as the core reason for the expansions, but industry observers say there's another motive: It's an inexpensive way to drum up awareness in the fierce competition for customers.

"I don't think it's about serving the customer; it's not like they're serving an underserved population," said Jerry Silva, an analyst at TowerGroup, a financial-services consulting firm. "It's about the branding and, secondarily, it's about the revenue because the price of bank machines has come down enough they can probably offer a sweeter deal to those companies than they've had in the past."

The pipeline for branded ATMs has been strong enough that about a year and a half ago the ATM giant Cardtronics created a division to handle it. "It's particularly appealing to banks that want to penetrate a new market," said Keith Myers, exec VP-financial services division. "They'll use a hub-and-spoke concept and build just a few branches and contact us about branding ATMs around the perimeter of the branches."

One example of this is Commerce Bank's recent deal to add machines in as many as 170 CVS stores in the Washington, D.C., area. "There's an immediate impact in that market," Mr. Myers said. A Commerce spokesman didn't return calls.


Banks have experimented in the past with off-premise branded ATMs, but the rationale then had more to do with collecting transaction fees than with expanding the brand footprint.

In the late 1990s, BankOne installed about 9,500 branded ATMs in stores like Rite Aid, Mailboxes Etc., and Sears, in the hopes of generating revenue from the service fees it charged every user regardless of whether he had an account at the bank. "Using that strategy, we generated losses," said Tom Kelly, senior VP, JPMorgan Chase.

Since then, many of the major banks have embraced a more customer-centric philosophy, with many remaking branches with some Starbucks-like design features and adding free checking accounts. With their new ATM plays, Chase and BankOne customers get free transactions. "It is about visibility, but, more importantly, people want to access their money at ATMs and they don't want to pay a fee," Mr. Kelly said.

It's unlikely that the ATMs will have much of a role in netting new checking accounts, said TowerGroup's Mr. Silva.

"The ATM tends to be a very sticky channel-people stay at banks because they have large ATM networks, but never has it been mentioned in terms of acquisition," he said.

Drug money

* Chase has struck a deal to put its ATMs in Duane Reade’s 216 drug stores in New York City.

* Commerce Bank recently put in place ATMs in as many as 170 CVS stores in the Washington, D.C. area.

* BankOne will add ATMs in all 220 Walgreens stores in Arizona by the end of the year.

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