Cardtronics Inc., the top merchant automated teller machine deployer, has acquired Allpoint, the country's largest surcharge-free network, to diversify its revenue stream beyond ATM surcharges.
The Houston company completed the acquisition of Allpoint last month from ATM National Inc. of Bethesda, Md., but has not announced the deal.
In an interview Friday, Chris Brewster, Cardtronics' chief financial officer, called the purchase "another leg of the strategic effort" to increase transaction volume at his company's machines. "Allpoint gives banks another reason to develop a business relationship with Cardtronics."
He would not say how much his company paid for Allpoint. Both Cardtronics and ATM National are privately held, though Cardtronics has considered going public.
Cardtronics and Allpoint had been partners for years. Banks and credit unions pay a fee to join Allpoint and can offer their customers free transactions at machines that are part of the network. This arrangement gives an advantage to small banks and credit unions that do not have extensive ATM networks of their own.
However, Allpoint did not own any ATMs; it partnered with independent sales organizations such as Cardtronics, which owned 25,000 of the 32,000 machines in the network.
Mr. Brewster said that about 25% of ATM users are willing to pay a surcharge, but 75% avoid using machines that do not belong to their bank, because they do not want to pay a fee. Buying Allpoint was "a way for us to address that 75% of the market that may not be as attracted to our primary business model" of surcharging consumers.
He would not say how many of the transactions his company processes come from machines on Allpoint's network. Cardtronics plans to keep Allpoint's management in place and will continue to use the Allpoint name.
Cardtronics has also been diversifying its revenue by making deals with several banking companies to put their names on some of its ATMs. The banking companies can offer their customers free access to more ATMs, and Cardtronics gets a stable source of revenue; it also continues to earn surcharge revenue from other companies' customers who use the machines.
JPMorgan Chase & Co. of New York, PNC Financial Services Group Inc. of Pittsburgh, and Commerce Bancorp Inc. of Cherry Hill, N.J., signed such agreements with Cardtronics last year.
Mr. Brewster said that by working directly with banks, Cardtronics could also begin to offer new services. For example, he said his bank customers might eventually be able to offer one-on-one marketing to their customers through his company's ATMs.
Ben Psillas, the president and founder of Allpoint, said Friday that potential bank and credit union customers were sometimes wary of joining an ATM network that did not own any machines. The purchase by Cardtronics has "eliminated the middleman," and his customers are now working directly with the ATMs' owner, he said.
"The stability and credibly is there. They know the ATMs are going to be there," Mr. Psillas said.
In the past many of his customers asked him if they could put their logo on some of the machines, he said. "I'd say, 'That's great, but I can't do anything for you. You can call Cardtronics.' Now they have the ability to buy that access directly through us."
Mr. Psillas said that when he unveiled Allpoint about three years ago, the industry wondered, "Will this thing fly?" Since then the surcharge-free network concept has become well established. Genpass Inc., which used to impose surcharges on the ATMs in its merchant network, switched to the surcharge-free model in 2003. (U.S. Bancorp bought Genpass last year.) Visa U.S.A. Inc. formed a surcharge-free alliance in 2004.
Tim Sloane, the director for the debit advisory service for Mercator Advisory Group Inc. of Waltham, Mass., said that buying Allpoint is a "wonderful way for Cardtronics to be talking to banks that they would otherwise not be talking to, and also gives them opportunities" to sell various back-office services, including the outsourcing and driving of ATMs.
More and more banks are considering outsourcing their ATMs, especially those at merchant locations, he said. As the banks examine their ATM costs, they are discovering that they are "totally not efficient" when compared with companies such as Cardtronics or Genpass.
Gwenn Bezard, a research director for the Boston market research firm Aite Group LLC, said that the purchase puts "some competitive pressure on other ISO deployers," and that Cardtronics' competitors are also looking for sources of nonsurcharge revenue.
The purchase also reflects a general shift away from surcharging; in the last three years the industry has been "moving back where consumers were in the early '90s," he said. "The pendulum is moving back … to waiving the surcharge."
