How I Became a Successful ATM Distributor

¶ … ATM Northeast Inc. (www.ATMetrade.com) was launched in January of 2004 by Kathleen Pacheco and Jack Kerney. Today the company is a successful ATM distributor having sold over 250 machines to various businesses. The company has a succinct mission to be an industry leader in providing new and reconditioned automated teller machines (ATMs) to the business community. A review of the literature suggests that the use of ATM's will continue to play a role in the American Banking System. With this understood, it is important that distributors know how to run a successful business and implement new tactics to ensure that they have the competitive advantage.

Automated teller machines have transformed the way that banking transactions are conducted. They provide consumers with quick and convenient access to their bank accounts and allows them to withdraw and deposit money. Across the globe there exists a group of business people known as ATM distributors. These individuals are responsible for the placement of ATM's in non-banking locations such as gas stations and restaurants. The purpose of this discussion is to share the story of one such individual who was able to become a successful distributor. The paper will discuss the history of her distribution company and provide a literature review on the subject of ATM's and successful distributors. Finally, the discussion will offer recommendations.

Methodology

The primary research for this discussion was gathered from the experiences of Kathleen Pacheco who is one of the owners of the company. In her account, Pacheco describes the formation of the business and the issues involved in running the business. The secondary research was collected form a variety of scholarly journals and other periodicals. These sources provide insight into the world of the buying and purchasing of Automated Teller Machines (ATM)

Organizational History

Express ATM Northeast Inc. (www.ATMetrade.com) was launched in January of 2004 by Kathleen Pacheco and Jack Kerney (who also serves as a mentor). The company has sold more than 250 machines to a variety of customers including convenience stores, colleges, entertainment clubs, gas stations, restaurants, bars, postal services, car washes and nightclubs. The founders were presented with the idea to start this company by researching business opportunities on the internet. This business was created because the owners observed a need for the availability of ATM machines in non-banking locales. The founders also believed that there was a potential to make residual income from the sell of ATM machines. The company was able to start at not cost, which was also appealing. The master supplier for the business is Cardtronics (www.cardtronics.com)

The company currently has six employees. Jack Kerney serves and CEO while Kathleen Pacheco serves as that Vice President of Operations. The company also employs three sales people and one telemarketer. The responsibilities of Kathleen Pacheco include forecasting the budget, serving as a liaison for vendors and maintaining the website. In addition, Kathleen handles the human services needs of the company interviewing potential employees, training employees and holding weekly staff meetings.

The company has been successful in a relatively short period of time and has several competitors including CGI ATM, ATM USA, TRM ATM, Fidelity ATM, and E-funds. In addition, the company faces several barriers including state regulations, competitors luring customers away, retaining sales staff and the reluctance of business owners to purchase the machines for their establishment. Of these four barriers one of the more difficult to overcome is retaining a sales staff because they are paid on commission only.

S.W.O.T. Analysis

Strengths

Demand for ATM's in non-banking establishments

Greater access to customers through the internet

Proven ability to sell the machines to businesses

Weaknesses

Difficulty retaining sales staff

Opportunities

Further expansion into more bricks and mortar stores

Contracts with restaurant or grocery store chains

Threats

Stiff Competition

Worries concerning the security of ATM's

Vision and Mission

Like any successful business, Express ATM Northeast Inc.has both a vision and a mission. The vision for the company is to launch a website. In addition the company desires to extend the business from its base in New England to a national enterprise via the internet.

The mission statement for the company is as follows; Express ATM Northeast Inc., is an industry leader in providing new and reconditioned automated teller machines (ATMs) to the business community. As authorized distributor for Cardtronics, we provide quality customer service and information throughout the decision making process.

Literature Review

Like cellular phones and the personal computer, automated teller machines have become a part of daily life for people around the world. Most people can scarcely remember the world without ATM's. According to Gup (2003) ATM's were first introduced in 1971 in Seattle, Washington. The author explains that ATMs first appeared because of the 'changing economic conditions in the early 1970s, when rising inflation and interest rates made it more difficult for consumers to borrow, reduced consumers' loyalty to their local banks (Moore, 1984). These changes in economic conditions and consumer attitudes stimulated competition among financial institutions. For banks that could afford the investment, "ATMs represented an attractive strategy through which to distinguish themselves and achieve a competitive market advantage (Gup 2003)"

Initially ATM's were not very popular and few consumers used them. However, the popularity of ATMs grew dramatically in the 1990's as consumers started to feel more comfortable using such technologies. Over the years, consumers have become even more reliant upon this technology because of the convenience it provides.

According to an article found in the journal, New England Economic Review, although most banks still have tellers, many consumers handle their banking through an ATM. The article explains that 'ATMs have been widely recognized as a convenient way to obtain cash. With the majority of ATMs connected to regional or national networks, cardholders can withdraw cash from most institutions in the country. At the same time, banks have regarded ATMs as a way to lower their costs, as customers substitute ATM transactions for costly live teller use. To induce customers to use ATMs instead of live tellers, some financial institutions impose fees for teller use or reduce monthly charges to depositors who use only ATMs (Stavins, 2000)."

ATM's can be found on a variety of places. Some of the most common locations for an ATM are places of business. Places of business seem to profit greatly from the presence of an ATM. An article found in Nation's Restaurant News explains the story of a restaurant owner and the increases in profits that he experienced as a result of placing and ATM in his restaurant, the article asserts

"I wish I'd had it eight years ago," he says. "Our business is up, and I'm convinced the ATM has contributed. Not only that, but we're counting up more cash than credit card receipts and checks these days ... Actually, it was the increasing number of check-cashing requests that motivated Bailey to begin investigating ATM programs two years before he made the final decision ... I wasn't interested in incremental profits, just providing that extra service for our guests. I wanted some equipment that would be a no-brainer-something that looked sophisticated, but was easy to use. We certainly got it. The service provided us by the ATM distributor is phenomenal. If there are any drawbacks, I haven't noticed them yet (ATM = automatic troublefree moneymaker, 1997)."

Indeed the use of ATM's has become one of the most practical parts of the American banking system and the business world. Like any good idea, entrepreneurs quickly found ways to profit from the use of ATM's. Most of the people who profit are known as distributors. In the aforementioned case, the business owner had a pleasant experience with the implementation and use of ATM's in his establishment. It seems that part of the reason for such an experience can be attributed to the ATM distributor; this particular distributor offered the restaurant owner excellent customer service (ATM = automatic troublefree moneymaker, 1997).

In recent years, much has been made of companies that are in the business of ATM distribution. According to an article entitled, "How to be a successful ATM Distributor" this type of business endeavor is not as lucrative as it once was but ATM distributors can still make a decent income. According to the article ATM distributors make less profit now because the margins are lower and the market is saturated.

The article explains that the number of ATM's in America has increased dramatically from 122,700 to 380,000 while ATM transactions have decreased ("How to be a successful ATM Distributor," 2005). This increase in the number of ATMs has caused the number of transactions per ATM to decrease ("How to be a successful ATM Distributor," 2005). The author asserts that there are also fewer viable locations in which to place an ATM.

So then, how are ATM distributors able to make money? The article suggests some tips to improve the odds of becoming a successful distributor. The author explains

"A common way for ATM Distributors to get started is to work under the professional umbrella of a large distributor. The larger the distributor, the more attractive the deals they can command for the ATM's themselves and for the transaction processing and other services required to run the machines. In turn, they pass along these volume discounts to distributors working for them. They also pay fees to sponsor banks and to networks, which typically amount to several thousands of dollars a year for each network ("How to be a successful ATM Distributor," 2005)."

The article also asserts that large distributors also offer services such as help desks and contracts. In addition, the large distributor are a source for lease financing and transaction processing ("How to be a successful ATM Distributor," 2005). This is important because when a smaller distributor works under a large distributor they can learn the different aspects of the business while still being protected ("How to be a successful ATM Distributor," 2005).

The article insists that there is an exchange for the insight that is gained by working under a large distributor. This exchange comes in the form of a percentage of the fee that the smaller distributor charges customers to use the ATM ("How to be a successful ATM Distributor," 2005). This fee is the primary way for an ATM distributor to make a profit ("How to be a successful ATM Distributor," 2005).

Although working under a larger distributor is recommended, the author explains that doing so is becoming increasingly more difficult ("How to be a successful ATM Distributor," 2005). This difficulty is occurring because larger distributors are no longer recruiting small distributors that don't have any experience in the business ("How to be a successful ATM Distributor," 2005). The unwillingness of large distributors to recruit is due to the cost associated with aiding a small distributor in this manner ("How to be a successful ATM Distributor," 2005).

According to this article, another way of insuring that an individual becomes a successful ATM distributor is to simple "ask around" ("How to be a successful ATM Distributor," 2005). This means that a person interested in opening such a business should inquire of people that have professional relationships with top distributors ("How to be a successful ATM Distributor," 2005). These people will usually provide you with contact information. Once given this information it is important to get in contact with the distributors and perhaps visit there offices. This will provide the potential distributor with some information and insight into the ATM business ("How to be a successful ATM Distributor," 2005).

Finally, the article asserts that once and individual decides to become an ATM distributor they must dedicate some time to building the structure of the business ("How to be a successful ATM Distributor," 2005). This means they must concentrate on basic things such as having reliable transportation, a laptop and perhaps a palm pilot ("How to be a successful ATM Distributor," 2005). After the structure of the business is put into place, the individual should concentrate on sales and customer service ("How to be a successful ATM Distributor," 2005). These strategies should effective in starting a successful ATM distribution business.

Another strategy that should be utilized in being a successful distributor is the offering of machines that have multiple functions and provide services for the unbanked segment of the population (Bielski,2002). Such machines have been tested in 7-elevens throughout the country (Bielski,2002). According to an article found in ABA Banking Journal such machines allow customers to perform a number of transactions that standard machines do not. The author explains,

"The device operates as a cash and coin dispenser, but it can also accept tokens, cards, checks, cash, and promotional coupons. Customers can initiate purchases by card or cash. Built with a customer service phone, the device also offers a large touch screen display and full alphanumeric keyboard. As part of the check cashing process, it fires off electronic information to Certegy (formerly Equifax), which runs credit checks on the presenter to automate the risk management aspect of check cashing (Bielski, 2002)."

The article reports that the phones attached to the kiosk, feature customer service reps that collectively know 20 different languages (Bielski, 2002). This type of ATM is particularly useful for foreign workers that need banking services but have limited banking options (Bielski, 2002). The article also asserts that the initial pilot program illustrated the need for such an ATM machine. In addition, it gave the creators of the machine a chance to modify the machine so that it was more user-friendly (Bielski, 2002).

Another issue that a successful dealer must address is the safety of the ATM at the various places of business. According to an article found in Security Management explains a bill to increase mandatory security measures at ATM machines. The author explains,

"A bill (H.R. 3662) introduced by Rep. Steve Rothman (D-NJ) would require the Federal Reserve System to adopt mandatory minimum requirements for the security of automated teller machines (ATMs). ATM owners would have to develop measures to discourage robberies and assist in identifying perpetrators. Other ATM security measures to be required would include adequate lighting, CCTV cameras, maintenance of surveillance records, and alarm systems (Anderson 2002)."

Recommendations

Indeed, the use of Automated Teller Machines is here to stay. Thus companies that are in the business of finding new and innovative ways to aid in their success. Although ATM distributors are not as lucrative as they once were, there are some practical ways that an ATM distribution company can increase their odds of becoming successful.

In accordance with the literature review, one of the first things that a potential ATM distributor must do is ask around. If an individual is interested in opening this type of business it is important that they get into contact with individuals that have relationships with distributors. Once this has been done and the distribution center has been visited, the individual must decide if an ATM distribution business is right for him/her.

If they decide to go into business, they must make sure that they have reliable transportation, a laptop and a palm pilot. Whether the new distributor decides to operate under the umbrella of a large distributor or go at it alone, they must recruit a sales team. It is recommend that the potential ATM distributor should attempt to work under the umbrella of a larger distributor if possible . Doing this will allow the new distributor to learn the different facets of the business. In addition, it will save the new distributor a great deal of money. If the new distributor decides to work under a larger distributor, they must also take into consideration that the large distributor will expect to receive a portion of the profits.