Magazine article American Banker

Slow at First, Canada Bankers Now Focus on Teller Machines

Magazine article American Banker

Slow at First, Canada Bankers Now Focus on Teller Machines

Article excerpt

MONTREAL -- Canadians have been slow to grasp the benefits of automated teller machines, but now that the advantages are clear, ATMs are popping up in bank branches across the country. Names like Johnny Cash, Cashstop, Green Machine, and Instabank are greeting avid consumers.

There are only 2,600 ATMs hooked up in Canada, compared to 45,000 in the United States, but expansion and development in many aras have been rampant. By 1985, there are expected to be 7,000 automated teller machines servicing Canadian consumers.

The development of ATM networks in Canada has differed from the U.S. evolution. While American banks share services in some 100 regional and national ATM networks, the five major Canadian banks have jealously guarded their individual systems. But the antisharing philosophy is breaking down.

First, Bank of Nova Scotia and National Bank of Canada decided to merge teller technology. Then, bank of montreal announced it was linking its 430 teller machines with the widespread Cirrus Systems Inc. of the United States.

The pooling of the National and Scotia networks next is expected to save money and increase market coverage. Scotia has 139 ATMs across Canada but only seven in Quebec. National has just 58 ATMs, but most of them are in that province.

Meanwhile, bank of Montreal may have made Cirrus a major competitor in the Canadian market. Cirrus was formed in 1982 by 13 U.S. banks and is expected to have 7,500 terminals linked by year's end. Bank of Montreal clients will be able to use American machines by 1985, while U.S. users of Cirrus will be using machines in Canada by the summer tourist season.

With its recent purchase of Harris Bank in Chicago, the move toward a North American network is natural for Bank of montreal. Consolidation and Shakeout

"The question now is whether banks will consolidate, merge, or maintain their own ATM networks," says Thomas Jarmai, a bank analyst with Canada Bond Rating Service. "There will have to be some consolidation, and that will indirectly mean a shakeout. The amount of transactions needed to make ATMs profitable is currently not being performed. It is expensive to keep up with the Joneses -- especially when ATMs can soon become obsolete. Banks have used their systems to attract customers, and they are reluctant to attract clients for other institutions. In the end, however, shared systems will prevail."

Automated teller machines in Canada cost $40,000 apiece, not including installation or maintenace. That price is beyond the means of many smaller financial companies who had bought checking services from banks in the past and were hoping to latch onto an ATM network for another fee. …

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