Surcharges or Not, Makers of ATMs Targeting Mexico

By Costanzo, Chris | American Banker, July 6, 1999 | Go to article overview

Surcharges or Not, Makers of ATMs Targeting Mexico


Costanzo, Chris, American Banker


Mexico is the next stop for providers of low-cost automated teller machines.

The business case for the mini-machines became a no-brainer in the United States in April 1996, when Visa U.S.A. and MasterCard lifted restrictions on surcharging. The extra fees borne by cardholders made the installations profitable, leading to their proliferation.

Since then the major vendors have moved into Canada, where surcharging bans were eliminated in 1997.

Now the focus is on Mexico, where surcharging still is not allowed.

CCS Express, a division of Card Capture Services Inc. of Portland, Ore., has 20 ATMs in Mexico and about 500 in the pipeline there.

"We're not spending a lot of time focusing on surcharging," said chairman Jeffrey R. Jetton. "We sold 1,000 ATMs in the U.S. before surcharging existed."

Overall the company now has 7,000 machines deployed and says it expects to have as many as 30,000 worldwide by the end of 2003.

Access Cash of Arden Hills, Minn., has also made Mexico its next target.

"Revenues will be considerably less" without surcharging said Jon Thomas, executive vice president and chief marketing officer, but consumers' worldwide demand for convenience "will drive our business."

Access Cash also has 7,000 ATMs deployed, including 200 in Canada.

Mr. Jetton of CCS Express said the low cost of the simple cash dispensers and of their dial-up telecommunications means ATM owners can break even at 300 to 600 transactions a month, versus 2,000 to 2,500 for bigger machines.

Banks seeking to expand their ATM businesses face higher costs, he said. "They need cheaper machines."

CCS Express is making its business case in Mexico under a structure that gives machine owners a share in a $1 interchange fee.

It was only 55 cents in the United States when the company started, in 1993.

Patricio Mangino, the commercial director of CCS Express Mexico, said he expects to have 800 to 1,500 in the country within two years.

"It's a very new concept in Mexico," he said during an interview at TechnoBanca, a conference in Mexico City organized by American Banker and InfoBanca, a Latin American publishing company. "We have to make people understand it."

CCS Express faced similar challenges when it started selling mini-ATMs in the United States. As it is now doing in Mexico, it had to convince processors that they could run ATMs at a lower cost by using regular phone lines. It was also necessary to promote customer acceptance of the slimmed down, single-function machines-in an unclear surcharging environment. …

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