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Select-A-Branch's ATMs Extend Branding Model - December 6, 2007
An operator of merchant automated teller machines has developed a way for multiple banking companies to put their brand on a single machine.
The technology, from Select-A-Branch of King of Prussia, Pa., is a twist on the standard branding deals that many banks have with Cardtronics Inc., which operates the largest nonbank ATM network.
With those deals, financial companies pay a fee to Cardtronics and put their name on the screens and exteriors of a certain number of the ATM operator's machines.
Select-A-Branch ATMs do not carry bank logos on their exterior; when customers of participating financial companies insert their cards, the machines' screens mimic the appearance of the banks' own ATM screens.
Industry observers said this technology enables banks to extend their networks, as the Cardtronics branding deals have done.
Daniel Stechow, Select-A-Branch's chief operating officer, said in an interview Tuesday that in the past two weeks the company signed its first major banking company customers: the $123 billion-asset PNC Financial Services Group Inc. and the $44 billion-asset TD Banknorth Inc. A dozen community banks and credit unions already use its network. (TD Banknorth's parent, Toronto-Dominion Bank, has an $8.5 billion deal for Commerce Bancorp Inc. of Cherry Hill, N.J., and plans to merge it with TD Banknorth.)
Mr. Stechow said his company's machines read the first six digits of a user's card to determine if its from a participating financial institution. Clients companies provide graphics for the machines but pay nothing for Select-A-Branch to connect its ATMs to their networks.
Their customers pay no fee to use the machines, but the banks must pay $2 every time they do. People whose banks are not Select-A-Branch clients pay a $2 fee for each transaction.
Mr. Stechow said his company's ATMs would appeal to banks with limited geographical reach. "We substantially level the playing field for small banks and regional institutions," he said. "It opens the door for community banks and credit unions."
Select-A-Branch operates 70 ATMs, which are located at rest stops on the Pennsylvania Turnpike and at McDonald's Corp. restaurants in Manhattan. It expects to have about 150 in operation by mid-winter. The Actors Federal Credit Union owns the Manhattan ATMs.
Tim Sloane, the director of debit research at Mercator Advisory Group Inc. in Waltham, Mass., said providing people with expansive surcharge-free ATM service is "absolutely critical."
"Consumers put a very high value on accessibility and often consider that when they're thinking of switching" to a new bank, Mr. Sloane said. "ATM presence has a high value, and the industry sees it as very important."
Branding deals have been an important way of providing that for many banks. JPMorgan Chase & Co., for example, almost doubled its ATM presence in and around New York City in 2005 by branding about 250 machines located in Duane Reade Inc. drugstores through a branding agreement with Cardtronics.
Sovereign Bancorp Inc. of Philadelphia put its name on about 1,400 Cardtronics machines in CVS Corp. drugstores on the East Coast last year.
"It's great, but what drives individuals to use a machine is them seeing a recognizable financial institutions' name," Mr. Sloane said.
Select-A-Branch ATMs carry its name on their exteriors. And the company expects its clients to get the word out to their customers about the ATMs. Mr. Stechow said there are plans to place small television sets atop the machines to promote the banks.
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