From Digital Transactions:
Interchange rates on ATM transactions are falling and may not have hit bottom yet, so independent distributors of ATMs need to look for additional sources of revenue. That is the conclusion of a recently released white paper entitled, “The Future of Interchange in the United States,” sponsored by the the ATM Industry Association (ATMIA) and Kahuna ATM Solutions.
“While I don’t think interchange will disappear completely, rates could continue to erode even further,” David Tente, ATMIA U.S. executive director, tells Digital Transactions News.
That puts pressure on the independent sales organizations that provide off-premise ATMs to retailers.
“They need to be prepared for the possibility that interchange revenues could continue to fall and they need to look for additional sources of income,” says Bryan Bauer, president of Kahuna, an independent distributor based in Bloomington, Ill.
In ATM transactions, interchange is the fee that financial institutions that issue debit cards pay the ATM owner in exchange for the convenient access to customers’ bank accounts. It is set by the ATM networks. Interchange flows the opposite way, from merchant acquirer to card issuer, for debit and credit card purchases. Various forces have contributed to the ATM interchange fall-off, one of which is pressure by banks and credit unions on the networks to reduce their interchange expenses.
With industry revenues down because of reduced interchange fees and other factors, the need for diversification by various industry stakeholders is critical for ongoing profitability. These challenges hit both financial institutions and independent deployers, and highlight the need for all organizations to be more efficient and productive.
At the core of these challenges is a need to focus on the core business, and consider partnering or outsourcing those tasks that other organizations can handle more efficiently. In many ways, the banking industry is grappling with similar challenges seen in other industries over the last decade or so.
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