ATM interchange

I know right?! You’d rather watch paint dry then try to understand how network routing and interchange works…  It’s part of a cloudy payments mystery. It’s not surprising that many of the organizations involved in your payments solutions want you feeling nauseous when the topic comes up.  Why? Because it becomes much easier for them to keep a larger portion of the income for themselves when you ignore (or don’t understand) the details. Plain and simple. Let’s consider one of the income streams from your payment program:  ATM Interchange.

Why ATM interchange? Well, most of the interchange articles have always focused on point-of-sale (POS) interchange and the effects of the Durbin amendment.  And even though point-of-sale (POS) interchange has been beaten (or written) to death, it’s counterpart, ATM interchange has gone mostly unnoticed. And it’s easy to understand why the focus has been on point-of-sale.

Most of you have hundreds, if not thousands of cardholding members that carry your debit card around, making purchases every day.  However, most credit unions only operate 1-3 ATMs. So, when you are using your secret decoder ring to decipher your debit processor invoice, the heaviest volume of transactions and money moved occurs from your cardholders (AKA the issuer side).  Your issuing transaction volume can be outpacing your acquiring ATM volume by 20-to-1 or greater. As volume goes, so goes your focus. So, you pay attention to point-of-sale interchange and the ATM side gets little consideration.

ATM interchange works differently than point-of-sale interchange. However, the concept is similar.  Interchange is used as payment from one side of a transaction (the cardholder’s institution) to the other side (the ATM owner).  But, very little has been done to improve the interchange a credit union earns from its ATM(s). However, you can make some adjustments to the acquiring side of your ATM program that can have a positive impact on your bottom-line.  

First, review the routing table for your ATMs.  The routing table contains the list of networks your ATM can accept and the priority or ranking you give the networks.  Make sure to put networks with higher interchange at the top of your table. Next, analyze your ATM networks. You can improve the interchange income you receive from non-member transactions (foreign cardholders) at your ATMs by working with the right networks.  Most networks publish their fee schedules, making it easy to build your own comparison table. When comparing, make sure you consider all the possible costs: membership fees, monthly fees, admin fees, switch fees and lastly interchange.

When it comes to your ATMs, there is money to be saved and income to be earned.  Your ATM program may never be profitable. Even so, there are tweaks you can make to improve the bottom-line of your fleet (whether 1 or 100 ATMs).  With the Windows 10 migration coming in early 2020, you’ll be faced with some larger decisions regarding your ATMs. Get ahead of the migration date and give yourself a chance to get into the details without being rushed into a poor decision.

Large, required ATM changes like the ADA regulation and EMV were necessary evils that became great opportunities for many to make needed changes to their ATM strategy.  Windows 10 serves as another such opportunity. Now get on it!

Joe Woods

Joe Woods

Joe Woods, CUDE is a 15-year credit union veteran.  He has spent time with Corporate One FCU, Liberty Enterprises, co-founded Legacy Member Services and was part of the senior management ... Web: Details