The Almighty ATM : Customers Flock to Automated Teller Machines but Some Banks Say Functions Are Under-Used

Spencer Nilson went to Las Vegas a few weeks back and did not bother to take any cash.

“Every casino has an automated teller machine,” the Santa Monica businessman said. “I always know that as long as I’ve got these access cards, I never need to worry about cash.”

That could be a dangerous convenience in Las Vegas, but more Americans than ever are using automated teller machines, known as ATMs, and no one is more aware of it than Nilson, publisher of the Nilson Report, a leading newsletter for the credit card and ATM industries.

“People want cash,” said Nilson, who carries four ATM cards. “That’s the single most-used function of any ATM card. People are using them instead of checks. It is more convenient.”

Convenience has been the chief selling point for ATMs since they were introduced in this country more than a decade ago, and the numbers indicate that people do find them useful.

Transactions using ATMs have grown every year, reaching 4.6 billion in 1988, according to Nilson. There were 138 million access cards in the United States at the end of last year, and Nilson projects that the figure will rise to 145 million in 1990 and 175 million in 1995. There were 67,000 ATMs nationwide in 1988, a figure that Nilson sees reaching 73,000 in 1990 and 91,000 in 1995.

9,700 ATMs in California

California leads the nation both in number of ATMs--more than 9,700--and number of cards--more than 24 million. Residents here also are more active in using their cards.

Rita Champ, vice president of San Diego-based Star System, said surveys by the regional ATM network show that 69% of state cardholders use their cards at least once a month, compared to a national average of about 50%.

“They really are becoming a method of everyday banking,” said Champ, whose network provides links to 7,457 ATMs in five Western states and Hawaii for the 392 banks, thrifts credit unions that belong to Star.

National and regional networks, such as Star, which allow a customer of one bank to use ATMs at hundreds of locations, have contributed to the increasing convenience of ATMs. Small banks, particularly, like the networks because they expand their geographic reach so dramatically.

Despite the steady growth, some in the banking industry feel that ATMs have not lived up to their promise. They complain that it is difficult to get more than half their customers to use the cards regularly, making the expensive machines and the computers that run them less cost-effective.

The United States lags far behind Japan both in number of machines and frequency of use. For instance, although Japan has a population half the size of the United States’, there are 80,000 ATMs there, according to Nilson’s latest worldwide survey.

Catherine Bond, an expert in boosting card use, said banks are coming up with some clever ways to increase use.

“I’m seeing a tremendous surge in enthusiasm,” said Bond, who is head of a consulting firm in Hartford, Conn., called C. Bond & Co.

Drive-up ATMs are growing in popularity, including at some Security Pacific branches, although banks are finding engineering problems in serving vehicles of different heights, such as high-axle Blazers and ground-hugging Corvettes. Some new ATMs use color display screens, which are supposed to be easier to read. Pilot programs use ATMs to dispense postage stamps, travelers checks and airline tickets.

Dispensing Ski Lift Tickets

First Interstate Bank of Nevada, part of First Interstate Bancorp in Los Angeles, is testing ATMs to dispense ski lift tickets.

“They seem to be working well and be accepted by consumers,” said Andrew P. Studdert, head of consumer banking for the parent company. “And the lift lines move faster.”

At seminars she conducts for banks, Bond stresses that the most important step in increasing ATM use is talking to customers about their needs and the way ATMs fulfill them.

“Many people still look on ATMs as emergency cash machines, and the industry has been talking just about convenience,” said Bond. “But ATMs also offer privacy, no request for an identification, and control over account transfers.”

Star System’s Champ said an important element in persuading people to overcome their fears of ATM technology is providing plenty of live demonstrations that consumers can understand. That means using bilingual demonstrators and some other twists. One savings and loan had a 72-year-old woman demonstrate to senior citizens in Sun City, Calif., how ATMs work.

The next big step in ATM convenience will probably be a link between the nation’s two largest ATM networks, Plus System in Denver and Cirrus in Chicago.

The link will mean that a customer of a bank that belongs to either system would be able to get cash from any one of the combined 52,000 machines--from Las Vegas to, say, Atlantic City.