Depositors banking on machines

Sometime this spring, the Union Bank & Trust Company will install nine brand new automated teller machines (ATMs) in Grand Rapids, Mich. The total cost: $ 800,000 to $1 million.

The hardware itself isn't that expensive. Each robot teller costs $25,000 or so. But the business of supplying these increasingly popular machines is so attractive that more and more companies are leaping into the market. In 1981 alone, US banks are expected to spend more than $250 million on ATMs.

Union Bank's additional costs include promotion, bookkeeping changes, the "environment" for the machines, and so on.

"And after that there will be ongoing costs of $150,000 to $300,000 a year," says Steven Meyer, assistant vice-president, who is in charge of the bank's automated-teller program.

Since the first ATM was installed in 1969, the machines have matured past the point where they have to earn acceptance from skeptical bankers and their customers. Now several manufacturers that were reluctant to build ATMs are moving in.

And with many of the introductory "bugs" having been worked out (they don't "eat" a customer's card so often), the machines can do much more today than just spit out money.

A customer standing in front of an ATM can get an account balance, transfer money from one account to another, pay bills, make payments on credit cards accounts, purchase six-month certificates of deposit, and even find out how the hometown team did in its latest basketball game. Many of the tellers are near bank branches, but a growing number of them are in free-standing kiosks that can be situated at street corners, shopping centers, and train or bus stations. Programmed to recognize a customer by his card and four-digit code, they can also give instructions in several foreign languages.

It is estimated that each machine is used from 1,000 to 4,000 times a week, depending on its location and promotion by the bank.

While these new services have helped increase public acceptance, there are still only about 20,000 of the unsmiling tellers in operation in the United States. But this market is being fought over by some eight US companies including such giants as IBM and Burroughs. Others, including NCR Corporation, Bunker Ramo Corporation, and TRW Inc., are also competing to cement long-term arrangements with banks so they can supply, maintain, and eventually replace expensive teller equipment and the computers to back them up.

At Union Bank, Mr. Meyer says the choice was made easier by the fact that the bank was already familiar with the leading supplier of ATMs, Diebold Inc. of Canton, Ohio. The bank has been using Diebold's drive-in teller equipment as well as the product Diebold is best known for and the one people expect to see in every bank -- safes.

Of the 20,000 ATMs in operation, Mr. Meyer noted, about 9,000 have Diebold's name on them.

But this dominant share may be eroded as more companies fight for a piece of the market. And, following the tale of the auto industry -- though in much less time -- the Japanese are joining the fray.

While Diebold is the leader in ATMs, it was not the first. That honor belongs to the Docutel Corporation of Irving, Texas.

"It was a cash dispenser, pure and simple," Docutel spokesman Richard Hanlon notes.

In those early days, he recalls, ATMs were the responsibility of the bank's data processing center. Today, while data centers are still the main forces behind the machines, "marketing departments seem to be getting more and more involved in them."

These departments have helped bring many of the changes that have been made in ATMs. At Citibank in New York, which has 468 ATMs in use, prototype machines were tested by bank customers and modifications were suggested -- some of which were incorporated in an ATM design the bank drew up. The machines were then built to the bank's specifications, a Citibank spokeswoman, Susan Weeks, said.

"People said they wanted the ATMs to speak to them in plain English," she said. "Now the screens say things like 'Hi' and 'May I help you?' And if it makes a mistake, it will say 'Oops.'"

All this gee-whiz ability costs the banks dearly. They must spend $25,000 to Linda Fenner Zimmer, a private consultant considered a leading expert on ATMs. Marketing research, promotion, management, and bookkeeping can add another $30, 000 to $40,000 for each machine. For this reason, she says, banks will be adding ATMs in the next few years at about the same rate they did in 1980 -- some 6,000 a year.

"They [bankers] will be watching the economy closely" before moving any faster with ATM programs, she adds.

Edwin B. Cox, senior financial industry consultant at Arthur D. Little Inc., the research and consulting firm, expects to see 50,000 to 60,000 ATMs in use by 1985. Almost all of the machines installed until then will be new units, he believes. After that, most of them will be replacements.

While the Japanese have yet to make a major dent in the ATM business, they are coming, Dr. Cox says. "It's a little like the auto market: The US will break the ground and the Japanese will soon follow," he notes.