With Americans increasingly relying on convenience and accessibility when it comes to banking, Automated Teller Machines (ATM) are becoming more popular than ever. By starting an ATM business, you can take advantage of this trend and help business owners to offer ATM services right on their properties.
For those interested in a business model that provides recurring revenue with a relatively low initial investment and time commitment, the ATM business might be a perfect fit. However, the process involves more than just purchasing machines and placing them in prime locations. This guide will provide insights into the ATM industry, including the steps needed to get started, trends, and answers to common questions. By the end, you should have a solid understanding of what it takes to start an ATM business. So, grab a notepad, and let’s dive in.
Business Overview
An ATM (Automated Teller Machine) business involves owning, operating, and maintaining ATMs at various locations, such as convenience stores, gas stations, event venues, or shopping centers. The main revenue comes from transaction fees paid by users. This business model involves three parties:
The ATM owner, the venue owner where the ATM is installed, and the ATM processor, which processes the paperwork that keeps the ATM functioning. Those three parties share the ATM processing fees.
- ATM processors may have network accessing fees per transaction.
- On top of the ATM processing fee, the ATM operator adds a transaction fee.
- The venue owner will get a portion of the fee generated by the ATM operator. This fee is negotiated between the venue owner and ATM operator, but on average, venue owners receive $0.50 per transaction or up to 50% of the operator’s fee.
The key to success in this business is location; high foot traffic areas often mean more transactions and higher revenue.
Owning your own ATM business is often promoted as a passive income opportunity; however, there is still work to be done as cash will need to be replenished and regular machine maintenance and repairs. That said, the time spent on the business is very flexible, and commitment isn’t high. This business can easily be owned while still working a full-time or part-time job.
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Industry Summary
According to a report by the Federal Reserve Board, cardholder ATM fees and cardholder account servicing fees represented the two largest sources of cardholder fee revenue for issuers in 2019 (the most up-to-date report), representing $97.4 million and $33.3 million, respectively. While we do not have information on how big the market is for private ATM owners, we at least know that they are generating revenue on top of these fees, which is quite substantial.
Current key players in the industry include Euronet Worldwide Corporation, Hess Cash Systems, Source Technologies, and Triton Systems of Delarae LLC.
Industry Trends
Many trends are affecting the ATM industry. According to ATM Depot, many old ATMs are currently being replaced with new models. These new models have greater capabilities, including mobile pre-staging, dynamic branching, video banking, and contactless transactions. Equipped with touchscreens, new ATM models appeal to a younger demographic.
These newer ATMs also offer ATM owners the chance to personalize the ATM by displaying marketing messages on the screen, and this means ATM owners can potentially increase their profits by selling advertising time.
Smart ATMs are also on the horizon. These ATMs can offer a greater range of services, including multi-currency cash dispensing, cryptocurrency, loan repayment, bill pay, ticket dispensing, and account opening. These services can reduce bank staff costs, delivering customers unparalleled convenience and new options. As they become more popular, having a smart ATM could help a bank to win business over a competitor without this smart technology.
Other technological improvements are making ATMs more practical and safer. For instance, solar and wireless machines can operate in locations that aren’t currently ATM-accessible, which is great for short-term events.
Target Market
An ATM business’s target market is the venues that allow the business to install an ATM. These venues may be banks, malls, convenience stores, restaurants, and any other locations that would benefit from having an ATM available.
Checklist To Start An ATM Business
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If you’re thinking about starting your own atm business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Research the Market
Starting an ATM business, like any other venture, requires thorough research and assessment. This is crucial because it helps entrepreneurs understand the market, identify potential challenges, evaluate the competition, and estimate the profitability of their business idea. Here are some factors to consider during the research phase:
Location: The success of an ATM business heavily relies on its location. High foot traffic areas like shopping centers, restaurants, or event venues often generate more transactions.
Competition: Determine how many ATMs already exist in your target area and who operates them. If the market is saturated, it could be challenging to find profitable locations. Start by studying the locations of existing ATMs in your target area. Are there areas underserved by ATMs? That could indicate potential demand.
Transaction volume: Estimate the number of transactions that might occur at each machine. This depends on factors like foot traffic, cash usage in the area, and competition. Nearby businesses might be willing to share their views on the need for an ATM. Collaborating with them might even create win-win opportunities.
Operational costs: Calculate how much it will cost to maintain the machines, including cash replenishment, machine servicing, and communication costs.
Step 2: Develop a Business Plan
If funding is needed, the next step will likely be to include creating a business plan. Lenders and investors will use the plan to evaluate the concept and potential profitability.
There are a few sections they will focus on, which include:
Market analysis: Detailed insights into the target market, demand, competition, and potential locations for ATMs should be included. This section demonstrates that you’ve done your homework.
Risk management and compliance: Outline how you plan to adhere to regulatory requirements and manage potential risks, such as security concerns. It adds credibility to your business plan.
Financial projections: Your business’s financial aspects, including the investment required for machines, operating costs, revenue streams, and profit margins, should be carefully detailed. It allows lenders and investors to gauge the profitability and sustainability of the business.
Related: How to write a business plan
Step 3: Source Funding
Starting an ATM business is an exciting venture, but before diving in, securing funding is a pivotal step that demands careful consideration and planning. Depending on the scale and nature of your ATM business, the startup costs might vary, and accordingly, the sources of funding will differ.
For many entrepreneurs, personal savings are the primary source of funds to start this type business. However, if personal savings aren’t enough, there are a few sources to look to. These include:
Friends and family: Borrowing money from friends and family can be a viable option, especially if you have people in your network who believe in your business idea. The advantage of this type of funding is that it often comes with lower interest rates and more flexible repayment terms than traditional loans. However, it can put personal relationships at risk if the business fails or if there are disagreements about the loan terms. Always put agreements in writing to avoid misunderstandings later.
Bank loans: Banks and credit unions offer small business loans that can be used to start an ATM business. To qualify, you typically need to invest a significant portion of your own funds (typically 15% at a minimum), have a good credit score (usually above 650), and provide sufficient collateral. The advantage of bank loans is that they can provide substantial funding, and interest rates are generally lower than other types of loans. However, the application process can be lengthy, and there’s no guarantee of approval.
SBA guarantee: The Small Business Administration (SBA) offers loan guarantee programs that guarantee a portion of the loan, reducing the risk for lenders and making it easier for small businesses to get funding. SBA loans have competitive terms and interest rates, but they also require a solid business plan, good credit, and collateral.
Alternative lenders: Online lenders and peer-to-peer lending platforms can provide funding more quickly than traditional banks, and they often have less stringent eligibility requirements. However, interest rates can be higher, and repayment terms may be less favorable.
Angel investors: Although not as common, local people with a higher net worth might take an interest in your business idea. Investment from angel investors can be harder to obtain as they often seek high-growth, scalable businesses. It’s not the typical go-to option for an ATM business but could be explored for the entrepreneur with the right connections.
Step 4: Register the Business
Starting an ATM business is not just about having the right idea and funds; it also involves making your business compliant with legal requirements. Each state is different, but here is general overview to help with your research.
Choose a business structure: The first thing you’ll need to decide is what business structure is best for your business. This could be a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Each of these structures has different implications for liability, taxes, and administrative complexity. Many ATM business owners opt for an LLC because it provides personal liability protection.
Related: Comparison of business structures
Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Related: Finding a domain name for your business
State requirements: State licensing requirements and regulations for ATM businesses can vary significantly across different states. Despite this, it is generally accepted that most non-bank ATM businesses require a license. The specifics of these regulations are typically overseen by the state’s Division of Banking or similar regulatory body. In some cases, you may also need to apply for a money transmitter license, which usually involves a fee and approval process.
Federal, state, and county/city governments all have their own set of regulations, so what is required can vary widely depending on your location. For example, in New York State, there are no licensing requirements for the ownership and operation of ATMs by non-banks.
ATM businesses have several regulations and licensing requirements.
Related: What types of licenses does an ATM business need?
Obtain business licenses and permits: Depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).
Step 5: Choose Locations & Install Machines
Starting an ATM company requires strategic planning and execution, especially when it comes to choosing locations and installing ATM machines. This process can be one of the most significant factors in determining the success of your business. Some key steps for success include:
Research and identify high-traffic areas: The priority for ATM placement should be areas that are open to the public for long hours and lots of foot traffic, such as gas stations, convenience stores, retail stores, bars, etc., to maximize daily transactions. Keep in mind too, that for an ATM to work, a connection to a phone line, internet, or cellular connection will be required, so before signing a contract with the property owner, be sure those services are available.
Other considerations should include creating a route of ATMs that are close together to minimize travel time and also so they are easy to stock and service. Also, consider the proximity of other ATMs and that the location has proper lighting and security measures.
Negotiate agreements with property owners: When you find a spot with potential, reach out to property owners or managers to discuss the possibility of installing an ATM. Clearly outline the responsibilities of both parties, including rent (if any), maintenance, and security. Property owners often agree to house an ATM for a percentage of the transaction fees or a monthly fee.
Once you strike an agreement with a venue owner, having a detailed, sound contract can help protect this agreement and ensure you receive the income you’ve negotiated. Be sure to budget money for a business lawyer who can help you draw up an appropriate contract and review any modifications you may need to make. If a lawyer isn’t in the budget, RocketLawyer and Law Depot have free and inexpensive templates that may be helpful.
Select the right type of machine: Next, choose a machine that fits the needs of the location. For example, a full-function ATM might be suitable for a shopping mall, while a simple cash dispenser could work for a small café.
Install the ATM: Once you’ve selected your machines and locations, you’ll need to install the ATMs. This involves setting up the machine, programming it, and ensuring it has an internet or phone connection. Especially with the first machine, it’s typically best to hire professional installers who specialize in ATMs. They will understand the technicalities and compliance requirements.
Step 6: Prepare to Launch!
Starting an ATM business indeed holds vast potential, but like any business, attention to detail and meticulous planning in various aspects is essential. Here’s a wrap-up of the final steps that may still be needed.
Business insurance: Safeguarding your investment is crucial. Consider liability insurance to protect against potential lawsuits, as well as property insurance for the physical ATMs.
Related: What types of insurance do ATM businesses need?
Bookkeeping: A clear financial tracking system is fundamental. Whether using software like Wave Accounting (FREE) or Quickbooks or hiring a professional accountant, ensure your financials are in order.
Business bank account: Separate business and personal finances by opening a dedicated business bank account.
Management software: Tools like ATM Boss, esq, or fiserv can help in managing your ATMs, monitoring transactions, and maintaining compliance.
This material is property of StartingYourBusiness.com
Common Questions When Starting An ATM Business
How much does it cost to start an ATM business?
Even when starting a smaller ATM business, the owner needs to ensure that they have enough disposable cash to keep the machines reliably stocked. Startup costs will vary depending on the number and quality of the ATMs to be purchased.
The cost to get a machine ready to operate will vary but expect a range between $5,000 and $17,000. Here’s a breakdown of the costs:
ATM machine purchase: $2,000 – $8,000
ATM prices can range from $2,000 to $8,000. Typical freestanding ATMs range from $2,300 to $3,000, while used ATMs average $1,200 to $1,800.
Installation costs: $300 – $800
This includes delivery, setup, and any required customization.
Location rental: Varies
Renting a spot in a high-traffic area might require a monthly fee or a revenue-sharing agreement.
Initial cash load: $2,000 – $6,000
You’ll need to have cash to load into the ATM. The amount depends on the location and expected demand.
Business registration and permits: $100 – $500
The costs here depend on state regulations and the business structure you choose.
Insurance: $200 – $400 (initial cost)
An essential initial investment to cover potential theft, vandalism, or other unforeseen mishaps.
Miscellaneous costs: $500 – $1,000
These may include utility costs, additional security measures, or other location-specific expenses.
How profitable is an ATM businesse?
The profit potential in an ATM business can be attractive, but it’s vital to understand the dynamics involved. Typically, ATM owners make money through transaction fees charged to users, which can range from $1.50 to $3.00 per transaction. The average number of transactions per ATM machine is often cited as 6 to 10 per day.
Here’s a simple breakdown to estimate the monthly profit:
Revenue
– Transaction Fee: $2.00 (average fee)
– Daily Transactions: 8 (average transactions)
Total Daily Revenue $2.00 x 8 = $16
Monthly Revenue $16 x 30 = $480 per machine
Expenses
– ATM Machine Lease or Amortization: $50 to $100 per month
– Cash Loading Costs: $30 to $60 per month
– Communication Costs: $10 to $20 per month
– Maintenance and Miscellaneous: $20 to $50 per month
– Total Expenses: $110 to $230 per machine per month
Profit
Monthly Profit per Machine: $480 – $230 (maximum expenses) = $250
Annual Profit per Machine: $250 x 12 = $3,000
Keep in mind that profits can fluctuate based on the location, competition, and other factors. Some ATM business owners report making up to $500 per machine per month in high-traffic areas, while others in less favorable locations might make much less. The profit potential is there, but careful planning, site selection, and ongoing management are key to realizing this potential.
What skills are needed to run an ATM business?
Starting an ATM business doesn’t require a business degree, but certain skills and experiences will be helpful.
Technology background: A background in technology will allow a business owner to better understand, use, and represent their ATMs to venue owners.
Troubleshooting and repair skills: Some basic troubleshooting and repair skills can help an ATM owner to keep the machines operating. An owner who can do some maintenance and repair themselves can save money over frequently calling in a professional.
Attention to detail: Attention to detail is essential when dealing with the large amounts of money used to stock ATMs.
Familiarity with the area: An ATM owner familiar with a certain area can better identify sites that are likely to generate a high volume of ATM usage.
Security experience: Some experience working in or training in the security industry is valuable. Knowing and following security best practices can help to minimize the risk of an ATM owner being robbed while servicing the machines.
Negotiation skills: Experience negotiating contracts can help a business owner to reach agreements with venue owners.
Networking talents. Building relationships with venue owners is an important element of running an ATM business. Strong interpersonal skills and networking talents will be an advantage.
What is the NAICS code for an ATM business?
The NAICS code for an ATM business is 522320, which is classified under Financial Transactions Processing, Reserve, and Clearinghouse Activities.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
