How is Point of Banking Different than
Regular Atms When it Comes to Processing?
There is a major difference between the way banking industry regulations process Point of Banking machines (an ATM-like device), and regular atm machines. Point of Banking machines are processed differently than regular atm machines.
A regular cash dispensing atm machine collects "interchange" for each successful transaction it performs. Interchange is a fee that the cardholder's issuing bank pays to the networks to cover processing costs. The networks keep a portion to cover their cost of providing network access into cardholder's banks. Without this service, there would be no way to get approval codes for transactions because banks don't just let anyone connect to their system.
Then, the processor keeps a portion of this money for administration costs, and shares a portion of it with their ISO, or distributor that setup the merchant location for service. This interchange does not come out of the surcharge, therefore the machine owner normally keeps 100% of the surcharge amount he collects on his machine because the processing is paid for by the interchange fee.
Point of Banking machines cannot collect interchange according to current regulations. This is why each transaction costs the machine owner a "processing fee" that is withheld from the surcharge on each transaction that is run. When the cashless atm runs a transaction, the processor withholds the processing fee at the "switch", where the transaction is routed to the proper network that will handle each specific transaction. The network being used on each transaction depends on which networks the cardholder's issuing bank belongs to. The processing fees on Point of Banking terminals are sometime referred to as "switch fees", or "network access".
This is the "trade-off" of not having a cash dispensing atm machine where you could be keeping 100% of the surcharge. Regular atm machines cost much more to own and operate than Point of Banking terminals, plus regular atms are much more likely to break down, they require a dedicated phone line, and thieves are always looking to break in to them and steal the cash.
Another interesting note is that many insurance companies these days are going way up on their premiums for merchants who have cash dispensing atm machines...some may even drop the merchant's coverage! Insurance companies don't want to have to pay for repairing the merchant's building if / when someone wraps a chain around the atm and rips the machine out of the location...very expensive, and this type of crime is on the rise across the United States.
Regular atm machines always have to be re-stocked with cash, which is a hassle that most merchants don't want to deal with. Hiring an armored car service to do this gets expensive and cuts into the profit that the machine is making, which makes the cashless atm even more appealing.
Point of Banking machines can easily be set up in drive thru applications where a regular cash dispensing machine wouldn't work without going to considerable expense to install an outside machine, or a wall unit.
Mis-information about Point of Banking
Many atm companies and credit card companies do their best to put out wrong information about Point of Banking to scare people off and make them believe there is something wrong with this type of service. There have been several business opportunity companies that have been shut down due to promising investors large returns, but this has nothing to do with Point of Banking itself. ( More info is at The Business Opportunity Information Page )
It is in the best interest of atm companies and credit card companies to say things such as this because more merchants across the country are going with Point of Banking which is costing these companies business....and so, they say whatever they can to discourage the use of Point of Banking.
One rumor that has been heard is "Congress just passed a bill making it a Federal crime to operate Point of Banking". The fact of the matter is Point of Banking machines are perfectly legal as long as industry security standards are used, which is why DES-3 Encryption and card number truncation is so important. Some companies that offer cheap equipment aren't following these security standards which could be very bad for their business...and yours!
If you still have questions concerning the difference between Point of Banking and regular atms, or even credit card processing, give us a call and we will do our best to help you understand!