Another obstacle to internet banking--no neighborhood ATM-- bites the dust.
<<E*Trade to Buy ATM Network
Amid a Push Into Online Banking
By PAUL BECKETT
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- E*Trade Group Inc., a pioneer of electronic commerce, is tiptoeing into the bricks-and-mortar world.
The Menlo Park, Calif., online financial-services firm, seeking to overcome one of the biggest hurdles to widespread acceptance of Internet banking, said it will acquire 8,500 automated teller machines, immediately propelling it into the ranks of the largest ATM providers nationwide.
E*Trade has agreed to buy, in an all-stock deal, Card Capture Services Inc., the largest independent network of ATMs in the U.S. Its 8,500 machines are located in 48 states and in three countries. By comparison, Citigroup Inc.'s Citibank unit has about 1,900 ATMs, Wells Fargo & Co. has about 6,300, and Bank of America Corp. has more than 14,000. The acquisition, terms of which weren't disclosed, is expected to close in the second quarter and will be immediately accretive to E*Trade's earnings, officials said.
Join the Discussion: Can online banking fully replace traditional bank services?
E*Trade, best-known for its online stock-trading service, is buying the network just months after launching a big push into online banking through its acquisition of online bank Telebank.
While Telebank is one of the largest Internet-only banks, with about 130,000 accounts and $3 billion in deposits, it and others have been hobbled by consumers' reluctance to bank online because it doesn't necessarily provide easy and free access to cash.
Moreover, deposits still have to be sent in by mail. Telebank doesn't charge its own customers for withdrawals from other banks' ATMs and refunds monthly four surcharges of up to $1.50 each that may be imposed by banks for use of their ATMs by Telebank clients.
Still, E*Trade acknowledged that hasn't been enough. "I want to grow even faster, and part of doing that is being able to penetrate the mainstream banking market," said Mitchell Caplan, E*Trade's chief banking officer. "This lets us compete very effectively in the marketplace at large."
Most of the ATMs owned by Card Capture Services, Portland, Ore., are located in stores such as Rite Aid pharmacies and Safeway supermarkets. They currently handle 3.1 million transactions a month. E*Trade said that through this acquisition and others, it expects its customers to perform as many as five million transactions a month on its ATM network by the end of this year.
Indeed, as E*Trade brings together its Telebank and E*Trade client list in a bid to create a full-service online financial firm, E*Trade also is planning to offer other services on its ATMs that could eventually include stock trading for E*Trade's 1.8 million account holders. The ATMs will carry the E*Trade, not the Telebank, brand name.
Nonetheless, it remains to be seen whether bank customers will be sufficiently reassured by the ATM network when many still want the even-greater physical presence of a bank branch they can visit. Neither E*Trade nor Telebank has any branches. And privately held Card Capture Services' ATM network right now doesn't take deposits, so E*Trade's banking customers still will have to send them in by mail.
An E*Trade spokeswoman said E*Trade plans to upgrade the ATMs to accept deposits.
Write to Paul Beckett at paul.beckett@wsj.com>>
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