Confirming what many have suspected for some time, a just-released study conducted for the Business Journal reveals that Angelenos are using their ATM cards ever more frequently to buy goods and services directly from merchants and using cash and credit cards less often.

“I use it for everything every time I shop at the grocery store, everywhere,” said Lucy Fire, a Hollywood resident. “It’s so much easier than using cash. And when you use ATM cards, you know how much money you have (in your account, unlike with credit cards).”

The ranks of local merchants accepting ATM cards have been steadily growing enabling Angelenos to use their ATM cards to pay for everything from essentials such as groceries, gas and apparel, to such discretionary items as cigars, wigs and tattoos.

Star System Inc., operator of the Star ATM network in 12 Western states, provided the Business Journal with specific data on ATM usage in L.A. and other Western cities.

The results show that Angelenos still use their ATM cards mostly to get cash, but an increasing number are also using their cards to purchase goods directly from stores.

“Online point of sale has been around since 1987, but it’s only recently that we have seen this technology embraced by merchants, which has led to a growth in transactions,” said Nikki Waters, senior vice president of marketing for Star System.

One local merchant embracing the ATM craze is Retail Slut, a retail funky-clothing boutique in Hollywood.

“We don’t even take checks anymore because of all the check scams in the area. We only take ATM cards now (for check-like debit payments),” said Peter Thomas, owner of Retail Slut.

The spectrum of local merchants now accepting ATM cards for point-of-sale transactions in Los Angeles ranges from mainstream establishments like Ralphs grocery stores and Carl’s Jr. hamburger stands to such offbeat retailers as Tattoo Mania of West Hollywood and Politically Incorrect Cigars in West L.A.

During Star System’s 30-day test period last fall, Angelenos averaged 3.8 point-of-sale ATM card purchases, exceeding the number of such purchases by consumers in San Francisco, San Diego and Las Vegas.

The only market to outdo L.A. in its use of ATM cards to make direct purchases was Phoenix, where the average consumer made 5 point-of-sale ATM buys over the 30-day period.

The average Californian made 3.9 ATM point-of-sale during Star System’s fall 1996 test period, up 50 percent from the year-earlier period. Systemwide, the jump was just as dramatic as that experienced in California.

“The increase in point-of-sale (ATM card) transactions has been phenomenal,” said Kate Graham, vice president of retail marketing at downtown L.A.-based Sanwa Bank California.

Meanwhile, the survey also pointed out that consumers use of automated teller machines throughout the Star system dropped slightly in 1996 vs. 1995, reflecting a general movement away from purchasing with cash (obtained from ATMs) and toward more direct buying with ATM cards.

Waters of Star System and Graham of Sanwa Bank agreed that the single biggest factor behind the increase in point-of-sale purchasing has been the widespread introduction over the past year of ATM cards that double as debit cards.

Such cards let consumers purchase goods by taking money from their checking accounts. Many debit cards also allow consumers to get cash back at stores, thus negating the need for trips to the ATM altogether.

Graham said the growing use of debit cards has already led to a slight decline in ATM use, and that trend will likely continue as point-of-sale transactions become more popular.

While use of ATM cards to buy goods is rising, their primary use is still to obtain cash and transact other business at automated teller machines, according to the Star survey.

The report shows that Angelenos used ATMs an average of 7.8 times over a 30-day period last November. By contrast, San Francisco and San Diego consumers used their ATMs 8.5 times and 9.9 times respectively in that period, while people from Las Vegas and Phoenix averaged only 7 and 6 times respectively.

Part of the discrepancy between L.A., San Diego and San Francisco could owe to geographic differences between the cities, according to Nikki Waters, the senior vice president for marketing at Star System.

“Part of it is the proximity from an individual’s home or office to an ATM. That will play a critical role as to whether someone uses his ATMs more often,” Waters said. “It could be that L.A. is such a large geographic area and not as condensed as San Diego or San Francisco that consumers may have to travel further to get to their ATMs.”

At the other end of the spectrum, the relatively low ATM usage in Las Vegas probably owes to the high volume of cash that circulates in that market, which reduces the need for cash-dispensing ATMs, Waters said.

The low use of ATMs in Phoenix could be due in part to that market’s older population, which didn’t grow up with automated teller machines and is therefore less likely to use them, said Graham of Sanwa Bank California.

Both Waters and Graham noted that a trend over the last two years has been for consumers to move away from banking at their own ATMs and to use more “foreign” machines owned by other banks.

Star’s figures showed that Californians used foreign ATMs an average 2.5 times in the 30-day survey period for 1996, up sharply from the 1.5 times for the like period in 1995.

Waters attributed the growing use of foreign ATMs to a proliferation of new machines in non-branch sites over the past year.

“It’s all convenience,” she said. “It’s where the machines happen to be. A lot of machines have been deployed in grocery stores, malls and theaters. A lot more machines are in places people happen to be when they need cash, and many of them probably don’t bank with the bank that placed those machines.”

Within the five cities surveyed, San Diegans are using foreign ATMs the most, 3.7 times in the 30-day period, while Angelenos and San Franciscans used foreign ATMs an average 2.2 times over the same period.

Waters said the high San Diego figure could owe in part to that city’s high concentration of smaller community banks, which have smaller ATM networks and often encourage their customers to use foreign ATMs for convenience. She added that the trend in foreign ATM usage will probably either plateau or drop off slightly in the year ahead due to new surcharges introduced last year for many consumers who use foreign machines.

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