Peter McCormack in his series of podcasts covers bitcoin ATM operations from various angles. If you are looking into operating of bitcoin ATM’s the full series of 5 episodes will be an interesting listen.
The first episode is with Gil and Eric from Athena Bitcoin, one of the largest operator on the market. They also one of operators who expanded business over national border and installed ATM’s in Argentina and Colombia.
Gil and Eric met 5 years ago and thought about business opportunities of getting into the money flow related to cryptocurrencies. In late 2014 they started a business with several ATM’s in Chicago area and saw an immediate demand. Then expanded business to other states and countries with currently 65 ATM’s in the U.S. (in 8 different states), 22 in Colombia, 11 in Argentina, and are looking to expand into Mexico.
Speaking about business challenges Gil mentions that company is being regulated by FinCEN on the federal level, and in 3 different states on money transmission level, which is about consumer protection (read an overview of bitcoin ATM regulation). In other countries they follow BSA (US Bank Secrecy Act), which is less stringent than Colombian or Argentinian law, but limits per person per day are lower than in the U.S. Currently Athena doesn’t require ID scan until customer reaches $3000 total purchase amount, based on same used cell phone number. Machines make pictures and record videos of users and Athena team verifies that the same person doesn’t evade limits by using different phone numbers again and again.
They have risk-based approach, when different processes are applied depending on the amount purchased, e.g. $50, $500 or $5000 as those are totally different use cases. Having a client in front of a machine gives much more reliable checks than for example for online exchanges. You can easily verify the customer as picture is taken by machine, you are sure this person intended to use ATM and also means the person resides at particular physical location.
What are the most popular locations? Convenient ones: gas stations, outdoor shopping centers, especially closely located to highways. Most customers don’t randomly buy bitcoins because they saw an ATM, usually it starts with customer wishing to purchase some, and then finding convenient bitcoin ATM location nearby or on the way. If operator has large scale business it makes sense to find a partner who owns many spots, e.g. Athena Bitcoin has relationships with companies who own gas station chains, shopping centers.
Most of machines are profitable, and definitely some do better than others. To scale business the obstacle is that it is a cash based business, which is hard to get banking relationships and also conduct it, as physical cash needs to be deposited to bank.
The company started expanding to other countries, because there are plenty competitors in USA, but mostly because there are many use cases in developing countries.
Athena Bitcoin supports Bitcoin (BTC), there was increase in demand for Litecoin (LTC) from couple years ago. They also support Bitcoin Cash (BCH) and larger blocks, which means lower costs for users to transact. Ethereum (ETH) is not supported, because it is mostly not used for goods and services payments.
Athena Bitcoin buys machines from Genesis Coin, do some customization with wrapping / locks, and use machines in operation.
ATM’s charge fees and many users complain that fees are high. This is mostly for two reasons: costs are high, and delivery happens immediately. They charge on average 8-16%, depending on popularity of ATM location. Machines by themselves cost $8500-10000 per unit. Other reasons for relatively high fees: they pay landlords, cash business is expensive, maintenance of machines is expensive.
Using bitcoin ATM’s is not for investors. If you want to buy $20000 in bitcoin, you should not use an ATM, but if you need $200 to pay someone today then makes sense to use an ATM.