Bitcoin ATM industry is growing fast. There are several new bitcoin machine installations worldwide daily. Existing bitcoin ATM operators increase number of machines in their networks, as well as new operators join the market. Even on the production side, there are new manufacturers developing their products and coming to the market with new bitcoin machine models targeting different segments and niches, e.g. recently were added BitTeller, Bitlox, BitConcept on our site.
Running a bitcoin ATM is an interesting business opportunity in the new era of digital currencies, however, sometimes the lack of information keeps people away as they don’t know where to start, or get any practical estimations of how much you can earn with a bitcoin ATM. In order to increase transparency Coin ATM Radar conducted a survey with a number of bitcoin ATM operators to find out what are current metrics of an average bitcoin ATM business.
Before going any deeper we recommend to read:
- “How much can I expect to make owning a bitcoin ATM?” on Quora
- Bitcoin ATM profitability real life examples
- How to start a bitcoin ATM business – check list
- Exchange and counterparty risks when running a bitcoin ATM
Now back to survey. It was sent to 24 operators in total, 11 responded either in full or skipping some questions due to not wanting sharing info, although it was mentioned that none of info will be associated in any form to the company or person responding. Even limited info we received gives a good estimation of level of costs and earnings one should expect.
The questionaire included the following blocks of questions:
This is one of the most underestimated expenses items in this business. People (at least before) were concentrating on acquiring machine first without paying attention to legal framework, where they planned to operate it.
Regulatory base varies from country to country, e.g. in Europe mostly it is more relaxed than in the U.S. for example, but not everywhere. In Germany bitcoin ATM operators are basically similar to banks from licensing perspective. That is why Germany is a white spot on bitcoin ATM map.
Speaking about US regulation, there are several items potential operators should be looking into:
- It is recommended to start with getting legal advice on the local regulation. Lawyers usually charge per hour ($250-500/hour), and operators usually have a list of questions beforehand. So usually costs are $500-1000 here.
- All bitcoin ATM operators have to register with FinCEN. The process is relatively easy an application can be done via website. FinCEN does not charge money to register, the process takes 30-60 minutes. Operator receives approval confirmation by email within ~ 3 days or so and uploaded to public search database on FinCEN website within a few weeks.
- Before application to FinCEN operator needs to develop a document on AML/KYC compliance policy. Based on information received from operators some wrote on their own (reported costs less than $1K), independent consultant specializing in writing such documents and analysis could be hired (costs are ~$8-10K), while lawyer is not required to write an AML/KYC a lawyer can still be hired (this is usually the most expensive solution and some reported costs were about $20-25K and more to have an AML/KYC program draft, including research and customization). It is very important to mention here, that compliance policy can’t just be a template spread among different operators, it has usually to address geographic location that you are operating in, take into account the level of money laundering and other criminal activity reported in the area. AML/KYC program doesn’t have to be sent to FinCEN, it has to be kept by operator and provided right away at FinCEN request.
- Maintaining compliance policy. Annually compliance policy has to be updated (costs are usually $5-8K and go over independent audit (~$10K)). It varies on location and size of company, e.g. in New York or Las Vegas costs will be much higher for doing it than in other states.
- Operators also need to check legal status for operating a bitcoin ATM at a state level. Every state has its own approach. Some states regulate bitcoin ATM operators as not money transmitters, however, some take a stance that bitcoin ATM operator fall under requirement to have a money transmitter licence. It is a good practice to approach your state regulators with “no action” letter explaining why bitcoin machine operator is not a money transmitter, especially when customer gets bitcoins directly from the hot wallet of an operator (and not directly from exchange, see the following article with more details on this). If no action letter is a success or state regulator confirms that state license doesn’t apply, the operator doesn’t have to go over registration process. If money transmitter license is required — application costs might be $500-1000 or more, in some states a surety bond is required and you have to pay to a bank like 1-10% of a bond size (e.g. from $50000 bond size it will be a $500-5000 premium), ancillary costs associated with third-party activities like professional fingerprinting. Surety bond is required so that if the licensed money transmitter goes under there is money to cover transactions that have not cleared or other future promises. Operators need to prepare application and gather necessary pieces of information, which requires time and effort. So total costs here could be starting from $5000 or more to get a licence per state.
- Ongoing compliance review. There should be an assigned compliance officer who will check and maintain compliance policy at the company: monitor transaction activity, do training etc. Salary of an external specialist here easily can be $80-100K a year. However, if in a big company where there is a network of machines it can be justified, in small start-ups there is usually not enough job to do full time (~10 hours per week). How much time is spent also depends on sophistication of the software used and what particular bitcoin ATM vendor. Not going into very details some bitcoin ATM models are better with this respect to providing information needed for AML/KYC purpose. According to some operators (although not all obey this rule), it is very important to have a dedicated compliance officer and not one of business owners according to “internal control” process. A compliance officer has to be a dedicated person who does not get a compensation for higher volume, otherwise there is a conflict of interests, when compliance officer will approve transactions with higher probability due to other goals to be achieved (more revenue).
Summarizing legal costs, there are different types of operators. Smaller ones usually do basic level registration and compliance programs and might operate under radar to some extent (costs are usually up to $5K upfront and same amount annually to maintain operations). There is an average “compliant professional operator”, who usually runs several machines and have costs of about $15K upfront with about $10K annually to maintain compliance program and $50-100K per year spending on salary for dedicated compliance officer. And there are big companies, whose costs were reported to be in the $60-100K range just to start a business, and running costs are in $20-30K annually for maintaining programs and additionally compliance officer costs of usually more than $100K per year.
It depends on the type of bitcoin ATM purchased, one-way or two-way and also bitcoin ATM vendor. Mostly used on the market are Genesis Coin solution (Satoshi1 one-way $6.8K and Satoshi2 two-way $8.9K), Lamassu (mostly installed are one-way $6K, however with additional Santo Tirso stand machine becomes two-way $11K in total), General Bytes (BATMTwo one-way $2.8K, BATMThree two-way $7K for basic model).
Also it makes sense to check delivery costs, as Genesis Coin price per machine includes delivery costs within US, while General Bytes is a Czech Republic based company and might be a cheaper option to deliver within Europe.
International shipping of bitcoin ATMs are in $500-1000 interval.
Import duty needs to be paid on imported machines, which depends on country. E.g. for importing Lamassu machine to US tax is 0% according to this source, while in 10-15% range for other countries. Some operators (including the ones in US and operating Lamassu machines (delivered from Portugal) ) reported shipping and import tax costs reaching of up to 30% of machine price, so it has to be verified separately.
Installation of machines can be done by employees of an operator, or external company can be hired for doing this job at rate of $2-3K per machine reportedly.
Summarizing, bitcoin ATM costs hardware including price of machine, delivery, taxes, installation set up are usually in the range of $10-15$K.
There are several models to rent a location.
Sometimes (rare) it is possible to find a location for free, when usually a business owner shares positive view over bitcoin and wants to help spread adoption, on the other hand in this scenario business owner gets extra traffic at location and free online publicity.
More usual costs for renting a place is in the range of $300-700 per month.
Most expensive are installations at big shopping malls and outlets, usually in the range of $1-3K. Placing a banner and other advertising around machine might cost extra. Such locations usually have high foot traffic.
Summarizing, costs operators usually pay are $500 monthly on average per retail location, or $2K for high profile location.
Cash collection services
Usually it is done both by own employees and by external services. Costs for external services are at $200-500 per month for a location. Cash collection is usually conducted weekly, but may vary depending on the activity of using any particular machine.
If cash is deposited to a bank — bank may charge extra fees for depositing funds (0.1-0.5%). International transfer to bitcoin exchange costs $40-50 per payment. Purchase of bitcoins for fiat currency will add extra 0.2-0.3% on top of price (exchange fees).
Jumping ahead and knowing the monthly average volume is around $30K, operator of 2 machines for example will pay about $600 cash collection services, $200 depositing to bank, $200 wire transfers fees, another $200 bitcoin exchange, totaling $1200 for both or $600 per month per machine, or $300 per machine if cash collection is done by internal employees.
Liquidity required for operation
There are many different approaches here used. Usually if there are several machines operated by the same company they share a pool of liquidity both at exchange and in a hot wallet (read which settings different bitcoin ATMs support). This reduces amount of funds to be frozen in liquidity required for operation.
Proportion-wise operators reported distribution of liquidity funds between 50/50 (fiat on exchange and BTC in hot wallet) to 80/20 ratio.
Liquidity funds required for smooth operation of machine depend on the volume machine does, on average volume of $30K per month you need to have about $10-15K in both fiat and BTC funds locked (with weekly turnover cycle) when operating one machine. In case volume is $60K per month, you need higher funds volume for smooth operations (2x). Usually operations are not spread evenly with some high size purchases or sales over short periods, and liquidity funds need to cover these cases so that wallet doesn’t run out of bitcoins, and customer does not have a spoiled experience (actually it is seen quite often). When operator has several machines the chance of peaked volume is averaged across many machines and the turnover of funds becomes more or less stable, and in this case required liquidity funds can be approximately calculated as monthly volume / cash turnover cycles per month * 1.3 (safety buffer) (e.g. when running 5 machines with 30K average volume each and weekly cash collection and depositing to a bank, required liquidity for such a pool of machines is about 30*5/4*1.3 ~ $50K). If you distribute funds 70/30, then in hot wallet there needs to be $15K in BTC, and rest $35K to be hold on exchange ready for conversion.
With a network of machines all are funded from the same source requirement per machine might be lower because pool of machines transactions make distribution of peaks more even. Also operator may reduce this liquidity size requirement by increasing cash flow cycle speed, e.g. depositing and making wire transfers to exchange more often, however there is minimum required time for this, as collecting and depositing usually takes 1 day to get funds on the bank account, international transfer easily takes 3 days, there can also be delays on the exchange side to top up balance of your account. Most operators reported that cycle normally is about 1 week.
Customer support services
As it was mentioned in a post for starting a bitcoin ATM business, running a proper customer support is one of the key success elements. Many operators still do this in-house by answering emails and sometimes accepting phone calls. Others hire external support and can have several people to cover several time frames in order to provide as quick response as possible 24/7. Salary of a dedicated support person is in $25-35K range per year.
A specialized software application usually adds $20-40 per agent per month.
Bitcoin manufacturer costs
Almost all bitcoin ATM producers apart from one-time costs of machine purchasing charge extra commission ongoing. Here are several top used machines and their expenses:
- Genesis Coin machines — 1% from transaction volume
- General Bytes — 0.5% from turnover in case GB’s server is used
- BitAccess — 20% from earned fees volume
- Lamassu — $100/month for support per each machine (optional, but recommended)
So depending on type of machine, your set up and volume of operation, costs here might be $100-500 per machine per month.
Layout customization / branding / promotion
Many machines are branded with custom wraps to make them look unique and visually different from other competing machines. It is a very important aspect and it was covered in the post on bitcoin ATM branding. Operators reported custom wrap costs in the range of $400-600 per unit.
Customization of software is supported by some manufacturers via backend, e.g. Genesis Coin gives easy tools to update home screen and other UI elements.
Operators can add their listings to our site and other bitcoin directories for free in order to drive traffic to their machines. Some operators used press releases to go public, which costs $150-300 per release.
On Coin ATM Radar you can also use paid services to make your machines more visible and easily found by customers, e.g. becoming a featured operator, which costs currenty affordable $50 / month for one operator independent of number machine they have. Operators can also promote separate machines on a geographical level using promo campaigns, which cost $1/day/machine.
Before this moment we mostly talked about costs of running bitcoin machines. Let’s look at revenue side of the business. Here are some metrics reported by operators.
Operators reported on average a machine brings roughly $30K a month in transaction volume. Some operators reported it is lower in the $20-25K for machine, some operators reported higher values (some up to $100K per machine). We find volume of $30K quite a realistic to receive at a good location with enough visibility and promotion on the internet.
Many factors can influence the transaction volume, including the population density and bitcoin-awareness level. Of course, in highly-populated areas like NY machines will be used much more often than somewhere in the low population city.
While keeping bitcoin ATM map updated, there is a trend in behavior mentioned recently, when operators switch locations of ATMs. Previously it was mostly because location closed / owner didn’t prolonged lease, however, now it is more and more often when operator changes location, because it is not bringing enough volume and operators are searching for more profitable location. So generally operators know how much an ATM can bring realistically (based on other installations they have) and are trying to find optimal locations. Sometimes moving machine just couple of districts away changes usage picture drastically.
Many operators reported that a newly installed machine reaches its normal turnover approximately in 1-2 months. Which is not consistent with 6 months we wrote in another article in Volume section, which means after couple of month at a location it is more or less clear whether it is a good spot for bitcoin ATM or not, and if not it is a good idea to try to move it to another location.
Normally bitcoin ATMs are used for buying bitcoins with cash today, rather than selling. Operators reported the estimation of between 80/20 – 90/10 for buy/sell volume comparison.
Average transaction size
Buy transaction size is reported at $100-350, with an average among different operators at $175. Average sell bitcoin transaction was reported in the interval $150-$500, with an average among those who reported it at about $250 per transaction. Important to note here, that all operators who reported sell transaction average size mentioned it higher than average buy bitcoin transaction size.
Change in volume based on price fluctuation
Sell bitcoin to machines is not popular (usually ~10% of volume), while transaction size is higher than for buy orders. Some operators reported slightly increased volume in transactions at machine due to price increase happened in May-June 2016 (from no change in volume to 20% increase by others), however most of the volume increase or buy/sell ratio change was coming from increased sell bitcoin volume. The point here is that while share for sell transactions is low, in some periods it can increase, and it is good to cover this part of demand. So if you are planning to operate only one-way machines, we highly recommend to reconsider and to have at least several two-way machines (e.g. 1/3 of all your machines).
Monthly transactions number
This parameter can be calculated based on volume and average ticket size reported above ($30000*0.9/175 + $30000*0.1/250 ~ 166 txns, or 5 txns / day). However, similar question was included into the survey and some operators reported it separately. The number reported is in 100-150 interval, with average about 130 transactions per month per machine, which is close to calculated value.
Mostly this section of survey was not filled by operators. Some reported that there are other extra costs, without providing details what are the costs exactly.
Hopefully this post can help in evaluating bitcoin ATM potential. We plan to post another article of calculating profits for running 1 bitcoin ATM and a network of 10 machines. Check our blog periodically for new updates.
If any questions — feel free to ask in comments or send a message at email (email@example.com).
If you are an operator, who was not covered by this survey and would like to contribute by sharing your figures — you are welcome to do so by sending an email and this article will be updated accordingly.
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