Diebold looks ahead, to outsourced services and mobile

Diebold looks ahead, to outsourced services and mobile

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Tags: Bank / Credit Union, Manufacturers, Mobile Banking, North America, Public Companies, Trends / Statistics
4/26/10

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For Diebold Inc., services and outsourcing hold the keys to future business. Earlier this month, the $2.7 billion ATM and financial self-service supplier drove that message home to industry analysts and bankers invited to its Canton, Ohio headquarters.

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"What got you here won't get you there," said Chuck Ducey, Diebold's executive vice president of North American operations, quoting the title of Marshall Goldsmith's book about successful people. Ducey used the example to describe Diebold's changing vision — a vision the company has been refining for the last two years as it's worked to build its business more on services and outsourcing and less on hardware.

Today, the majority of Diebold's revenue remains on the financial self-service/ATM hardware side of the business, but things are shifting, Ducey says. While 76 percent of the company's revenue comes from financial self-service, about 60 percent of that revenue relates to services, not hardware. The company's security business, which accounts for about 24 percent of overall revenue, is expected to grow in coming years, too, with security eventually accounting for 35 percent of the company's revenue. And more business is popping up in developing global markets, such as Asia-Pacific and Eastern Europe.

Growing the business in developing markets will be critical, as will a focus on the integration of financial channels for Diebold's bank and credit union customers — and this is where integrated services is expected to play an even more key role, Ducey says.

"Integration of the banking channel is critical for the future — the branch, the call center, mobile, online. This is not just multichannel, but true integration," he said. "As an example, we can look at integration between the mobile channel and the ATM as a way to combat skimming. If you add the mobile channel, a one-time PIN could come through to your phone that you would need in addition to your card in order to conduct a transaction. I call it â€˜out of band' authentication."

Use of the mobile channel for payments, banking and services will be the future, Diebold says, and it's that expectation for mobile growth that has spurred Diebold to push more mobile services through the Integrated Services solution.

Some mobile facts from Diebold:

263 million mobile devices in the United States
More than 1 billion SMS messages exchanged per month
94 percent of SMS messages read versus 50 percent of e-mails
73 percent of consumers say they want to see account balance information on mobile phones
61 percent of 25 to 34-year-olds would make purchases using mobile phones
53 percent of consumers want to see transaction history on mobile phones
50 percent of 18 to 25-year-olds say a mobile banking offer is important when choosing FI
49 percent of customers would use a mobile banking/payments application
11 million U.S. households will use mobile banking by 2010; 32 million by 2016
By end of 2010, 30 percent of all online banking households will engage in mobile banking
Mobile payment transactions will exceed $300 billion globally by 2013

"Integrated Services means bringing all channels together, and that's what we're doing today," said Greg Steffy, vice president of Integrated Services.

While Diebold is targeting small- to mid-sized financial institutions, such as Colorado-based Alpine Bank ($2.7 million in assets), it also plans to cater its services to larger FIs that might only want a part or piece of an overall servicing package.

Alpine, when it signed on nearly a year ago, was the first FI customer to contract with Diebold for mobile banking. Since that time, Alpine has been beta testing the ClairMail solution Diebold offers, called MobiTransact. Alpine expects to launch its mobile banking offer in May.

Tom Kenning, regional president of retail operations at Alpine, says the mobile offer is one the bank is paying close attention to, since competition in the Grand Junction, Colo., region is fierce.

"We have 24 percent of the market in the markets where we have a presence, but Wells (Fargo) is a close second at 19.44 percent. And we face a lot of competition with their technology," Kenning said. "That's why the deal with Diebold and ClairMail was so attractive. We have to compete to stay ahead, and we believe Diebold's MobiTransact will help us do that."

Rather than going directly to ClairMail, Alpine saw value in working with Diebold for its expertise.

Why Diebold says it stands out

A focus on services and solutions is not unique to Diebold. Talk to any major hardware vendor in the ATM space and you'll likely get the same story. Germany-based Wincor Nixdorf AG and Duluth, Ga.-based NCR Corp. both have shifted their attention in recent years to place more emphasis on services. But Diebold says its business is different, because it has experience the competition can't touch.

"In Brazil, where we have a strong presence, they outsource a lot because of the complexity of the ATMs," Steffy said. "ATM outsourcing took off in that market in the 1990s, and we learned a lot about what we are offering here from our experience in Brazil. We have real-world experience that our competitors don't."