Shrinking interchange, EMV liability shifts and the looming threat of ADA-related civil suits rank among the top concerns this year for U.S. IADs, according to a new study. But despite these challenges, the majority of IAD's surveyed said they expect to expand their business in 2013.
Results of the third annual IAD survey, a joint effort of the ATM Industry Association and Kahuna ATM Solutions, were released today at ATMIA US 2013. In a presentation at the conference, Bryan Bauer, president of Kahuna ATM Solutions, and Frank Lunn, CEO at Kahuna discussed survey findings.
The survey was conducted in November and December 2012, and attracted 108 respondents — the highest industry participation to date. It covered a range topics that currently are top-of-mind for ATM deployers:
- concerns about the overall health of the ATM industry;
- legislative and compliance issues;
- migration to EMV;
- contactless transactions;
- product and service offerings;
- and opportunities for the future.
Following is an overview of the top reported concerns for U.S. IADs.
Nearly two-thirds (64 percent) of survey respondents chose "Further Reduction in Interchange" as their chief concern about the health of the ATM industry.
The survey showed that 41 percent of ATM deployers favored the creation of an ATMIA committee to negotiate with networks over falling interchange, while 36 percent favored filing and/or supporting a lawsuit against the networks and 12 percent favored asking Congress to pass legislation that forces networks to make changes to rules that restrict differential surcharging.
"I'm not surprised shrinking interchange is the number one concern for ATM deployers," said Bryan Bauer, president of Kahuna ATM Solutions. "Between decreases in the published net interchange rates and the increased popularity in tiered interchange policies, ATM deployers on average have realized a 16 percent decline in interchange from one year ago, and a 33 percent decline in interchange over the past six years."
For some time, ATMIA has focused on these reductions, which are widely viewed as appeasement of card issuers by the major card associations.
"ATMIA is working with the card networks to resolve the balance between supporting the needs of the issuer and the needs of the acquirer," said ATMIA executive director David Tente. "ATMIA supports variable surcharging — it is good for competition and good for the consumer. It provides ATM deployers with incentives that result in more choices for the ATM user and the convenience of an ATM in many locations that might not otherwise be served."
In July 2012, the National ATM Council, which represents the interests of independent providers of ATMs across the U.S., filed a lawsuit against Visa and MasterCard. The suit took issue with interchange reductions by the associations that adversely limit revenue ATM deployers can collect on transactions, according to NAC.
The suit asked the court to declare Visa and MasterCard rules restricting differential surcharging unlawful, and seeks damages for economic losses that IADs have suffered due to differential-surcharging restrictions.
Recently, the court dismissed the suit against the associations saying that the plaintiffs had failed to prove the claimed monetary damages. According to NAC executive director Bruce Renard, the suit currently is being amended and will be re-filed in coming weeks.
EMV and mobile payments
In 2011, amid a nationwide ATM upgrade to meet new Americans with Disability Act requirements, Visa announced its "roadmap" to EMV migration in the United States.
The Visa plan included implementation and liability shift deadlines intended to accelerate the adoption of chip technology and cardless EMV mobile payments. The Visa announcement was followed shortly by similar EMV initiatives from the other major card brands.
The survey found that complying with EMV migration deadlines was a major concern for IADs; half indicated that it was one of their greatest "legislative/compliance/network fears, worries or concerns."
"Our clients are very concerned about the financial strain of EMV migration," said Bauer. "The top-of-mind concern is obviously the capital investments in upgrading hardware, but not too far behind and equally as frustrating is the inability to comply in time for MasterCard's Maestro liability shift."
"For ATMIA membership as a whole, EMV migration is our number one issue," said Tente. "Since the majority of EMV discussions are centered on retail point-of-sale, we are finding it necessary to be very proactive about assuring that the unique needs of the ATM industry are made part of those discussions."
The survey revealed that IADs are anxious to learn more about EMV and what it means for the industry. Sixty-four percent of respondents want more information about the U.S. EMV requirements, 62 percent want to know what the cost will be for EMV migration, and 40 percent want to better understand the implications for the ATM industry of Visa/MasterCard liability shift.
The survey also found that IADs are unsure whether to include near field communications — which drives contactless/mobile payments — as part of their EMV-migration strategy. An overwhelming 64 percent of respondents were unsure if they would adopt it, while 20 percent said they would not add NFC capability.
The possibility of a surge in ADA-related lawsuits rated as the third greatest concern among IADs receiving mention from 42 percent of respondents.
Since the March 15, 2012 ADA implementation deadline, FIs and IADs have seen an uptick in lawsuits over ADA compliance at their ATMs. One visually impaired woman from Texas has already filed 19 ADA-related lawsuits against ATM deployers; a blind man in Pennsylvania has filed at least 20 ADA-related suits.
"ATM deployers need to be very diligent about compliance with the new regulations," said Tente. An amendment to the regulations to allow for correction of an infraction before a lawsuit could proceed to litigation would be a welcome change in the regulations, he said.
Growth in challenging times
"With declining transactions due to saturation in the marketplace, reductions in interchange and the pace with which payment technology is changing, this industry has become more challenging," said Bauer. "Yet, the continued optimism we see from ATM deployers and operators is encouraging."
Seventy percent of survey respondents — representing an increase of 3.2 percent over last year — said they had plans to grow their business this year. Only 8 percent said they would make no change, while 7 percent were unsure about their plan for growth and 6.5 percent said they would seek to align with another business for efficiency.
Many IADs are beginning to offer ancillary products and services for ATM users and industry partners in the hopes of increasing revenues and adding value to existing business relationships.
According to the survey, these are the top 12 products and services offered by IADs (other than atm transactions):
- credit card processing;
- ATM branding packages;
- professional support/managed services;
- kiosks and surrounds;
- financial institution turn-key outsourcing;
- video toppers;
- ACH services;
- deposit automation;
- bank branch products;
- surcharge-free transaction networks;
- security products.
Read more about trends and statistics.
photo: evil erin