Article

Argentina's growth sparks attention

After rough years, an economic upswing leads to more deployments.

May 7, 2007 by

*About the author: Ulric Rindebro is a contributor to ATM Marketplace. To submit a comment about this article, pleasee-mailthe editor.

Argentina's economy, once on the brink of ruin, is bouncing back. And as a result, ATM deployments are booming.

ATM companies like the United States' NCR Corp. and Diebold Inc. say they are reaping benefits.

Total ATM sales in Argentina have doubled since 2005, hitting 1,000 at the end of 2006. And experts don't expect the growth to stall anytime soon.

"It seems like this year will be even better," said NCR country manager Gustavo Nusenovich.

According to the Argentine association for foreign banks, Argentina had 7,362 ATMs at the end of last year. That total is poised to grow 40 percent over the next five years, says Luis Prieto, a personal banking manager for the country's biggest bank, Banco de la Nación Argentina. And sources at ATM network operator Red Banelco, which has about 4,100 ATMs in its network, say they expect ATM placements to grow 10 percent per year over the next three years.

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Gabriel Santacreu, a sales manager for NCR's Financial Solutions division in Argentina, said the recent increase in ATM sales has been surprising, given the past state of Argentina's economy.

Argentina suffered one of its worst economic crises from 2001 to 2002. But a combination of favorable internal and external factors saw the battered economy start to recover in 2003. From 2003 to 2006, the country's economy has grown between 8 percent and 9 percent annually, according to the World Bank.

By the end of last year, most banks were back in the black, and from February 2006 to February 2007, lending to the private sector grew 38.5 percent.

Industry insiders say consumer lending and credit-card financing, which has contributed to more ATM usage, has pushed the country's loan recovery.

"Although the 2001 crisis hit the country and its financial system very hard, the last couple of years of its recovery have been outstanding," said Diebold country manager Hugo Andres Bolatti.

Mario Vicens, head of the Argentine association for foreign banks, said the economy's upswing set the tone for the increase in ATM placements and new brick-and-mortar bank branches.

"None of this would have been possible without the favorable scenario that the economy's evolution has brought about," he said.

More growth ahead

The Economist Intelligence Unit says it expects Argentina's economic growth to continue, expanding an additional 7.5 percent this year and 5 percent in 2008. That growth, coupled with the fact that banks are again making profits, will ensure continued demand for ATMs, agreed Bolatti and NCR executives Nusenovich and Santacreu.

The federal government bank, Banco de la Nación Argentina, had 899 ATMs at the end of last year; over the next several years, it plans to deploy around 100 ATMs annually.

Replacements are driving ATM sales, but so are new deployments at branches. And off-premises installations also are picking up, Bolatti said.

According to NCR, about 50 percent of the ATMs sold in Argentina today are replacements. The rest are new installations, about half of which are slated for placement beyond the branch.

Top private-sector bank BBVA Banco Francés has "ambitious objectives" for the payroll business segment, which BBVA Banco Francés e-banking manager Leonardo Cirillo says will require more off-premises ATM deployments at company locations.

At the end of 2006, BBVA Banco Francés had 566 ATMs. Cirillo said the bank plans to expand its network by some 100 new units over the next two years.

As private consumption continues to rise, banks are looking to off-premises locations, such as in malls, supermarkets, gas stations, railway stations, airports and tourist sites, Diebold's Bolatti said.

Advanced functions, independent players

About 70 percent of the country's ATMs are basic cash-dispensers, NCR's Santacreu said. But that is expected to change as ATMs play a more central role for the country's financial institutions.

Argentine bankers now are viewing the ATM as a strategic commercial channel - a CRM tool.

"The ATM is a growing channel," Cirillo said. "Today it is being used for general publicity and for promoting bank products and services, as well as making individual loan and insurance policy offers."

Deployers also say they are busy paving the way for envelope-free deposits and the ability to return change to customers at the ATM. Nusenovich and Santacreu said NCR is now working with Argentina's central bank to improve the quality of the notes currently in circulation so that deposit-automation functions can become a reality.

And executives at NCR and Diebold say they envision a new "social role" for the ATM in Argentina, as banks and the government work to incorporate more people into the financial system. A case in point: Last year 44 ATMs were deployed in small towns where ATMs had never existed. As the country moves to reach unbanked consumers, more enhanced functions at ATMs are likely, experts say.

Fingerprint technology for ATM identification is one such enhancement, although experts waiver on when the new technology will hit Argentina.

Deposit automation and biometrics capabilities, coupled with strong demand for new ATM deployments and replacements, are keeping ATM vendors upbeat.

"Our expectations are high for the years to come," Bolatti said.

The new growth could open doors for independent players, who until now have reined over only a fraction of the country's ATM business.

Today, Argentina's ATM base is about evenly divided among the country's banks. Domestic private-sector banks own and operate about 36.8 percent of the market, while international banks hold 36.3 percent and state-run banks hold 26.5 percent. At the end of last year, independent deployers held less than 1 percent (.4 percent) of the country's total ATMs.

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