Article

Asian ATM invasion

As U.S. ATM manufacturers look to Asia for growth, their Asian counterparts are looking back.

January 3, 2007 by Tracy Kitten — Editor, AMC

U.S. ATM manufacturers are looking to Asia for new growth opportunities. And in Asia, ATM manufacturers are looking to the United States.

 

Despite the U.S. ATM market's arguable level of saturation, Asian companies say they see opportunity.

 

Two companies in point: Guangzhou, China-based GRG Banking Equipment Co. Ltd.and Seoul, Korea-based Nautilus Hyosung Inc. The latter has had a presence in the United States for some time through a distribution deal with Fremont, Calif.-based Tranax Technologies Inc. The former is a new entrant with plans to penetrate the firmly established U.S. financial institution ATM market.

 

With the exception of its participation in a small credit union show in mid 2006, GRG made its North American debut in November during the Banking Administration Institute's Retail Delivery Conference & Expo in Las Vegas.

 

Richland Hills, Texas-based Electronic Forward Thinking Group, simply known as EFT Group, is GRG's exclusive U.S. distributor. During BAI's conference, EFT president Tom Riley said GRG is poised to have a big impact on the market in 2007.

(Photograph submitted by EFT Group) GRG ATMs in November were displayed for the first time at BAI's Retail Delivery Conference & Expo. EFT Group is GRG's U.S. distributor. Shown above is EFT Group chief executive Kelly Horton with an RD attendee.

"We've had credit-union interest and community-bank interest," he said. "Many of them have told us they're looking for an alternative, and we're here to provide it."

 

EFT maintains and cultivates GRG distributors in the States, and Riley said the network of distributors has been growing steadily, although he would not elaborate.

 

"You have some huge public companies that have been in this space for a long time," Riley said. "But they can't compete on price. And as the retail ATM machines become more commoditized, you'll see the market opening up."

 

With so many players competing in the space, how far will the market have to open in order to make it a viable business option? That's a question Celent LLC senior analyst Madhavi Mantha asks.

 

"My personal opinion is that it's a bit of an uphill battle they're fighting in the U.S. market," Mantha said. "If some of these new players enter the market with a little bit of a broader self-service approach, like building on retail, that might be more of a fit. But in the banking market, I don't think it's a market that they could easily enter. And even in the off-premise ISO market, you've got the more traditional players like Triton, Tranax and Tidel - now NCR- that have a base there."

 

That base will likely help Nautilus Hyosung, which can use its relationship with Tranax to strengthen its market position. But for GRG, the differentiating factor and market advantage will be its parts, Riley said.

 

"GRG is different from other Asian companies that come in here in that we use parts from recognized providers," he said. "When you open the GRG ATM, you know the names. We use De La Rue dispensers, etc., whereas most Asian providers use their own equipment."

 

Riley said GRG's two-year service and maintenance deals also are likely to clinch a few deals.

 

"This is a mature market; but it's the largest market in the world, and the replacement market is huge," he said. "GRG also is competitive from a total cost-of-ownership perspective."

 

But it won't be service that opens a chasm for companies like GRG, Mantha argues. It will be the competitive price point. 

 

"I think it's one thing to be able to offer a lower-cost technology alternative," she said. "In general, when you look at other industries, that is a strategy that some Asian companies have pursued with varying levels of success. But take a look at Wincor. They are a dominant and well-known player in the European market; but they have a long way to go in the U.S. market. For a provider to be successful with a banking product in the U.S., they have to step up and provide full value, beyond just providing a cheaper ATM."

 

And GRG and Nautilus Hyosung are by no means the only Asia-based players that could make a direct push into the U.S. ATM market. Another possible competitor: Seoul, Korea's Chungho Comnet Co. Ltd. Chungho has been selling its ATMs in North America since 2002 through its subsidiary, Hackensack, N.J.-based Nextran.

(Photograph by Tracy Kitten) Nautilus Hyosung displayed its ATMs at BAI's RD for the fourth-consecutive year.

And then there is Fujitsu - a long-time North American player that's watched its ATM market share decline over the last few years. According to ATM & Debit News' 2007 EFT Data Book, Fujitsu's estimated U.S. ATM shipments dropped 83 percent from 2004 to 2005.

 

To adjust, Fujitsu has changed its strategy, Mantha said.

 

"Fujitsu has moved away from their traditional ATM focus," she said. "In North America, they are very focused on POS and retail systems, and my impression is that they are focusing much more strongly on the retail environment. They've built on the relationship they had on the retail side, and they're leveraging that.

 

Greener pastures?

 

From Nautilus Hyosung's perspective, the retail and banking grasses in the United States are ready to sow.

 

For the first time since it sealed its distributor and marketing relationship with Tranax more than eight years ago, Nautilus Hyosung is making a concerted effort to strike out on its own in the States.

 

It showed its wares for the fourth-consecutive year at BAI's RD conference; and in February, Nautilus Hyosung will have its first ATMIA East booth.

 

J.H. Moon, Nautilus Hyosung's overseas general manager, says he's not sure what kind of relationship, if any, his company will maintain with Tranax in the coming years. The two are in negotiations and expected to reach some agreement in early 2007. But from this point in time, it appears that both expect to go after the same U.S. markets, he said.

 

"We are looking for another opportunity to expand our vision," Moon said. "Tranax wants to go for kiosks.Our company wants to go for the financial market. For the last two years, Tranax has focused on the retail market, but this may be a market of interest to us." (Read also, Tranax wants to be first to ride wave of change.)

 

In spring 2006, word of Tranax' plansto open a U.S. manufacturing facility began to circulate. Since that time, Moon said, Nautilus Hyosung has been anxiously waiting to see what Tranax' next move will be.

 

"We expect them to manufacture and develop ATMs for the U.S.," he said. "They're only doing kiosks now, but we will see."

 

Tranax spokesperson Robin Stavisky said Tranax could not comment on its relationship with Nautilus Hyosung, as the two companies are still in negotiations.

 

Regardless of that outcome, Nautilus Hyosung's executives say they are confident the company's ATMs can compete in the U.S. retail and banking segments.

 

A check-cashing and imaging sidecar is slated to hit the streets by the end of the second quarter. The company also plans within the next 24 months to develop a bulk-note acceptor.

 

And, as is customary in Korea, Nautilus Hyosung will sell directly to financial institutions and retailers. Moon expects that to be an advantage, not a hindrance.

 

The company also opened a U.S. office in Dallas, where it expected to employ between 12 and 15 people by the end of the year. By the end of '07, the total number of U.S. employees is expected to hit 25.

 

"Our core development will still be done in Korea. But modifications and distribution will be done in the U.S.," Moon said.

 

 

 

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