Article
ATM industry fights the Fear Factor
In the latest installment of On the High Road, ATM Industry Association International Director Mike Lee sees heartening signs that the ATM industry is moving ahead in a time of economic uncertainty. On the frontline of the fight: the entry-level ATM.
October 28, 2001
Mike Lee is international director of the ATM Industry Association, and is based in London.
At Phoenix International Airport earlier this month, I went through yet another security checkpoint where I was frisked, in this nervous aftermath of Sept. 11. I had just withdrawn dollars (not too many!) from one of the few ATMs at the airport. I wanted to buy reading material and one or two souvenirs to take back to England after officiating at the ATM Industry Association's first trade show in the West, "The New Frontier for ATMs."
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I then bought Time magazine, with a cover story called "The Fear Factor." This sentence struck me on the front cover: "Bombarded by threats real and imagined, a world on edge asks, What's next?"
Real threats, yes -- anthrax, terror attacks, recession. Imagined threats? Which is the greater kind of threat, I asked myself, real or imagined? Real threats, it seems, generate a host of imaginary threats that are just as dangerous.
While at the till, my eye caught a coffee mug commemorating Sept. 11. It showed a collage of the New York skyline, the Twin Towers still intact, the Statue of Liberty and the U.S. flag in the background, with the words "We Will Remember, September 11, 2001" written along its white and red stripes. I had just enough U.S. currency to buy the mug as well.
I am looking at it right now. But I will never drink out of it. The message on it is too precious, too strong, for such a utilitarian, mundane purpose. That mug is for remembering, a simple tool that commemorates for me back in England the saddest event in recent history.
And remembering is a mental and emotional act of great significance. Evil of such magnitude should never be forgotten; nor should the goal of curing the world of the insidious sickness of terror ever slip from our minds. Time magazine is right; the world is on edge because of the Fear Factor.
The battle, as always, is as much in the mind as it is on the ground and in the air of that tragic country of Afghanistan. Fear can lead to panic; decisions made while in a state of fear tend to be counter-productive, compounding problems rather than solving them. Whereas confidence is the lifeblood, not just of the economy, especially the entrepreneurial sector, but of happiness itself.
ATM industry moving ahead
I have proof that the ATM industry is not reacting with fear to the current climate which Time describes as a "world on edge." On the contrary, there are signs of an unstoppable confidence in the industry. I have been deeply impressed by its resolute and robust response to the real and imagined threats that have entered the world since Sept. 11.
In the week following Sept. 11,ATMIAwent ahead with its scheduled conference and exhibition in London, heeding the call from world leaders for people to return to normalcy as soon as humanly possible.
Perfectly understandably, there were several withdrawals from the event in the light of the tragedy, which no one can fail to respect. But many American delegates and exhibiters did travel that week, in the shadow of that act of mass destruction, including ATMIA President Lyle Elias.
To me, that was brave. The horror and grief were still fresh in all our minds, as was the danger and the risk of travel.
And I will never forget the minute's silence as just under 200 people, from 20 countries, stood together in an act of international solidarity in honor of the victims of the massacre. It remains a mental picture I cherish of an industry I have always liked, respected and admired.
I hope many readers feel a similar surge of pride in the industry of which we are all a part. With such pride and confidence, we can win the war of the mind, we can beat the Fear Factor.
Speaker after speaker at the London conference exuded a quiet confidence in the industry that appeared to be entering a vigorous period of growth in the UK and, it was hoped, across the European continent in the next few years.
Then there was the large turnout in Las Vegas this month for ATMIA's first-ever Conference West in the U.S. Two measures of the big turnout were the 45 same-day registrations and the fact that immediately following the show, one of the world's largest financial services publishing groups approached ATMIA to collaborate on future events.
One of the world threats is the negative impact of the terroristic attacks on a global economic slowdown, pushing the U.S. closer to recession. The leisure, airline and retail sectors have all been hit by downturns.
How is the ATM industry performing in this bearish economic climate? Has its expansion been curtailed at all?
In a recession or slowdown, it is often the manufacturing sector that gets hit the hardest as export demands for products drops. In Britain, the manufacturing sector has been struggling for a long time as a strong pound puts prices of some British products out of reach for its trading partners.
Regarding ATM manufacturing, something happened this week that gave me yet another sign that the ATM industry is not only weathering the storm but is determined to continue expanding.
New sponsor
A relatively young ATM manfucturer,Cross International Technologies, based in Fremont, Calif., became a global sponsor of ATMIA. Global sponsorship is the highest level of financial support available for members of the association.
Without sponsors like Cross, the ATMIA will lack the funding required to expand globally. So the agreement between Cross International and ATMIA, signed this week, symbolizes not only the health of one of its major new manufacturers, but also the faith to move forward together onto the international stage.
Cross International Technologies is a fast growing provider of ATM technology, having installed more than 25,000 ATMs since 1998. Cross offers a full line of ATM machines, from the innovative, compact Nano Cash to the PC-based Mini-Bank 3000.
Both Cross and ATMIA are ambitious about having a global presence. It was a proud moment for me and for the association when Director of Operations Lana Harmelink and I shook hands in Las Vegas with Dr. Hansup Kwon, president of Cross, and Heemook Kwon, Cross's VP of Business Development, to seal the agreement.
In my experience, there appears to be no Fear Factor in sight restraining the ATM industry. Rather, there is determination, solidarity and faith in the future -- from manufacturers, deployers, network processors and service providers.
Entry-level ATMs
And it is the entry-level ATM that is fighting at the frontline of ATM markets around the world against the Fear Factor and the economic slowdown.
A new survey entitled "Entry Level ATM Trends and Futures" by Peter Kulik, managing director ofKLCI Research Group, shows that cash is still the killer application for entry-level ATMs and that a powerful consumer demand for instant and conveniently dispensed cash continues to drive the expansion of these ATMs into new markets.
Such is the growth of convenience ATMs around the world that banks and retailers in some countries are beginning to be aware of the revenue opportunity they afford, concludes the report.
"With few exceptions," Kulik writes, "it is more profitable today for deployers worldwide to deploy new ATMs than to deploy new services on existing ATMs."
Services additional to cash, the report argues, including ATM advertising, only succeed when they are highly niche, such as cell-phone top ups on college campuses. No less than 85 percent of transactions worldwide on convenience ATMs are cash withdrawals - up to a staggering 98 percent in Canada. Rather than offering advanced functionality, ATM deployers are focusing on the "glitch-free" delivery of cash services.
Kulik's report, which represents the views of 37 deployers, nearly one-third of the worldwide base of ATMs in convenience locations, comes to the remarkable conclusion that proper site selection can make convenience ATMs profitable even without surcharging, based on interchange rates alone.
Site selection and placement remain an art; the report states that four feet can make the difference between a successful site and an unprofitable one. One deployer was quoted as saying "10 metres could drive 1,000 extra transactions."
Some key factors in site selection for convenience ATMs were seen as: foot traffic in the area, hours of operation, sales turnover, type of merchandise sold, average cash value per sale, density of ATMs to population, density of local population, quality of site and operations (cleanliness, staff attitude, etc.) and presence of POS.
Interestingly, isolated sites with high traffic - hotels, sports centers, even ski resorts -- were seen as good sites, in addition to the traditional locations at petrol stations and shopping malls.
As ATM density per population numbers increases, transaction volumes per machine tend to decrease, squeezing out some of the important profit margin. Some international ATM deployers likeHanco ATM Systems Ltd, who have pioneered the merchant cash replenishment model, are in a strong position to absorb lower transaction volumes, as their break-even point per machine is lower than average due to the lower operational costs built into the merchant cash replenishment model. Kulik notes in his report that there is an increasing acceptance of this model in the UK and Australia.
Reaching out to retailers
ATMIA have started to see the merchants themselves as a nelgected link in the value chain of the ATM business. The association will attempt to redress the balance by putting on a pre-conference workshop on "Merchant ATMs: Best Practice for the Most Revenue" at its next conference in Florida on Feb. 19, 2002.
The idea of the workshop is to reach out to merchants and retailers who have ATMs in their businesses. How fully do they understand the "big picture" of the ATM business? Are they getting the most out of their ATMs? Do they know the regulatory background? What business model are they using? How can they cut down costs and raise new revenue? ATMIA hopes to bring merchants and retailers into the ATM fraternity to play a part in strengthening the convenience ATM sector.
Entry-level ATMs are at the frontline of business development around the world for the ATM industry because they forge links to the huge retail and leisure sectors, with all their customers, who then use ATMs while shopping and during recreation hours.
More optimism
Kulik's report on continued growth in the entry-level ATM market is not the only evidence of a robust culture that will resist the Fear Factor in the days ahead. Some bullish estimates emerge in a "Market Survey Assessment of the UK Market Potential for Remote and Convenience ATMs" by Payment Systems Europe Ltd, including one prediction that there will be a growth of 15,000 convenience ATMs in the UK over the next 2-3 years.
This fits in with the recent historical development of ATMs in Britain. According toAPACS, there were 22,121 ATMs in the country by the end of 1996, just over 4,000 of which were remote or non-branch ATMs (less than one fifth of the total installations). By the end of 2000, there were 34,339 ATMs installed in the UK, of which just under 10,000 were non-branch.
The ratio of bank branch ATMs to non-branch ATMs had thus changed quite significantly within five years to make the latter group of ATMs more than 40 percent of the total installed base.
This trend is not confined to the U.S. and the UK. In its new report, "Off-Site ATMs 2001,"Retail Banking Research Ltdstates that off-site ATMs are now driving overall ATM growth worldwide. The report covers 35 countries and so is very representative of what is happening in the ATM world.
Will the entry-level ATM penetrate the markets of Europe as it has done so successfully in the U.S. and UK? This is an adventure, first pioneered byEuronet Worldwide, which is only just beginning.
Today Euronet Worldwide owns or operates more than 2,500 ATMs across Hungary, Poland, the Czech Republic, Germany, France, the UK, Croatia, Greece, Indonesia and the U.S. It has offices in Budapest, London, Paris, Berlin, Prague, Warsaw, Zagreb, Bucharest and Athens with a transaction processing center in Budapest. The company owns and operates the largest independent ATM network in Europe.
Yet there is only limited surcharging in Europe!
Although entry-level ATMs can be profitable without surcharging, the relaxation of banking regulations in Europe and the introduction of surcharging on the continent would surely herald an off-premise revolution for Europe's ATM industry.
Some industry insiders predict that it is just a question of time before this happens. I would tend to agree. Will Europe stay so fundamentally different from the U.S. and the UK in this respect, resisting indefinitely consumer demands for convenient cash in retail and leisure environments and other remote locations?
Yes, other mechanisms such as credit cards and cashbacks will meet some of that demand. But there is nothing quite as tangible as cash "in the hand" to spend at these locations, and nothing quite as convenient as 24 hour access to one's own banked money.
It is unlikely that countries across Europe are going to move away in significant numbers from that dependence on convenient cash "in the hand" through unlimited self-service access. So my guess is that consumer demand in Europe for entry-level ATMs will prove irresistible, as it has done in Britain and the U.S. As was the case in these two countries, it will be the entry-level ATM which will be at the forefront of the consumer-led revolution in delivering instant cash to the masses wherever they need it.
I have seen the ATM industry fighting against the Fear Factor over the last few weeks in striking ways. There is an inventive will to win, to take the ATM to a great diversity of locations in an incredible array of cultures around the world. Surely this proven trend cannot be stopped now or in the near future -- and, perhaps, for an indefinite period, who knows?
For the moment, ATM manufacturers like Cross International, Papelaco, Triton and world leader NCR have all expressed faith in the future by becoming global sponsors of their industry association. We are all growing stronger as demand for the ultimate self-service banking machine promises to escalate.
That faith reminds me, in this current climate of a "world on edge," of the last words Franklin D Roosevelt ever wrote, on the day before he died: "Let us move forward with strong and active faith."
Included In This Story
ATM Industry Association (ATMIA)
The ATM Industry Association, founded in 1997, is a global non-profit trade association with over 10,500 members in 65 countries. The membership base covers the full range of this worldwide industry comprising over 2.2 million installed ATMs.
Triton Systems
Triton FI based products • NO Windows 10™ Upgrade • Secured locked down system that is virus/malware resistant • Flexible configurations - Drive-up and Walk-up • Triton's high security standards • NFC, anti-skim card reader, IP camera and level 1 vaults are all options • Triton Connect monitoring • Lower cost
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