Article

ATM vendors look to Brazil

Manufacturers and vendors fight to lay claims in Brazil.

July 30, 2007 by

Ulric Rindebro is a regular contributor to ATM Markeplace who covers financial trends in Latin America. His recent stories include a feature about ATMs in Argentina and serving underbanked consumers in Chile.

ATM manufacturers are seeing opportunity in Brazil, and competition is growing fierce, experts say.

From a banking perspective, Diebold Inc. and NCR Corp. are doing their part to maintain their market strongholds by pushing replacements with some of the country's largest banks. And emerging Brazilian ATM players, like Perto and Itautec, are casting their ATM nets beyond Brazil, while at the same time promoting their local-market knowledge with Brazilian banks.

Diebold is Brazil's biggest player, thanks to the company's 1999 acquisition of local ATM maker Procomp, now known Diebold Procomp.

For NCR, Brazil represents a "huge market" of strategic importance, said NCR's Brazil manager, Elias Rogério Silva. NCR currently is No. 3.

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Brazil is the world's third-biggest ATM market, trailing only the United States and Japan in number of machines. Brazil has somewhere between 155,000 and 165,000 ATMs, according to most industry sources.

Brazil's largest banks have more ATMs in their networks than the ATM parks of neighboring Argentina and Chile combined.

"This market has a huge potential to renew the installed base," said NCR's Brazil manager, Elias Rogério Silva.

As much as 40 percent of that base could be up for renewal during the next four years, and new ATM placements are expected to grow by 5 percent annually for the next two to three years, said José Geraldo Borges Ferreira of Banco Itau, Brazil's second-biggest private sector bank.

Driving migration

The move from OS/2 to Windows, coupled with new legal requirements - such as those set for disabled users - is driving the renewals, Silva said.

"The Brazilian market is extremely advanced compared with other countries," said Juarez Sant Anna, Diebold's sales and marketing vice president in Brazil.

Trends in Brazil

Outsourcing: Several things are transforming the ATM landscape in Brazil. One is outsourcing, which has become an attractive business for ATM vendors. For Diebold Inc., outsourcing has been identified as a strategic priority, said Juarez Sant Anna, Diebold's sales and marketing vice president for Brazil.
CRM: On the commercial side, banks are increasingly using the ATM as a customer relationship management tool. They also are replacing cash dispensers and inquiry terminals with full-function ATMs, at both on- and off-premises locations. Borges Ferreira said Banco Itau uses its 23,000-ATM fleet as a "powerful tool" to generate business by selling products and services at the ATM.
Off-premises deployments: Brazilian banks are deploying more off-site terminals, and those who get market share early will have a competitive edge, since most Brazilian banks have relatively few off-premises machines. Only 3,000 of Banco Itau's 23,000 ATMs are located off-premises. The Banco24Horas network is on the forefront in the move toward greater off-premises deployment. Ninety percent of its 3,300 ATMs are located outside the branch, Silva said.
Biometrics: When it comes to technology and functionality, "the tendency is biometric recognition, bulk cash and bulk check, cash recycling and image capture," Sant Anna said.
Homegrown:"Made in Brazil" also is becoming more common as local ATM makers look beyond their borders for new markets. Perto is a pioneer in that regard. The company's exports last year represented 20 percent of its ATM production; this year the company expects that figure to hit 30 percent. Perto is selling ATMs to banks in Latin America, Europe and Asia and has invested $3.2 million to double its capacity at its works to produce 1,100 units per month this year.

Brazilian consumers are using advanced self-service functions, such as bill-payment, at the ATM. That makes the Brazilian market distinct from other countries in Latin America as well as the United States.

Together with Russia, India and China, Brazil forms part of the famous BRIC group of emerging markets. Just like multinationals in many other industries, Diebold and NCR see the Brazilian market as strategic for their global operations.

"Brazil is very important to Diebold, as it is a global center in many different areas, like software development, financial products and integrated services, besides having a significant share of Diebold global revenue," Sant Anna said.

Brazil holds Diebold's second-largest country operation. The United States is No. 1.

Diebold chief executive Tom Swidarski in April said the company planned to invest $15 million this year to boost its ATM production in the country.

NCR also has a manufacturing plant in Brazil, where the company produces machines for Brazil and the rest of Latin America. Roughly 60 percent of the plant's output stays in Brazil.

Opportunityfor banks

Like the big vendors, Brazil is important to multinational banks, including Spanish banking giant Grupo Santander. Grupo runs the Brazil's fourth-largest private sector bank Banco Santander Banespa, which has some 7,500 ATMs in its network.

Santander says it expects to deploy 2,000 new ATMs in Brazil by the end of 2009. The aggressive ATM-push forms part of Santander's expansion plan, which aims to double its ATM market share, from 5 percent to 10 percent, in Brazil's banking sector.

Brazil's third-largest bank, federally owned Caixa Econômica Federal also has aggressive plans for growth. At the end of 2006, Caixa had 17,200 ATMs. Over the next two years, the bank plans to boost that number to 25,000, namely because of increased bank transactions and social-benefit payments being processed by the bank each month, said José Ronaldo do Amaral, Caixa's self-service area manager.

Network-sharing deals between banks also is necessitating growth.

Network sharing started in 1998 and today approximately 25,000 ATMs are included in network-sharing agreements.

"Network sharing is just beginning and banks see it as point of presence, efficiency and cost reduction," Silva said.

In May, Caixa and Brazil's largest bank, the federally controlled Banco do Brasil, expanded and extended a limited agreement to share ATMs and other self-service terminals. That announcement came one month before private-sector bank Banco Bradesco announced a limited deal for expansion into Brasilia and Sao Paulo, with an expectation to extend out into the rest of the country in the near future.

Steps for banks in the future include going beyond basic cash withdrawal and balance checking to broader transactions, like billpay, at each other's ATMs.

TecBan's Banco24Horas network, the only bank-owned ATM network in Brazil, serves around 43 financial institutions, with more than 100 million clients and around 3,300 ATMs, in 290 cities.

TecBan's network has "huge potential," Silva said, because of the number of banks in its network.