ATMs in Peru multiply

Peru's state and private banks, finance companies and savings-and-loan institutes had 3,113 ATMs installed at the end of last year, representing a 97-percent jump from the 1,580 machines on record in 2003, according to England-based research firm Retail Banking Research Ltd. By comparison, ATM growth in Latin America as a whole is much slower, comparatively, experiencing an increase of only 38 percent from 2003 to 2007.

"The main factor that has been driving the growth of the ATM market in Peru is the favorable performance of our economy, which has seen a sustained growth trend in the number of clients, total deposits and gross loans," said Enrique Arroyo, general manager of ASBANC, the country's association for private-sector banks.

Peru's economy over the last five years has boomed, outperforming most other emerging markets. The reasons, experts say, include market-friendly reforms, strong exports, foreign investment and private consumption. GDP growth in Peru reached an average of 6.5 percent from 2003 until 2007, according to the Economist Intelligence Unit, or EIU.

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"Peru and Latin America have been very good markets for NCR this year," said NCR Corp's vice president for Latin America and the Caribbean, Michael O'Laughlin.

Peruvian banks have made significant investments in expanding their ATM fleets as well as in ATM upgrades and replacements, O'Laughlin said.

The fast-growing economy saw many unbanked individuals and families become bank clients for the first time, producing a consumer-loan boom with growth rates above or around 40 percent or more per year.

Several Peruvian banks have been busy expanding their branch and ATM networks outside the capital city of Lima. A greater focus is being paid to the country's provinces, where the unbanked population is still very large, said Juan Carlos Saona, NCR's country manager in Peru.

And private and state-owned banks are expanding their reach into those historically unbanked markets. Peru's private-sector banks have approximately 32 percent of their ATMs in provinces, and new placements are growing faster than in the capital, according to ASBANC. The Peruvian state bank, Banco de la Nación, in 2009 plans to deploy 150 additional ATMs in more rural areas, namely to clear crowded branches in the city. Today, Banco de la Nación has a fleet of 500 machines. 

"The bet is to incorporate people who have never even had a bank branch in their own village," said Renzo Barbieri, chief executive of ratings agency Equilibrium.

A host of other factors also contributed to the rapid ATM expansion, such as efforts to reduce costlier branch transactions, improving customer service, deposit and cash automation, strong bank profits and the entry of new players into the banking sector, said Diebold Inc's commercial manager in Peru, Sergio Frías, and Juan Jose Sanchez, vice president and Diebold's regional manager for the Andean region.

Despite the strong expansion in recent years, Peru has one of the lowest ATM penetration ratios in Latin America. In 2007, Peru had only 8.9 ATMs per every 100,000 people; the average Latin American country averaged 14.98 ATMs per 100,000 people, according to a 2007 survey conducted by FELABAN, the federation for Latin American banks.

Brazil, the most advanced ATM nation covered by the survey, had 32 ATMs per every 100,000 inhabitants. 

Many countries around the world are facing a drastic reduction in their economic-growth prospects because of the looming recession in the United States. However, despite this highly adverse international environment, the slowdown of the Peruvian economy is set to be mild. The EIU forecasts average GDP growth of 6.1 percent for 2008 through 2012.

 

An installed ATM base that is small but growing leads bankers and ATM executives to estimate that ATM growth will continue at a rate of between 15 percent and 25 percent in coming years. RBR expects more than 5,000 ATMs to be installed in the country by 2013.

Those attractive facts have made Peru a hot destination for the big three manufacturers in the ATM world — NCR, Wincor Nixdorf AG and Diebold. According to RBR, NCR was the leading ATM provider in Peru at the end of last year, with a 61-percent market share. Wincor Nixdorf came in second with 24 percent, and Diebold trailed with 15 percent.

Interbank is Peru's fourth largest bank and runs the country's main ATM network, Global Net, which is often considered to be a local ATM pioneer in terms of strategy. The Unicard network, which is comprised of several local financial entities and international banks, such as Citibank, HSBC and Scotiabank, is the other big ATM network in Peru. And several banks operate their own ATM networks.

 

Interbank aggressively expanded its ATM fleet from 202 machines in 2003 to 1,010 last year. By the end of this year, it expects its fleet to include approximately 1,400 ATMs, said Interbank's e-banking division manager, Manuel Velarde.

 

Most banks in Peru have expanded their branch networks at a faster pace than their ATM networks, but at Interbank the opposite has been true. Like other banks, Interbank uses its ATMs to migrate costlier branch transactions, but it also operates Global Net as a revenue generator, by accepting cards from all other banks and several non-banks, Velarde said.

 

Four years ago, Interbank made an innovative move when it introduced the first coin-dispensing ATMs in Peru. Velarde said it has been a successful experience and the bank plans to finish this year with 400 of those machines. And more than a year ago Interbank introduced an envelope-free deposit-taking ATM, which accepts both cash and checks.

 

Interbank's strong focus on off-premise placement is another strategy that has been successful and made the bank stand out among its competitors. Velarde said as many as 70 percent of Global Net's machines are today installed at so-called convenience locations.

 

Peru's largest bank, Banco de Crédito del Perú, or BCP is the other big ATM deployer in the market. In April 2008, BCP announced plans to invest U.S. $150 million to expand its branch infrastructure, ATM network and distribution channels. In terms of ATMs, the bank said it would increase its fleet from 759 machines to 909 machines by the end of the year.

 

Saona says the strong growth of Peruvian ATM market in recent years has been directly influenced by the expansion of Interbank's Global Net and BCP.