How Cardtronics aims to capitalize on the 'snowball effect'
Execution, evolution and expansion. These core objectives have put Cardtronics on an extended earnings roll — one that continues to build momentum with the company's announcement of the results for its most recent quarter (see sidebar).
Over the past five years, the company has consistently and methodically added the products, services and personnel needed to grow bigger, stronger and faster year by year.
Of the previously mentioned E's, though, the second — evolution — is not only the most interesting in a general sense, but also the most instructive in regard to Cardtronics' business strategy for keeping the snowball rolling on its designated path.
At the beginning of the company's Q3 earnings report last week, CEO Steve Rathgaber put it this way:
"We are gradually evolving and growing our way into a whole new market segment by embracing a financial institution customer well beyond our classic approach with our Allpoint and branding products. Our goal is to become the ATM infrastructure partner for financial institutions.
"We can take our scale, expertise and unique capabilities from the retail side to the bank or credit union side, whether remote or in the branch. We can be the solution provider for the ATM infrastructure, which for Cardtronics opens access to a new and larger market that contains the majority of both ATMs and withdrawal transactions."
As the owner-operator or more than 190,000 ATMs, out of an estimated 3 million worldwide, Cardtronics already has carved out a mammoth share of the market.
And that's just on the independent side, which Rathgaber said represents less than half of all ATMs and one-third of all ATM transactions. On the banking side, a whole new world of opportunity is knocking.
Cardtronics already has a figurative foot in the door, i.e., brand awareness and existing relationships with financial institutions.
In its annual report for 2015, the company said that as of Dec. 31, it had struck branding agreements with approximately 500 FIs, and had 1,300 FIs participating in its Allpoint Network of surcharge-free ATMs.
As an example of the leverage this might create for Cardtronics, Rathgaber pointed to Pentagon Federal Credit Union.
One of the largest credit unions in the country, with $21 billion in assets and 1.5 million members, Pentagon already had branding and Allpoint agreements in place with Cardtronics.
The CU recently expanded this relationship by turning to Cardtronics for the management of its fleet of 135 ATMs — both on- and off-premises.
"This represents our biggest in-branch deal to date, and we are very excited about the opportunities to grow within this segment," Rathgaber said.
Offering additional examples, Rathgaber cited Cardtronics' acquisition earlier this year of the retail ATM portfolio of JP Morgan Chase, and the more recent acquisition of approximately 300 off-premises retail ATMs from an unidentified major bank in the U.K.
"The consistent theme across all of these accomplishments is our focus on becoming the ATM infrastructure partner for our financial institution customers," Rathgaber said.
But, while Rathgaber is "bullish" on the potential within the FI-owned ATM segment, he also "recognize[s] that we'll have to incrementally raise our game to fully bank grade if we are to migrate beyond the retail site placements that have been our traditional staple."
To do this, the company recently brought on board two industry veterans with a long history of working with banks: Brian Bailey, formerly of NCR, and Brad Nolan, formerly of JP Morgan Chase.
Bailey joined the company as managing director of its global financial institution segment with responsibility for helping the company capitalize on the opportunity to become a comprehensive ATM solutions provider for FIs globally.
Nolan joined Cardtronics as managing director for global product and marketing with responsibility for developing the company's product and service suite to position it as a global ATM partner for financial institutions.
In other Q3 accomplishments, Cardtronics:
- secured ATM operating contracts representing more than 1,000 locations in North America and Europe, with placements at various retail and transit locations, including more than 450 high-traffic convenience stores;
- renewed relationships with Kroger and Albertsons (Safeway), with the long-term extension of agreements serving nearly 1,800 locations across both chains;
- added 22 participating financial institutions — representing nearly 670,000 cards — to the Allpoint Network;
- expanded a bank-branding agreement with TD Bank covering an additional 189 Walgreens locations in Florida;
- launched the business in Spain, including a relationship with the EURO 6000 ATM network and pilots with two major retailers; and
- announced the planned acquisition of DirectCash Payments Inc., the operator of approximately 25,000 ATMs in Australia, Canada, the U.K., New Zealand and Mexico. The acquisition is subject to a vote by DCPayments shareholders and other conditions and is expected to close early in Q1 2017.
Suzanne Cluckey / Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally. She is now the editor of ATMmarketplace.com and BlockChainTechNews.com