Article

ISOs heat up Sweden's and Finland's ATM markets

Sweden and Finland are among the countries with the highest average volume of cash withdrawals in world.

July 12, 2010 by ATM marketplace

Sweden's first independent sales organization, Kontanten, broke the banks' ATM monopoly in 2006 and it has continued to grow its ATM fleet at fast rates while banks have been reducing their ATMs.

The company saw a business opportunity in the fact that Swedes were still using cash a lot, despite banks' efforts to convince people to use more cards and online banking instead of the more costly ATM channel.

Sweden and Finland are among the countries with the highest average volume of cash withdrawals in world, according to Retail Banking Research, a London-based strategic-marketing firm.

Two years after its debut in Sweden, Kontanten entered the Finnish market through its subsidiary Eurocash — and in the process broke another ATM monopoly held by bank-owned network operator, Automatia. Wincor Nixdorf AG, Paderborn, Germany-based ATM manufacturer, supplies the company in both markets.

Kontanten's business model is based on off-premise placements at high traffic locations to generate revenue from usage fees, which in Sweden and Finland are paid by the ATM card issuer.

Today, the company has ATMs at retail and convenience store chains like 7-Eleven, supermarkets, shopping malls, gas, train and subway stations, airports, and also at municipality-owned companies. Swedish and Finnish banks, on the other hand, have most of their ATMs at the branch.

Gunnar Jacobson, one of Kontanten's founders and its CEO, said many store owners are happy to get an ATM as a certain percentage of what people withdraw is spent at the very same store. Jacobson says that banks "are not following the market" as they see ATMs as a cost and are missing out on the opportunities in the off-premise market.

In Finland, Kontanten is still a very small player with close to 60 machines, but in Sweden it has surpassed Handelsbanken as the third largest ATM player with around 420 machines. It's now trailing Nordea and Swedbank, which is by far the largest deployer with roughly a third of ATMs in Sweden.

Handelsbank has 390 ATMs and the bank is following the decrease in ATM transactions, which means reducing the number of machines by 5 percent each year, said Per Sondell, the bank's ATM product manager.

"We believe there are much more safe and modern ways to pay than cash, card payments is a good example," said Sondell.

Another of Sweden's large banks, SEB, has decreased its ATMs during the last few years due to the closing of some branches. SEB, which is based in Stockholm, does not plan to increase the number of ATMs beyond the current 345, said Maria Markussen-Bohman, head of the bank's ATMs.

She agrees with Sondell in regard to ATM transactions. "We expect the ATM transactions to decrease with approximately 10 percent this year and we expect the decreasing trend to continue going forward."

Huge growth potential for ATMs

Kontanten continues to install ATMs across Sweden and Finland at full speed and the goal is to have 1,000 machines in the Swedish market and 300 in Finland in a couple of years.

ATMs in Sweden have increased from 2,821 in 2005 to 3,360 last year, and in Finland from 1,689 to 1,705 in the same time frame, according to Retail Banking Research, which points out that all ATM growth in Finland during the last two years and most of the growth in Sweden have come from non-bank deployment.

Retail Banking Research expects this trend to continue in coming years as banks will keep reducing ATMs or only make a limted number of new installations.

The Kontanten CEO believes that the ATM potential for Sweden and Finland is around 6,000 and 3,500-4,000, respectively. Those numbers would bring down average monthly withdrawls to what is seen in the rest of Europe — and it would be better for consumers and still be a profitable business for ATM deployers, Jacobson said.

There is also a big opportunity for ATM providers as many of the banks' machines are old. Jacobson estimates the average age of bank-owned ATMs in Sweden to be 12-15 years.

NCR Corp., the world's largest ATM manufacturer based on annual shipments, sees an attractive opportunity in the Swedish market — and also in Finland — for its SelfServ line of intelligent deposit ATMs as banks will have to upgrade their machines in coming years, said Ricky Jürgens, the company's area manager for the Nordic and Baltic markets.

NCR, which is based in Duluth, Ga., serves Sweden and Finland through its partners Point International and Fujitsu.

Finland has the highest ATM transaction volume in Western Europe at 9,500 transactions per month and this could attract another ISO player to enter the market when economic conditions improve, said Jürgens. "Several ISOs have knocked on the door in Finland, but none has entered yet," notes Jacobson.

Banks and Kontanten working together?

At first banks were not pleased to see the entry of Kontanten in Sweden and Finland, but today that has changed to an environment of collaboration.

"Banks must have ATMs, but they want as few as possible," said Jacobson, who adds that Kontanten is now strongly focusing on becoming an outsourcing option for banks in terms of operating ATMs and cash-handling for both banks and retailers. "We want to become a full-service provider."

There are several ATM networks in Sweden and according to Jacobson the five largest banks are planning to create a joint network operator. He believes the banks will make a decision on the issue this year — and then it will take one to two years for them to discuss and decide on all the details involved in such a venture before operations can start.