Article
Surcharging's next stop: Europe
Our publisher's commentary on his trip to ATMs Europe '99, a London conference hosted by SMi. by Tom Harper, publisher
March 11, 2002
I blinked a couple times when I heard a European ATM professional say ATM saturation is not too far off in the U.K.
Nearly 25,000 machines will be in the market by year end, he said, and "it's estimated that 60 percent of ATMs do 88 percent of all transactions." Since 40 percent are in questionable sites, this points to saturation in the U.K.
Of course surcharging may change this somewhat, he said.
I had to agree.
European Union of ATMs
Europe's ATM market came vividly to life for me at ATMs Europe '99, one of the first conferences of its kind held in the U.K. The impact of surcharging on the U.K., and the rest of Europe, permeated almost all of the 24 presentations.
Representatives from banks and ATM-related firms in France, Turkey, the U.S., India, Portugal, Scotland, Ireland, England and Poland exchanged ideas and strategies. We found that the challenge of making money from cash machines knows no geographic boundaries.
According to Atos, a British processing and ATM management firm, Europe is the second-largest market (200,000 machines) behind Asia/Pacific Rim (246,000). Other studies show that the U.S. is just about even with Europe in number of installed machines.
Atos figures show Germany leading the European pack with nearly 42,000 ATMs, followed by Spain (34,000), France (27,000), Italy (26,000) and the U.K. (25,000). From there the totals dive drastically: about 8,000 in Turkey, 2,000 in Greece and a little over a thousand deployed in Ireland, with a dozen other countries scattered between.
Another shocking Atos statistic: Europe averages 447 ATMs per million people. That compares to 590 machines per million in the U.S. and 1,100 per million in Japan.
Surcharge ahead
How can deployers in the U.K., or even America, look at such a high Japanese ATMs per-capita number and even think about saturation in our own countries?
When I heard the speaker comment on U.K. saturation, I immediately wondered if their banks were prepared for the onslaught of private deployers. Particularly the profit-conscious, opportunity-seeking U.S. ISOs.
We've seen the effects of the surcharge in North America. We've witnessed deployment powerhouses like Access Cash and CCS installing more machines than the banks of Norway, Greece, Finland, Sweden and Denmark combined. We've observed Canada's market exploding with hundreds of private deployers soon after the country's major EFT association loosened the reins on surcharging.
Why would it be any different in the U.K. and throughout Europe?
Several U.S. ATM manufacturers and a large ISO attended the conference. Most hoped the U.K. banks would keep their eyes closed in the face of the coming whirlwind.
The view of the U.S. companies is simple: they can get rich in a big way if they move quickly enough into the U.K. Their plan is to ride the surcharge wave all the way to its crest, then surf throughout Europe as other countries adopt the practice.
Saturation? Many U.S. ATM deployers don't know what it means. They believe we're only experiencing a slight slowdown in the number of machines shipped in the U.S. -- not a dammed-up river, just a slower-flowing one as the flood subsides. Study after study indicates there's still enough projected growth to double or triple the number of installed cash dispensers in less than 10 years.
Even in countries like Japan, with more than twice the number of ATMs per million people, deployment continues.
One industry observer describes the "saturation fallacy" this way: Banks took the high-volume sites first. That left less-desirable locations, but banks took those too. Then still more deployers, including private companies, gobbled up the remaining sites, which happened to be in lower-traffic locations.
Nowhere did "saturation" enter into this equation; all that happened was researchers had to average transaction volume at all the sites. Because lower numbers were included, the mean lowered. But that did not necessarily mean the high-volume ATMs started dropping off. Surcharging, POS and other factors played a role in diluting ATM usage.
In my hometown of Louisville, Ky., two competing shopping malls were built side by side. Not because they wanted to cannibalize each other, but because they saw profit in feeding off each other's business. Both parking lots are full, and both recently invested in major remodeling. Many restaurants follow the same strategy, tapping into a neighboring competitor's overflow dinner crowd.
Likewise, if there are two ATMs in close proximity, we may deduce incorrectly that the machines will split a finite number of transactions, when in fact together they may draw more usage. Cash-seeking consumers might frequent the location because if one ATM is busy, they can always walk over to the open machine.
ATM worldview
Saturation is hardly a concern in most world markets.
"Half of the world's ATMs have been installed in the last five years." Peter Hirsch, managing director of Retail Banking Research of London, wowed the audience with past growth and future potential for ATMs around the world.
Hirsch said over 100 countries have ATMs. According to his research, the U.S. leads with 194,000. Japan is next with 144,000, Brazil with 50,000, South Korea 47,000, Germany 46,000 and Spain 38,000. He believes we'll hit a worldwide total of nearly 1 million machines by 2002.
Despite differences between the countries, Hirsch predicted world growth will continue to be smooth and even. "Each country's situation is very specific."
Manufacturers should take note of global trends, he said. Replacement units are being bought in bulk by banks as machines age and new technology -- with superior features -- plummets in price. Manufacturers should not be surprised if shipment growth lags behind installations, mainly due to the warehousing of large numbers of machines.
Hirsch also thinks that global competition will heat up. And as more manufacturers enter the market, global players will find a challenge in winning over banks who tend to be loyal to their local ATM makers.
More for less, more or less
One thing's for sure -- customers, no matter where they live, will want more for less. Not just more function, but more reliability and security, will play important roles in choosing machine purchases.
Implications for banks in the world market include:
• an increased currency circulation (not a decrease, as some cashless society proponents have predicted)
• good deals on bulk machine orders
• competition to provide ATMs to customers
• the threat of non-bank deployers
• the transforming power of the surcharge
• other off-site considerations
Manufacturers like NCR and Triton continue to answer the call of greater functionality for lower cost. The question is how much more will they deliver, and how soon.
The other question is what kind of a footprint the surcharge will leave on the world map.
I plan to attend SMi's ATMs Europe 2000 to find out.
Sources:
• Peter Hirsch, managing director of Retail Banking Research (London), can be reached at +44 (181) 940 1398.
• To learn more about next year's ATMs Europe 2000 conference, e-mail Michael Lee, SMi conference producer, at mlee@smiconferences.co.uk.
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