Article

Sweden's ATM ISO spurs competition

Kontanten pushes banks to notice strength of off-premises ATMs.

November 25, 2007 by

Ulric Rindebro is the financial-services editor at BNamericas.com and a regular contributor to ATM Marketplace. To submit a comment, contact the editor.

Sweden's first independent ATM deployer, Kontanten AB, is stirring things up in Sweden with a fast-growing business model for ATM placements.

The company's chief executive, Gunnar Jacobson, says it's taken Kontanten a while to get where it is today. In fact, he says it took two years to break into Sweden's bank-dominated ATM market.

Today, however, the company deploys "a couple of ATMs every day," he said.

Kontanten has placed about 200 terminals at off-premises locations through the country.The goal: to become Sweden's largest ATM deployer, with 1,000 ATMs, by the end of 2009. According to Retail Banking Research, all of Sweden at the end of last year had 2,999 ATMs.

Kontanten's business model is based on the fact that most Swedes still use cash, but have access to relatively few ATMs. Swedes make just more than nine monthly cash withdrawals per ATM, compared to the three monthly withdrawals made per ATM overall in Western Europe.

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Figures from RBR show that at the end of 2006, Sweden had only 333 ATMs per million people. The Western European average per million people is 736.

But Swedish banks have shown little interest in placing more ATMs, as most are more interested in moving their customers to use plastic cards and the Internet.

"For a long time, we tried to get a bank to install an ATM. But we got a cool reception and it was all very complicated," said Kjell Andersson, owner of a HemkÃ¶p retail store and a Kontanten client. "Today there's almost always people at the ATM, and it's being used by big shoppers and those who start the day with a cash-withdrawal and a sandwich."

Sweden's biggest bank, Swedbank, reduced its ATM estate from 767 machines to 765 over the last three years. And SEB, another top financial player in the country, has over the last three years stunted its ATM growth at 380 units with no immediate plans to expand.

Kontanten says it expects to fill the void by offering retailers options. It places the ATMs for free, making its money from surcharging, which in Sweden is paid by the banks.

At some locations with very high traffic, Kontanten has revenue-sharing agreements with the client. At low-traffic sites, clients pay fees for the ATMs.

The company also says it expects to introduce new functions this year, such as real-time deposit, at its ATMs within the next year. And the ability to load mobile-phone cards is another ATM offering Kontanten is considering, Jacobson said. Doing so will help Kontanten compete with Swedish banks, which typically offer either automated deposits or mobile-phone top-ups and loads.

ATM advertising is another idea that's being tossed around, Jacobson said. Point International has also said it is considering some sort of advertising option.

A whiff of competition

Kontanten's rapid growth in the retail and convenience sector has sparked interest. Point International, an NCR Corp. ATM reseller, works closely with some financial institutions in Sweden. This year, Point expects to offer an ATM solution that will compete with Kontanten. Kontanten works with Germany-based Wincor Nixdorf International, which holds the largest share of the ATM market in Sweden.

Point says it plans to charge banks a six-month fee for the ATM placement, rather than making money from the surcharge. It also last year bought independent Nordic ATM deployer EDT, which will give it more muscle to win business in Sweden.

For ATM manufacturers, new sales will be driven by deployments in the retail and convenience sectors, said NCR's head of Nordic markets, Bert van der Sluis.

Diebold Inc. is expected to ride that wave as well as it re-enters the Swedish market. Recent regulatory changes related to safe requirements have made the market more attractive.

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