News
Central Europe's ATM industry rises from ghettos of the past
In the latest installment of 'On the High Road,' ATM Industry Association International Director Mike Lee finds that the free market is an essential part of freedom in Poland and the Czech Republic.
January 7, 2002
Editor's note: Mike Lee is international director of the ATM Industry Association, and is based in London.
Making a cash withdrawal from an ATM in Warsaw, Poland's capital, within what was once the dreaded borders of the wartime Warsaw Ghetto, held a special significance for me earlier this month.
I was on my way to visit Warsaw's Ghetto Heroes monument and its solemn marble Umschlagplatz, with its engravings of the first names of victims of Nazi genocide from the Ghetto. You can read these words on the Umschlagplatz: "Along this path of suffering and death, over 300,000 Jews were driven in 1942-3 from the Warsaw Ghetto to the gas chambers of the Nazi extermination camps."
Drawing Polish Zlotys from the ATM, I was standing on free land, land liberated first from Nazi occupation and then, more recently, from Communist control. Warsaw, a city almost entirely obliterated in 1945, has risen from the rubble and ruins of war and, since 1989, from the shadow of Soviet domination.
And the ATM industry has been part of the great spirit of rebuilding that has continued to shape Poland into a free, modern democracy since that revolution in which Poland finally broke free from decades of foreign control.
New economy
Behind the Iron Curtain, there were no ATMs. Since Poland became a democracy, it has installed 5,000 ATMs, and the number is rising to keep up with demand in a cash society of 40 million strong.
It is a young democracy, and its ATM industry is just as young. But it is growing, part of the rebuilding of a new society for the 21st century.
The Warsaw Ghetto was an enclosed slum area, a death trap in which thousands died from starvation and disease, where Jews were rounded up and sent to concentration camps. As I pocketed my cash, it seemed to me as if the war-time Ghetto, which no longer exists in concrete form, belonged to medieval, not modern, Europe, created by an inconceivably primitive and brutal way of behaving and thinking.
And how hard it must have been for the Polish people after the devastation of World II, to be forced to wait another four decades to taste real freedom for their country.
And so my cash withdrawal, within the old Ghetto borders, had proved to me once again what a liberating piece of technology the ATM has become. Ghettos are designed to keep people inside -- oppressed, imprisoned, powerless, impoverished. The ATM makes cross-border cash payments possible around the world, without mediation and at any time, an access that has become part of freedom of movement for the modern citizen.
Mobile communication, too, has a free feel to it. I received a call from ATM Solutions based in South Africa, Triton's exclusive Africa distributor, while at the Ghetto monument -- again reinforcing the idea of freedom of movement. It is an interconnected world, one where Ghetto walls have no place, where freedom means being master of our own destinies.
It is impossible not to admire Warsaw today as a monument to a spirit of rebuilding, of immense perseverance, of the powerful force of reinvention. It is fascinating to watch the Polish ATM industry mirror the progress of the country into a 21st century democracy.
The very first ATM was installed in 1991, and the first non-bank ATM went up in 1995. Since then, the growth of the off-premise market has strengthened banking freedom, becoming part of the story of Poland's painful but successful growth.
ATMs have not worked well at petrol stations because most Polish motorists pay for fuel with debit cards, but it is expected that ATMs could be profitably installed in shopping malls and post offices, where they will attract steady traffic and attain high transaction volumes. With its huge population and strong affinity for cash, Poland looks like a big market of the future for ATMs.
Bumps in the road
However, there are obstacles to overcome in this rebuilding phase for the country. Of the 11 million cards on the market in the country, only about 60 percent are active. A large proportion of the population are still unbanked, and their salaries and pensions are paid in cash. Neither checks nor cash-backs are popular in Poland.
Another inhibiting factor is the lack of surcharging. This means it is essential for an independent deployer to be inventive in generating other sources of revenue in order to survive. I spoke to Janusz Diemko, the smart, and young, managing director of Euronet Worldwide-Poland, who explained how Euronet is using ATM advertising and voucher-dispensing in Poland, where the company has installed 650 ATMs.
"We have advertising on pre-printed ATM receipts and on our welcome screens. We also dispense McDonalds' vouchers," he told me. Janusz characterized the ATM as very much a cash dispenser in Poland. A massive public education program would be required to create a market for multifunctional ATMs, he said.
A further complication in looking into the future growth of the market, is that banks are not allowed to sell other non-bank services. For example, a bank deployer of an ATM would not be permitted to employ ATM advertising, or dispense movie tickets.
Although ATM crime is very low, almost negligible, in Poland, it is expected to rise as the country's ATM installation base broadens, as happened in Western European countries like France, Britain and Belgium.
Yet the Association of Polish Bankers does not, at present, permit low-cost smart technologies to be utilized, such as dye-staining, featured at ATMIA's recent ATM Security conference Such technologies could play a major role in reducing cash management costs and in preventing a significant increase in ATM crime, as the ATM market in Poland expands and begins to attract the attention of organized crime elements. There should be no invisible "iron curtains" restricting growth of an industry important to the modernization of society.
My cash withdrawal within the borders of the old Ghetto had felt like an act of freedom. I hope sometime in the future to collect my Polish Zlotys, or Euros, at a Warsaw ATM and find an even freer ATM operating environment there, enhancing banking freedom and access to cash for millions more Polish people.
Another new economy
The Czech Republic, like Poland, is a typical cash society of Central Europe, one that is young in freedom and in its ATM industry, with great promise for growth -- especially if the banking sector opens up the regulatory environment for ATM deployers.
Like Poland, the Czech Republic became free from Soviet domination in the Velvet Revolution of 1989.
Unlike the lightning swiftness of the Velvet Revolution, the ATM Revolution in the Czech Republic has had a slow but steady start. I am compelled to coin an unlovely but descriptive phrase to describe the ATM markets in many Central European countries -- underATMized.
In Czech Republic there are 1,500 ATMs for a 10 million population, a low density of one ATM per 6,666 head of population. If that is not underATMized, then what is?
This came home strongly to me one beautiful evening on the famous Charles Bridge over Prague's lovely Vltava River. Prague is one of the greatest cultural centers of Europe and one of its most popular tourist destinations. I was listening to a live performance on the bridge by Alexander Zoltan, one of the world's six glass harpists and a man who has been called the world's most successful street musician, when a tourist from Denver asked where the nearest ATM could be found.
He was enchanted by the magic of the sounds of 22 glasses tuned to different notes by adjusting the water level in them. Like me, he wanted to buy a CD of this unique, fine form of music to take home with him, but didn't have sufficient cash with him.
The gentleman from Denver had run out of cash, and he only had one opportunity to buy a memento of that memorable and magical glass harp concert. It was a long walk to find an ATM and return before the concert ended.
If there were more ATMs installed around the city, what a boost this would be to late night shopping, restaurants and clubs for the vibrant tourist industry in Prague. The cash would flow!
Never in my life have I seen such beautiful painted glassware, for which the Czech people are deservedly famous, as is on view in this artistic, elegant city. On the Charles bridge, Czech artists display their paintings and photographs. These artists would benefit from having some ATMs close to the action!
I get the idea there is an insufficient understanding of the economics of ATM deployment in some regions of Europe, especially those that once fell under the shadow of Soviet control, and this is one of the reasons slowing down the ATM Revolution.
Banks want to install more ATMs but they are inhibited by the high costs of installation, since there is no surcharging in the Czech Republic. While ATM cards are growing dramatically, ATM installations are not keeping pace with the expansion of the card market. There are just over two million cards, mostly debit cards. The credit card is only 18 months old in the Czech Republic.
"We are not an electronic country yet," explained Dr Michal F�bera, the sophisticated managing director of Group 4 Securitas, the sole cash replenishment provider in the country. He estimates that the Czech card market could grow to 3.5 million, but there is still a very strong cash culture.
"The British supermarket chain, Tesco, has created a shopping revolution in the country over the last two years, which has changed the cash flow of the whole country," F�bera said, adding that there was a huge potential market for ATMs at supermarkets, in city centers, at metros.
Euronet Worldwide is once again the sole independent deployer in the country. Country Manager Ian Bird believes the first step toward accelerating the ATM Revolution is to get the banking association to set interchange fees at international, Western levels. Only once that has been achieved can the movement toward surcharging begin. "We need 3,000 transactions per month at an average of 50 Czech Koruna at all our ATMs just to break even," he said.
It is a catch-22 situation -- it requires capital to expand the ATM installation base, but if interchange fees are significantly below international levels, and if no surcharging is permitted, those costs become prohibitive.
Central Europe has overcome, at great cost, the traumas of the Ghetto, of widespread destruction, of Soviet control, to emerge as a region of young, inventive democracies --the growth of their ATM industries forms part of their modernization toward 21st century freedom. Now you know why the simple act of withdrawing cash at ATMs in Warsaw and Prague earlier this month took on such symbolic importance for me.
The Ghetto of the Past has not quenched the spirit of rebuilding and reinvention in Warsaw. The Iron Curtain, behind which ATMs were not permitted, is gone. Prague, too, can celebrate its heritage and embrace its future in freedom.
What about a Velvet ATM Revolution?
