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Future shock

Genpass Technologies CEO Bipin Shah wasn't afraid to rattle some cages in his keynote address at last week's ATMIA conference.

January 29, 2002

Is the ATM industry booming, or is the boom about to fall?

Bipin Shah, president and CEO of Genpass Technologies LLC, adhered more to the second view in his keynote address at "The New World of ATMs," last week's ATM Industry Association (ATMIA) conference in Clearwater, Fla.

Shah, the former chief operating officer and vice chairman of CoreStates Financial Corp., was one of the creators of the MAC network and an early advocate of the ACH system and the Plus and Cirrus networks. He gave the ATMIA crowd an early history lesson, noting that the development of those networks, along with the adoption of interchange in the late '70s, were keys to the early growth of ATMs.

In the late '80s, Shah helped introduce debit to the EFT world. He said the inspiration came from a desire to simplify consumers' lives. "Why should the consumer take $100 in cash to buy $20 of gas and $50 of groceries" if he could purchase those items with a debit card instead?

"A consumer with $1,000 in the bank is going to buy more than one with $50 in his pocket," he added.

While debit took some time to catch on with consumers, Shah said it presents one of the biggest threats to today's ATM industry. ATM transaction volumes have remained mostly flat since 1996, he said, because "the consumer moved somewhere else."

Debit volumes, in contrast, have posted hefty increases the past few years. According to a NYCE Network press release, its debit volume grew 45 percent in 1999, reaching nearly 220 million transactions by the end of the year. Star, the nation's largest EFT network, reported that its debit transactions totaled approximately 2 billion in 2000, up 24.4 percent from 1999. Star's ATM volume, grew only about 4 percent in 2000, to 896 million transactions.

And Shah predicted debit's popularity will continue to grow, both with consumers and with card issuers. "The debit card is the key," he said. "The more cards you have, the more transactions you're going to see."

Shah believes debit usage will expand into new channels like the Internet and person-to-person payments. Noting that several companies are developing alternative payment schemes for the Internet, including some based on smart cards, he said, "Youdon't need another card; we have enough cards in our pockets. What you need is a change in technology."

ATM ownership will become less important in the coming years, he said, and card issuers will corner the market on transactions. "Who owns the plastic? It doesn't matter who owns the ATM; whoever owns the plastic is going to get the volume."

Shah also predicted that the still-fragmented ATM industry will see a wave of consolidation in the next five to 10 years, particularly among deployers. "I think there's probably going to be only three or four of you left," he told the ATMIA audience, many of whom were ISOs.

Yet ISOs will rule the world of off-site ATM deployment, he said. "Banks don't know how to manageanything that's not inside of marble walls. All the rest will go to the ISOs."

Shah also shocked the attendees with his prediction that the surcharge will depress over time, leading to the elimination of many low-volume ATM sites.

"You don't need the surcharge if you have the volume," he said, citing the example of Wawa Food Markets, a Pennsylvania-based convenience store chain that doesn't collect a surcharge at its ATMs and does thousands of transactions a month. "If you create volume, you can make money. The money will be in interchange over the long haul."

Shah mentioned that he had dined with Sam Jonas, president of the Englewood, Colo.-based ISO Cash Resources, before his presentation. The opinionated Jonas didn't agree with all of his ideas, he said.

"Debit will always be a threat to ATMs," Jonas said after Shah's presentation, "but the surcharge will never go away."

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ATM Industry Association (ATMIA)

The ATM Industry Association, founded in 1997, is a global non-profit trade association with over 10,500 members in 65 countries. The membership base covers the full range of this worldwide industry comprising over 2.2 million installed ATMs.

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