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Is the world ready for off-premise ATMs?

The world is starving for off-premise ATM growth, but will U.S.-based companies be equipped to satisfy the hunger pangs? Yes, says Jorge Fernandez, founder and president of Miami-based Capture Systems LLC, if they play their cards right.

July 4, 2005

If you are a "bottom line" type of person, the answer to the above question is absolutely yes. If you want to know more, then read on.

Jorge Fernandez

The world can either thank or curse the United States for its contribution to creating the concept of off-premise, convenient or white-label ATMs.

Only in a free market such as the U.S. could a concept once considered a sacred cow by the banking industry be made into a sound business in which virtually anyone could own, operate and make money with these machines.

The birth of the off-premise model

I first became familiar with the concept in 1998 when I started working for one of the leading ATM vendors in the market in an international business development capacity. Not only did I learn about the business, but I also experienced, first hand, the difficulties of trying to introduce the concept to foreign markets.

It was extremely difficult back then, and while it's no "walk in the park" today, the situation is getting progressively easier, which is why I think there is a huge opportunity in different parts of the world for the business to blossom, not just because of its income-generating opportunities, but also because I strongly believe that it will greatly contribute positively to local societies in reducing crime and giving people more access to their money.

The business grew quickly in the U.S., and it also experienced fast growth in Canada and the U.K. However, the business has not grown as fast in other parts of the world, where it has been met with different degrees of resistance. However, in the long term, the benefits of the concept will always, in my opinion, win over whatever local opposition there may be.

In the markets where the business concept was adopted quickly, the business became almost an overnight sensation, and many companies have made fortunes as a result.

In other markets, such as Mexico, it took the business seven years to even have a legal definition and for surcharging to be allowed. The key is that, with persistence and "doing things right," the concept will prevail.

Now that the U.S. and Canadian markets are getting saturated, it's time to look at how successful companies can take advantage of the huge opportunities that the world markets represent.

After going at it virtually alone in Latin America for so many years, I believe a lack of understanding about how to get the off-premise model up and running in other markets has prevented it from taking off outside North America. That lack of understanding is coupled with the fact that companies that spearheaded deployments in the past failed - because they went in without enough financial resources backing them.

It takes money to make money

In Latin America, for example, there have been a great number of markets where the business shows great potential. The problem has been that the companies that attempted to introduce the concept were expecting to hit a home run their first time at the plate. They wanted quick acceptance followed by a river of cash coming their way.

In short, they wanted similar results as in the U.S. When that did not occur, they lost interest and focus, and many of them did not have the resources to continue investing until the concept was accepted.

Now that the business has matured, leading companies have become financially stable and the business is well-entrenched in several markets around the world, I believe the opportunity has arrived to introduce the concept in many more foreign markets.

What are needed are companies with vision and commitment to seeing it happen; companies that see themselves as leaders in deploying machines all over the world.

Let's face it, the need for cash is universal, and the off-premise ATM meets that demand. Banks will meet some of the demand, but it has been shown time and time again that they are not going to cover everything.

These companies will need to be prepared to make the financial commitment and have the patience to see the business grow. Once they do, they will see the results happen.

As more markets adopt the idea, less resistance will be seen and quicker results can be expected. As always, understanding cultural sensitivities and knowing the nuances of each local market will be an absolute must. Local partnering will be required to foster the idea of partnerships rather than the "take over" attitude most often associated with companies that go abroad.

So why am I so excited about international opportunities? I have spent the past 15 years traveling the world on business. Since I never carry cash, I am always hunting down an ATM in some corner of the world. In essence, I am my own best research subject.

It's not always easy to find an ATM. Not every hotel in the world has one, and you hardly find one at the local gas station or convenience store.

In most of the world, ATMs are still seen as a "bank product," and FIs look at locations from the perspective of serving their own customers. If an area does not have a concentration of those FIs' customers, the FIs will most likely never place ATMs there.

In some parts of the world, people would never use an ATM past a certain time of day. When I asked a cardholder in a certain country in Latin America about her card usage at ATMs, she recited back a list of rules for using one of these machines. One of them was: "I would never use one after 7 p.m."

She told me that because ATMs in her country are walk-up or in booths in the middle of the sidewalk, "when people see me step away from the walk-up ATM or leave one of those booths, they know why I was there and that I have cash with me. Unless there are lots of people around me, I am afraid for my safety."

This person's attitude is typical of most cardholders in different countries.

When I asked her, however, if she would use a machine inside a retail store, her eyes lit up.

In many countries, the ATM per capita is usually about 5,000-to-1. As a result, ATMs are in great demand. At each ATM in these markets, there are more than 10,000 transactions per month.

Thanks to a push from the card associations, debit cards have become more popular than credit. And thanks to an ever-growing number of government policies, people are receiving their paychecks via debit payroll cards.

Those changes increase the number of people using ATMs and therefore the need for more ATMs.

Leading U.S. companies are set to take advantage of the market. While I have not invested into fancy research studies, as far as I am concerned, I have done the best study money can buy.

All one has to do is spend time in the targeted market, look at people's behavior, ask people about their needs for cash, talk to retailers and see what banks are doing. The rest comes easily.

The trick is to know how to do it right in each of the markets. To do it right, companies need a mixture of financial resources, cultural sensitivity, vision, the spirit of local partnership and, above all, patience to see it through.

About the author:Jorge Fernandez is the founder and president of Miami-based Capture Systems LLC, a company founded to pioneer the concept of off-premise ATMs throughout Latin America and the Caribbean. Prior to founding Capture Systems, Fernandez served in senior-level management positions, with international business development responsibilities, for Verifone, Ingenico, eFunds and Triton. He holds an MBA from the University of Miami and was the winner of the 2002 Best Practices award from ATMIA.