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Mexico is an open, but culturally different, market
Now that surcharging is on the way, the ATM market in Mexico is expected to explode. But Mexico is a different market, and some ISOs won't survive, as Jorge Fernandez, founder and president of Miami-based Capture Systems LLC, explains.
June 7, 2005
I love the movies. In fact, one of my favorites is "Field of Dreams." It combines my love of movies with my passion for the game of baseball.
In many ways, I think the ATM business is like a movie with its own field of dreams.
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Jorge Fernandez |
Imagine this scene: A man is sitting alone at a train station collecting his thoughts; there is no train schedule, but he has faith a train will show up any moment now. His eyes pan the station, and he thinks about the trains and the journeys they travel, the workers building the tracks, the factories cranking out the locomotives and the cars, and the construction company that builds the station. He also thinks about the passengers, and how most of them never pay attention or give any thought to what it really took for them to reach their destinations.
Building the off-premise ATM market in Mexico over the last seven years has been a lot like that scene. The business itself is like the train that we know is coming - we just aren't sure when it will finally arrive.
The good news is that the train is on the horizon … we can see its lights, and we definitely hear the rumble.
It's coming
Those of you who know me may be getting weary of hearing me say the same thing time and time again: "It's coming."
When I talk at the ATMIA conference, I almost always have some progress report about the business. But at no time in history have I been as positive and enthusiastic about the business opportunities with off-premise ATMs in Mexico as I am right now.
It has been said that the forces of an open and free market cannot be detained; eventually, freewill prevails and markets define themselves.
That was definitely the case with the off-premise evolution in Mexico, which began in 1998.
When we first went into the market, the concept of an ATM being owned or operated by anyone other than a bank was as foreign as the Internet was to all of us in 1985. ATMs had this mystical aura. They were big - no, wait, they were huge. They were expensive, and the only people allowed near them, other than cardholders, wore black suits and helmets and rode up in funny looking trucks loaded with heavy weapons.
The thought that an ATM could be seen as an actual "business" was another foreign concept. After all, ATMs were purchased by banks to, well, give customers service when they weren't open.
"They cost a lot of money and are expensive to operate. We'd never think of them as an actual business," a local banker once told me. Similarly, retailers thought of the ATM as something a bank would bring by one day, if the bank was big enough, the retail site had enough traffic and the moon and sun aligned properly that month.
"Getting paid for having an ATM in my shop? Don't be silly," a retailer would say.
Similarly, the local ATM network had never seen an ATM as small as the one geared toward retailers. That ATM also used dial-up communications, and virtually anyone could load it with cash and complete his own end-of-day report.
"You want to certify this 'thing'?" skeptics would ask. "Well, does it support Diebold 911 or NDC?"
Uncharted territory: ATMs in Mexico
But, back in 1998, a few of us dared to venture into the unknown in Mexico.
We spent a year-and-a-half certifying the first Triton 9600. And we got bounced back and forth between the POS and ATM side of the processing certification process, because processors didn't know what to do with this "thing."
When we finally got certified, no one knew how to deal with this "business." Should a bank be involved or should the processor handle the ATMs and do the settlement? A year later we were told, "Ah, now you need a sponsor bank. Good luck!"
Six months after, we had gone through three sponsor banks, and none of them wanted to work with us.
"Surcharging?" they would ask. "Nah, we can't do it."
Most didn't pay any attention to us, but those who did said, "It will never work in Mexico."
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A couple of hundred machines later, people started to pay attention. They wanted to set regulations so the market wouldn't explode like it had in the United States. But setting regulations was too risky - it required guidelines and market definitions. So the banks opted to scare customers, convincing them that our ATMs were not "really" allowed.
That tactic actually worked, and it slowed the business for a while. During one of those years we managed to sell only five ATMs.
But a couple of vendors hung in there with us - Triton and NCR - but that was about it.
No one else wanted to take a risk.
The surcharging dilemma
By 2003 we were tired, frustrated, out of steam and pretty much out of everything else. The off-premise business seemed to linger in obscurity, with only a few hundred ATMs installed. And no surcharging meant no one from the outside would invest in helping us grow the business. It also made creating the business case that much more difficult.
Interchange on international transactions decreased 50 percent, and the local banks also started to lower domestic interchange.
The business case was grim.
ATMIA stepped in about that time and helped get the ball rolling. We contacted some folks at the anti-trust division of the federal government in Mexico and, armed with our ATMIA documents, presented a case that outlined why our business was not allowed to prosper and why more ATMs would be a good thing in Mexico.
We showed how off-premise ATMs would provide citizens with more access to funds in safer locations. Then we prayed the government would help.
In December 2003, the Mexican Senate passed a law, "La Ley de la Transparencia," that declared off-premise ATMs legal. According to the law, off-premise ATM owners could surcharge.
But the law had to be implemented. Transactions would have to be settled, banks would have to decide what to do with the surcharged amount, and surcharge screens would have to be added to inform the public.
The deadline for surcharging kept getting pushed.
Finally, June 2005 would be it.
Never fear, the ISOs are here
Now the ISOs are coming.
But they have a lot to learn. ISOs are feared in Mexico. They raise suspicion in the mind of any Mexican banker, because of what happened in the United States, Canada and the U.K. after independents hit those markets.
Over the last 15 years I have worked with several international vendors to develop the market in Latin America. Without a single exception, they all made the same mistakes, and now I am seeing it all over again.
Everyone assumes what they don't know. And few, if any, take time to really understand.
Mexico is not "New" Mexico. Mexico's northern neighbors usually think they need to show Mexicans "how it's done." That's why Mexicans often refer to North Americans as "gringos" - not the most flattering of terms.
Most American folks set up shop in Mexico with a gringo mentality, and that is unfortunate.
Ninety percent of U.S. and Canadian companies get totally discouraged when they find out Mexico is not just like the markets they're used to.
Before surcharging, some companies wanted to extend the border to Tijuana and El Paso, saying, "We'll just sneak a few terminals in and drive them from the U.S. … no one will know."
Needless to write, those companies were caught and fined.
I think it's great that more companies want to come to Mexico. The more players we have, the faster the market will grow. The problem is that habits are hard to let go. Some companies may listen, but they're still going to do things the old-fashioned way.
To be successful in Mexico, however, you have to forget what you know and how you did it.
The biggest thing to remember is respect - respect for what has been done and respect for the differences in culture and mindset.
Only fools rush in
Don't assume anything. Don't go with predefined ideas or concepts. And be patient - things won't happen as fast as you're used to.
Some companies think sending a couple of people to Mexico constitutes due diligence.
No one is taking time to see how people interact in Mexico, find out what Mexicans think of surcharges and learn how Mexicans use their cards. (Will they walk another block to find their bank's ATM?) No one wants to find out what the difficulties and nuances of the business are in Mexico. And some, in their eagerness to be first, are partnering with the wrong people.
Some think Berlitz Spanish is the answer, but it's a double-edged sword. It teaches the basics, but it doesn't teach culture - the meaning of gestures or that "yes" can sometimes mean "no."
Knowing basic Spanish may get you to the hotel from the airport, but it won't get you anywhere in the local business world. And most Spanish translators, unless they've actually lived in Mexico, aren't going to be of much assistance either.
In short, take the time to do it right. Don't be an ugly "gringo."
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.
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