News

Nextran targeting credit unions

With retailers, transaction processors and others jumping into the deployment fray along with the more traditional banks and ISOs, it's hard to believe that there may be an untapped market left for ATM manufacturers. Yet consider the credit union, a market being targeted by Nextran Industries.

November 3, 2002

With retailers, transaction processors and others jumping into the deployment fray along with the more traditional financial institutions and ISOs, it's hard to believe that there may be an untapped market left for ATM manufacturers.

Yet consider the credit union. There are 10,201 of them in the U.S., according to Callahan & Associates, a Washington, D.C.-based credit union research and consulting firm.

Amazingly, just 490 credit unions have 10 or more ATMs, according to Callahan & Associates. At 20 or more ATMs, the number drops to 194. Only 17 have 100 or more ATMs. One credit union, Raleigh, N.C.-based State Employees' Credit Union, is found on the 2002 list of 50 biggest ATM owners produced by ATM & Debit News (at #29, with 723 machines).

"The ISO and financial institution markets are starting to look pretty saturated, but the credit union market is still a big market," said Jeff Rodman, president of New York's Actors Federal Credit Union, an institution with $70 million in assets.

Actors may be a case in point. The credit union owns 82 machines, all of them at non-branch locations. A large number of them are found in McDonald's restaurants in Manhattan and the Bronx.

The ComNet 4000, which Nextran Industries says has been purchased by about a dozen credit unions.

Rodman said that Actors' ATM network is a mix of new and refurbished NCR and Diebold machines and Triton cash dispensers. In the past two months, however, he has purchased 25 ComNet 4000 machines from Nextran Industries, a partially owned subsidiary of Korean manufacturer Chungho based in South Hackensack, N.J.

Two factors convinced him to try Nextran, said Rodman: price and aesthetic appeal.

"Price really hovered large on the horizon for us," he said. "We want a minimum of two cassettes in our machines and we prefer four. The Nextran machines came in very attractively on price, even with multiple cassettes."

The 10.4-inch color screen "really blew me away," added Rodman. "We're getting it on a machine that's in the same price range as a Triton, which has a tiny, little (5.7 inch) screen."

The ComNet 4000 is more substantial looking than ATMs in a similar price range, Rodman said. "It looks like a bank machine, where a lot of the stand-alone cash dispensers don't."

Another factor, Rodman said, was getting the latest technology for a price he's accustomed to paying for previous generation ATMs he purchases from refurb shops. "My (NCR) 5670s aren't going to do me much good when it's Triple DES time," he said.

Based partially on Rodman's recommendation, Richard Rays, the president of Paragon Federal Credit Union, purchased a dozen ComNet 4000s for his $250 million New Jersey institution. He plans to add them to an existing network of 27 machines, located mostly in branches.

Like Rodman, Rays said a price comparison with the high-end ATMs most commonly purchased by financial institutions is "quite remarkable."

He also mentioned Nextran's software, which offers the capability for advanced remote diagnostics. The capability is especially important for non-branch locations such as the corporate offices of credit union member companies. "One little hiccup, and we could be out of there in a heartbeat," Rays said.

Tony Park, Nextran's president, said credit unions and other small financial institutions are under-served by ATM manufacturers. "They don't get the attention they should," he said.

Nextran hopes to capture a significant chunk of the market by offering high-end features, including Microsoft Windows-based operating systems, large color screens and multiple cassettes -- but at prices lower than comparable ATMs.

According to Park, Nextran has already sold machines to about a dozen credit unions and two larger financial institutions, which he declined to name.

Gary Walston, vice president of sales and marketing for Houston-based ISO Momentum Cash Systems, said Nextran's strategy makes sense.

"If they can produce the quality and the aesthetic appeal that NCR and Diebold have traditionally delivered at a more affordable price, I think it would allow many credit unions to place more ATMs," said Walston, who has spent the past year calling on credit unions to promote both Momentum's outsourcing program and its Toll-Free ATM Network, which offers shared ATM access to financial institutions for a fee.

Because of features like the larger color screens, Walston said Nextran ATMs would be appropriate for office buildings, manufacturing facilities and other workplaces where customer service is a priority but transaction volumes would not merit the placement of a costlier machine. It's common for credit union members to ask their institution to provide such on-site ATMs, he said.

Credit unions could slash their costs even more by handing over the management of such sites to ISOs like Momentum, which can operate the machines for less, Walston said. He said most ISOs would be willing to manage these ATMs, regardless of transaction volumes, if provided with some sort of reimbursement from the financial institution.

Nextran will face two major hurdles in its attempt to win the business of credit unions and other financial institutions, Walston said. Namely, a hesitancy to try something new, a quality he said is endemic among financial institutions, and Nextran's ability to support its ATMs with a strong service infrastructure.

"You're going to have a lot of credit unions out there asking 'what's a Nextran?' where they all know NCR and Diebold, and to a lesser degree Triton, Tidel and Tranax," Walston said. "But I'd say they have a better opportunity with credit unions than with banks. Credit unions are somewhat more open to new things."

Like Walston, Paragon Federal Credit Union's Rays called service "a potential Achilles heel" for the manufacturer. "I'd be a bit worried if (Nextran) didn't have a local service staff here in the New Jersey area," he said.

Park said Nextran is emphasizing service as it recruits distributors for its ATMs. He believes Nextran equipment will appeal to large ISOs with strong in-house service staffs, many of which are already interested in pursuing outsourcing deals with financial institutions.

Nextran is also trying to line up deals with resellers of Diebold and NCR equipment. "They already have the right background of working with PC-based machines," Park said.

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