News

Off-premise opportunity growing in Latin America

Jorge Fernandez says his company, Capture Systems, provides proof that it's possible to successfully deploy off-premise ATMs in Latin America. He says one must understand the local cultures and business environments, find the appropriate market niches and develop strategies for each individual market.

July 22, 2002

Imagine a person working at their desk. It's close to lunchtime and he/she gets up to get something to eat, suddenly realizes he/she has no money and runs to the nearest ATM to obtain cash.

Now imagine another scenario: As a businessperson traveling abroad, you realize that you miscalculated how much taxicabs cost locally and find yourself low on cash. What do you do? Look for the nearest ATM.

The above situations occur thousands of times a day in New York City, Mexico City, Buenos Aires, Santiago, London and virtually anywhere around the world. The need for cash is universal, and so is the need to have convenient access to it.

The meteoric rise of off-premise ATMs in the United States occurred as a result of this need, coupled with the fact that ISOs figured out a way to make money from providing low-cost machines that could provide this service and generate income.

This commentary was prompted after reading several articles in leading EFT publications, including this one, about the limited opportunities for off-premise ATMs in Latin America. In fact, nothing could be further from the truth; one just needs to know how to do it right.

Our company, Capture Systems, successfully deploys this concept throughout the region. Today we have operations in Mexico, Central America, the Caribbean and Venezuela.

Capture Systems acts as an ISO, processor and placement company. Currently, we have close to 1,000 off-premise ATMs operating throughout the region with commitments for an additional 2,000. We are proof that off-premise ATMs represent a significant opportunity in this region.

On the home front

Many of the assertions about this market have been made by "experts" sitting behind a comfortable desk in the United States or a reporter based in some other part of the world who called a few financial institutions and wrote about the market based on their feedback.

However, one can not be an expert from afar, and writing about the off-premise market from a bank's perspective does not present a true picture of this market. Had the U.S. market relied on banks, there would not have been much of an off-premise market there either.

The current ATM situation throughout Latin America is not all that different from what was present in the U.S. back in 1994. That is, banks were the only deployers of ATMs and only the high-volume locations justified ATM placements.

For the most part, banks control this segment of the market in Latin America as well. However, as we have discovered, there is a huge demand for off-premise machines by consumers and retailers. The trick is to know how to introduce the concept.

We have seen many U.S. and Canadian ISOs attempt to export their business models to Mexico and other markets in Central America and the Caribbean with total failure. This is not because there was no market, but because they tried to do it the way they do in their home countries.

No one appreciates a stranger coming into their house and rearranging the furniture. Similarly, banks in the region do not like outside companies coming in and doing something the banks consider to be their business.

Also, there is no surcharging to support a traditional ISO business model. In the region, the business climate is very different and one must take the time and effort to develop local models to fit each of the markets.

Making it work

We created local partnerships with the banks, networks and retailers. Greed does not play a factor in any of these models; rather, everyone participates in the transactions and thus everyone is happy. Because the market is underserved by ATMs, the volume on each of the ATMs is four to five times that of a comparable U.S. machine, which compensates for the lack of surcharge.

In some markets, we installed our own front-end switch and offer a complete package. This helps the local ATM networks by relieving them of the certification of an off-premise ATM, a device that runs counter to the way most Latin American networks are accustomed to working with ATMs. By front-ending the ATMs, we switch the transactions to the local networks in standard formats they understand.

Additionally, we focus on providing complete turnkey solutions that include not only sales and marketing, but also proactive terminal monitoring, cash management services and 24/7 help desk services.

Using a local sponsor bank is not only required by the local banking laws, it also makes sense. A local bank provides credibility to the concept to other financial institutions and allows us to offer additional financial services to the retailers.

Moreover, our partnerships with the banks also allow us to install machines on behalf of the banks in locations that are not economically feasible for them, given the lower transaction volume. We don't position ourselves as competition to the banks; rather, we supplement the banks by installing locations they are not able to cover and offering service to their customers. In most of our markets, the ATMs are branded with the bank's name, not ours.

Beyond providing the traditional access to cash, we have also ventured into offering other value-added services through our off-premise ATMs such as wire transfer, pre-paid cellular minutes, advertising, dispensing of non-cash media and other custom services catering to the local retailers. In Puerto Rico, we have begun a rollout of full-motion video toppers in partnership with the country's largest discount store chain.
 
We are working with some of the leading retailers throughout the region to implement off-premise ATMs. In Mexico, some of these include: OXXO, the country's largest convenience store chain operator; Cinemark, one of the largest operators of movie theaters; Pemex, the largest operator of gasoline stations; and others.

In Central America, the Caribbean and Venezuela, we are working with K-Mart as well as some of the leading hotel operators in partnership with one of the region's largest financial institutions, placing ATMs in locations where the bank is not able because the transaction volume does not support their full-function machines.

Formulating the total market potential is difficult since we have not looked underneath every rock and the markets are, for the most part, still underdeveloped. Assuming that we can double the current installed base of bank terminals (currently, banks only install ATMs in locations that support over 3,000 transactions per month), the potential across the region could well be close to 100,000 locations. We can justify ATMs in locations of approximately 500 to 700 transactions per month.

The individual approach

In summary, we believe that the off-premise ATM market throughout this region is vibrant and filled with huge opportunities. To successfully implement a local strategy, one must fully understand the local cultures and the financial institution cultures, understand where the market niches are and then develop strategies and business models for each individual market.

This cannot be done from afar or believing that it's going to be an overnight success. Patience is key. We have been in the EFT industry for more than 15 years in this region, and it has taken us more than three years to get to where we are today.

The author, Jorge Fernandez, is president and CEO ofCapture Systems, the largest independent independent operator of off-premise ATMs throughout Latin America and the Caribbean. Additionally, the company offers processing services in Central America, Mexico and the Caribbean. He has been in the EFT industry for more than 15 years, most of those in Latin America and the Caribbean. He may be contacted atJorgef1@aol.com.