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The ATM Industry - growth around the corner?

I'm in the business of forecasting! Yet when asked where the ATM industry is heading, I will resort to projecting rather than to the type of precise forecasting our Ph.D.s use

November 5, 2003

The writer is president and CEO for Transoft International Inc.

I'm in the business of forecasting! Yet when asked where the ATM industry is heading, I will resort to projecting rather than to the type of precise forecasting our Ph.D.s use. I wish, of course, like everyone else that I knew exactly where the industry is heading, but that luxury is afforded none of us. Some unmistakable recent trends are easy to identify, though, and I believe they indicate a very clear direction.

First, the wild ride is over in the U.S. ATM business. We went from a quiet replacement market years ago to the explosive growth of an industry where surcharging provided instant justifications for an ATM on every street corner and in every convenience store. My company helped a mid-sized bank establish surcharging across the network, and the entire cost of doing so was recovered over the following weekend. Thus, one transaction every three weeks was enough for some, but after the dot-com boom, many ISO's have resorted to much healthier business cases (those that are still around, that is!). Numerous big bank, off-site ATM projects have been reduced or cancelled.

So does that mean we are back to the older quieter days? No. As with the stock market, the happy days may be over for some time, but among the slimmer pickings great opportunities still abound. Besides, less than a third of the world's 1 million-plus ATMs are in the U.S., with other markets unaffected by our slowdown and often in a healthier economy. As our industry is truly global, the growth is somewhere around the world, right now, right there-if you know where to find it.

Second comes outsourcing, which seems in the banking industry to come and go in regular multi-year cycles, but this time the trend is a bit different. There is a new willingness in banks large and small to allow core services into the hands of third-party outsourcers. Services like ATM transaction switching, monitoring and currency management are enjoying an up-swing, with ATM manufacturers and many other service organizations from within the ATM industry racing to provide the best and most competitive services. A significant paradigm developing against the backdrop of the post-9/11 economy seems to entail a complete focus on cost containment.

New disciplines in technology are taken to heart by banks and service providers alike. While there will always be a push for new, exciting types of service expansions and revenue opportunities, bankers around the world have joined the ranks of cost-cutters and proponents of serious business case justifications. Now, being that I am also in the business of optimizing the ATM supply chain and minimizing ATM costs, this pleases me tremendously, but is it good for all of us in the banking industry?

Naturally, businesses and industries consolidate in cycles too. Rapid expansion is great, but sometimes value is found better in resting; realizing it's time to ponder and maybe reconsider choices made and start focusing on real values. In the stock market maybe, particularly technology stocks have had to recognize this, since after every expansion follows consolidation. This is important for the new ATM technology and the direction of our industry. The WOSA/XFS standards provide plug compatibility for some vendor equipment and increases competition, resulting in… reduced costs. Maximizing up-time rather than number of locations creates more revenue. Improving profitability of individual machines establishes better efficiency without investment. The trend is clear; we are focused on getting better!

In the '70s and '80s we deployed ATMs. In the '90s, we realized they didn't run continuously as we had hoped and started monitoring transactions, networks and equipment. To get better accessibility for our end-user customers, we approached a real-time fixing environment, which improved on that availability at significant cost. Now in the '00s, the industry rests-certainly not by standing still, by any means, but by reflecting and improving. In my sub-industry I see the breakthroughs clearly. The move is on from being purely reactive to becoming pre-emptive. Anticipating and avoiding future costly events is considerably less expensive than fixing problems on the fly! The challenge is, though, the need for complicated expertise and solid results. Commoditization and consulting services are not applicable here. This is where software vendors and outsourcers have a great opportunity to establish that long-term deep respect with our bankers that creates a foundation of true mutual dependency. When a banker, who has spent years diligently building an ATM network approaching near 100-percent availability, will consider handing such things as cash supply or communications monitoring over to an external outsourcer, the industry is again reaching a platform of trust and maturity. A platform on which to grow the next boom!

Yes, the wild ride is not over in the ATM industry as such! So, where is it going to come first? After careful deliberation the votes have come in: profitability, profitability, and profitability! May it and therefore our industry long live.