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Wincor's penetration into U.S. could be uphill battle

This year will likely be the one that marks Wincor's success, or failure, in North America. A noted competitor in the international market, Wincor's ability to clinch the U.S. has been blocked by the deep roots of NCR and Diebold.

March 5, 2006

This year is expected to be a big one for Wincor Nixdorf International in the United States. The $1.9 billion Paderborn, Germany-based ATM manufacturer is leaning on a stronger U.S. presence and an enhanced focus on service, software and additional self-service branch solutions to pull it ahead of the competition - competition that is maintaining a far lead.

John Tyler is vice president of banking for Wincor's U.S. subsidiary, Wincor Nixdorf Inc.

According to ATM & Debit News' 2006 EFT Data Book, in 2004 Wincor ranked seventh in U.S. ATM shipments when compared to Diebold, NCR, Triton, Tranax, NexTran, Tidel (now NCR EasyPoint LLC), Lipman, Greenlink and Fujitsu.

Diebold is the U.S. ATM market leader, with NCR and Triton in close competition for second.

For Wincor, a relatively new entrant to the U.S. market, finding a competitive edge or niche won't be easy, said Sam Ditzion, president and chief executive of Boston-based Tremont Capital Group, an advisory firm that focuses on mergers and acquisitions within the ATM industry.

"I think if they had had a big successful push two years ago, there would have been a lot of opportunity for them to become a viable alternative," Ditzion said. "There still is opportunity, but the number of new machines that will be bought in the U.S. over the next two years (after all of the Triple DES upgrades, etc.) will be limited."

Dominic Hirsch, managing director of Surrey, England-based Retail Banking Research Ltd., said the complexity of the North American market, coupled with Wincor's 3 percent market share, pose a couple of challenges.

"Wincor will have to be innovative," Hirsch said. "On a worldwide basis, Wincor is No. 3, and they've grown by being innovative."

Hirsch pointed to Wincor's relationship with London-based Barclays, one of the United Kingdom's largest FIs, as one that could be imitated in the U.S.

"By targeting some of the big banks in the U.S. and working hard with them to design ATMs and be competitive on price, I think they could go a long way. That's what they did with Barclays and it proved successful. Once you've signed with a big bank, you're immediately recognized by those who didn't even know you were in the market."

If that's the case, then Wincor is traveling the right track. In November it announced a servicing deal with San Francisco-based Wells Fargo, the fifth-largest U.S. ATM deployer with 6,275 ATMs - a portfolio that includes Wincor, NCR and Diebold machines.

"They (Wincor) compete pretty hard on price, and they really do push the servicing side of their business," Hirsch said. "And there's no doubt that Wincor will try to get a slice of the service market in the U.S."

To leverage service and sales in the U.S., however, Wincor is leaning on partnerships, like the one it signed with IBM Corp. in 2002.

But partnerships can only take a business so far, Hirsch said. "In the U.S., they can partner to reach financial institutions, but they'll have to be innovative."

To be innovative, Hirsch said, Wincor could focus on the smaller FI space - a space Triton has worked hard to fill.

"Wincor has a history of being innovative, and this could be a space for them, with the credit unions and community banks," he said. "In the last few years, they've done a lot of things right, so it will be interesting to see what they do in the U.S."

But Tremont's Ditzion said Wincor's lack of a comprehensive service network that can rival NCR and Diebold, regardless of the FI focus, is its highest hurdle.

"In order to make it work, I think they will have to acquire someone," he said, adding that differences between the European and North American markets will have an impact.

"At the end of the day, while Wincor is relatively new to the United States, they are very well respected in the FI space in Europe. I think their product is very compelling, but their pricing and ability to service will create challenges. Also, I think it's a different target than they're used to."

A market difference

John Tyler, who late last year was named vice president of banking for Wincor's Austin, Texas-based subsidiary, Wincor Nixdorf Inc., said he thinks Wincor has a "compelling advantage in the U.S."

Tyler argues that Wincor's experience in Europe and market changes, including those pushing FIs to more advanced functionality and self service within the branch, give Wincor a clear advantage.

"When you look at how to migrate transactions to developing a product line of full-function ATM devices and put it all together, Wincor comes out ahead of the competition. I think our software is really at an advantage, too. And when you put it all together, it tells a nice story."

Wincor is working to put it all together.

At the company's annual trade event, Wincor World, which was held this year Jan. 24-26 in Paderborn, Germany, it touted a targeted approach to service - an approach Wincor enhances with some 70 global partners. (Read also, Wincor World showcases banking, retail solutions for the 21st century.)

"In North America, we've been in the market since 1996, and right now I feel very good about our distribution channel," Tyler said. "I'm very confident with our go-to-market strategy. We've overcompensated. We've hired more people than we need to meet the needs of the market, from a service approach. Deposit automation, assisted self-service - we're getting those out there so that we can then work to develop our service offering."

During the first quarter of 2006, which ended Dec. 31, Wincor hired 346 new employees to help develop its service business and promote expansion in so-called retail and banking "growth" markets, which include the U.S. and Asia.

Stefan Auerbach, who's responsible for Wincor's global services business, said Wincor is working to build a servicing arm that can support growth in the areas of branch-restructuring, process-optimization, Internet, security and software-standardization solutions.

Tyler echoed that sentiment.

"Over the last three months, assisted self-service has taken off in the U.S. There's an ROI there that to me seems compelling to major banks. Our ATS (assisted teller safe) and ATMs are helping to bring self-service to the branch, and we have more experience in that area than anyone."

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