Evolution of the ATM — 2014 and Beyond
It’s been roughly 40-years since the advent of the Automatic Teller Machine (ATM). Over the years, increasingly sophisticated technologies have been developed to meet the evolving demands of customers and financial institutions.
Recent projections show that the amount of ATM’s around the world will surge significantly over the next few years. In 2012 alone, more than 180K new units were deployed globally, a jump of 8% over the previous year. The Asia-Pacific region showed the strongest growth at 13%, while Latin America continues to lag with the least significant advancement. The most robust growth is in the independent market with mobile ATM Services providing much of the increased revenue.
In the United States, financial institutions have generally awarded their ATM business to a handful of American-based manufacturers such as NCR, Diebold, and Triton. Predictably, overseas ATM companies have sought to create inroads into this lucrative market with varying degrees of success. Companies such as the Korean-based Nautilus Hyosung have, so far, found most of their success in supplying stand-alone ATM’s to independent retailers, kiosks, and convenience-oriented stores. Despite continued efforts, it has been difficult for manufacturers beyond U.S. shores to earn the trust and break into the lucrative market that established financial institutions provide. GRG has improved it’s odds by using parts which are familiar to domestic maintenance firms, unlike most Asian manufacturers who tend to use their own parts. Enhanced service and maintenance contracts also enhance GRG’s prospects of securing desirable deals. This recognition of the replacement market is just one example of a foreign firm finding a way to fill a niche need in an established market slow to embrace outsiders.
Others would argue that service alone can’t provide the serious inroad most international manufacturers seek in the U.S. The bottom line may, indeed, be price point. Yet, for well-established European companies like Wincor, even providing that low price-point has yet to “crack the nut” with more staid and long-standing U.S. banking institutions.
A Few Of The Players …
Korean-based Nautilus Hyosung (NH) is certainly a juggernaut among overseas companies looking for a foothold in the U.S. At present, NH has secured more than 70% of the ATM market in the independent sector and its more advanced machines are seen positively by U.S. banking institutions. In 2011, Citibank announced its intentions to employ envelope-free machines manufactured by NH in its ATM network.
In addition to the U.S., NH has also established itself considerably in South and Central America, Europe, China, and Australia. Known for the reliability of their cash-distributing mechanisms and card processing, NH cash dispensers are highly regarded for being durable and reliable. EMC and Telecom certifications have allowed NH to meet the varying safety standards of countries across the globe.
NH originally partnered with U.S. based Tranax, but in 2007 they parted ways and NH has not looked back, continuing the upward movement they have worked hard to achieve in the U.S. Market. Most would be hard-pressed to deny that NH has made definite inroads towards competing with companies such as NCR and Diebold.
Established as the leader in global financial technologies, Duluth, Georgia-based NCR continues to meet the changing needs of financial, retail, healthcare, travel, entertainment, and public sector companies around the world.
Recently, NCR debuted innovative technological developments which allow customers to interact visually on an ATM with ‘live’ bank tellers in remote locations. Their APTRA Interactive Teller system allows banks to expand their hours of availability by allowing customers to speak with a teller directly from the ATM. This allows for quicker transactions, improved sales, and enhanced revenue growth.
Partnering with Utah-based uGenious Technology, two-way video conferencing has now been incorporated into NCR’s SelfServ 32 ATM. This emerging technology allows banks to extend their hours, and create “footprint branches” with bill paying, account and loan initiating, and intelligent depositing. More importantly, by inaugurating such a service, NCR maintains the personal connection that customers appreciate on a human level and where convenience and security is are concerned. According to NCR, “More than 1300 financial institutions in more than 130 countries around the world,” have purchased NCR SelfServ ATMs.
A powerful presence in the ATM industry,Diebold has been in business for over 150 years. Based in Green, Ohio, Diebold has 16,000 employees and does business in over 90 countries. In 2012, the company reported revenues in excess of $3 billion. Diebold enjoys the reputation of being a particularly customer-oriented business, offering a high level of support for its services and products. Recent years have seen them win awards for security system integration and call center excellence.
In February of this year, Diebold and Cincinnati-based Fifth Third Bank introduced the nation’s first Mixed Media Deposit Automation Terminal on the banks Madisonville, Ohio campus. Already known for their Opteva 700 Series ATMs, the new mixed media module allows Diebold ATMs to accept deposit bundles of cash or checks quickly and efficiently with no sorting required. Fifth Third has 2600 ATM’s distributed in 12 states and are the first in the country to offer the service.
Some feel it has been a mistake for NCR and Diebold to ignore the ISOs. Others counter that there is not enough money on that end of the ATM spectrum to make it worthwhile for the larger firms.
German-based Wincor Nixdorf supplies IT solutions for banks and retail outlets by developing technologies designed to enhance their clients ‘consumer-facing operations.’ To this end, they provide integration and ongoing operation of IT, along with hardware and software solutions.
Earlier this year, Wincor Nixdorf unveiled the tablet-based Beetle Mobile POS Solution at Euroshop. Tailored for the retail setting, the tablet operates on both Android and Windows 8.1 platforms. It can be utilized as a customer service station or mobile payment device in tandem with the typical scanning modules and cash drawer. Beetle Mobile POS allows for mobile and cashless payment using either magnetic stripe or chip. It meets existing EMV requirements and PCI standards.
Wincor Nixdorf’s AEVI PAY connects EFTPOS devices with the capability to operate payment terminals from various manufacturers including routing, switching, and authorization of ATM transactions. The company reported $780 million in revenue for the year 2012.
Headquartered in Guangzhou, China, GRG is the number one ATM Supplier in China and a top six competitor globally. Their core technologies include bill identification, high-speed bill processing, and encryption. In business for over twenty years, GRG develops ATMs for retail and financial institutions. In addition, the company produces AFC (Automatic Fare Collection) machines for subway and railway systems, plus cash processing and currency recognition equipment modules and systems. GRG products are used in over 70 countries. 100K GRG machines serve over 10-million people daily.
Facing the same difficulties other international manufacturers have infiltrating the U.S. market, GRG initially focused on developing nations. GRG has distinguished itself by developing an ‘equipment plus’ service, not only selling but servicing their machines, as well. This service includes handling, monitoring, and service of rear-end software. The company prides itself on a record of zero disputes for intellectual properties.
Is there room for more ATM manufacturers in the U.S.? Brazilian-based ATM manufacturer Itautec is counting on it. This $1-billion electronic and technology company employs 6000 people worldwide and has recently enjoyed double-digit sales growth in Africa. They are the number one provider of ATM’s in Brazil.
Itautec has spent a good deal of time developing their machines in the sometimes insular world of Brazilian banking. This unique environment led to great innovation as Itautec developed machines custom- made for the clients they served. Today, their equipment is considered to be “high-performing, advanced, and XFS-compliant.”
In the U.S., Itautec has made inroads by developing markets with American Air Force bases and casinos. Now, they hope to take lessons learned and expand their business into larger financial institutions in the U.S. It is a challenge that faces all of overseas manufacturers trying to work their way into the lucrative financial institutions in America, and it is one that Itautec is determined to meet.
Around The World …
North America has the lion’s share of the ATM market, followed by Europe. Today, rapid growth in these areas has slowed down. A good deal of the business remaining in these markets had to do with replacing older units and upgrading terminal specs in existing units. Many manufacturers who had their sights set on wooing America are now turning to developing and emerging areas such as the Asia Pacific, Africa, and the Middle East.
The Indian ATM industry has grown tremendously in recent years. Growing income, economic development in urban centers, and a movement away from class banking to mass banking have been the main impetus for the growth. It is estimated that India will require an additional 77K machines by 2020. Future changes are likely to be shaped by white-label ATM’s regulatory changes concerned with financial inclusion.
With a huge segment of India’s population still underbanked, the Reserve Bank of India is now urging financial institutions to have vision beyond the urban population centers. This is a tough sell, as financial institutions ordinarily create new branches and install ATM’s in populous areas because it is cost-effective and requires less infrastructure. The vast market beyond the major urban centers remains underserved and also remains a potentially lucrative market waiting to be catered to.
Banks, Bitcoin, and Beyond …
Bitcoin, as described by Wikipedia:
“Bitcoin is a peer-to-peer payment system and digital currency introduced as open source software in 2009 by pseudonymous developer, Satoshi Nakamoto. It is cryptocurrency that uses cryptography to control the creation and transfer of money.
Bitcoins are created by a process called mining, in which participants verify and record payments in exchange for transaction fees and newly minted bitcoins. Users send and receive bitcoins using wallet software or a personal computer, mobile device, or a web application. Bitcoins can be obtained by mining or in exchange for products, services, or other currencies.”
The first Bitcoin ATM in the United States, manufactured by Lamassu, was installed at a cigar shop in Albuquerque, New Mexico. To utilize the machine, users scan a QR code on their cell phone which informs the ATM where to send the bitcoin. Cash is then inserted and the bitcoin is transferred to the customer’s digital wallet. Lamassu doesn’t profit from the transaction, it makes money on the sale of the machines.
Late Breaking: (Tues, Feb. 25, 2014)
Fifth Third Bank (FITB) has partnered with Phoenix Interactive Design, becoming the world’s first bank to use Diebold’s single throat mixed-media deposit ATMs.
Before there is any mainstream proliferation of such machines, the legalities of cryptocurrency will need to be ironed out. Meanwhile, machines continue to surface in Austin, Las Vegas, and elsewhere. BitAccess, a Canadian startup, has reported daily transactions of up to $10K in Montreal and Toronto.
It is expected that 2014 will see the emergence of bitcoin and Dual-Cash menus on ATM’s. One can expect to see ATM-dispensed bitcoin prepaid cards, as well. In Prague, General Bytes looks to come to America with 500 bitcoin ATMs. These machines will cost less than $3K and will be operated on its own computer using the Android operating system.
In January of 2014, The Financial Crimes Enforcement Network clarified that bitcoin miners and investors will not be regulated by the US Treasury and will not need to register with the government. Bitcoin value is often difficult to decipher and fluctuating prices since it was introduced have made it a rather volatile denomination to deal with.
Bitcoin Bulletin: (Tues, Feb. 25, 2014)
MtGox, a major bitcoin exchange, announced that it was ending transactions “in order to protect the site and our users.” The statement was published on MtGox website which has since gone blank. It is believed MtGox may be on the verge of bankruptcy.
New Technology …
Japan’s OKI Corporation recently announced the installation and inauguration of use for an ATM which uses finger vein authentication technology. The ATM was placed at the Bank of Lanzhou in China (Gansu province). The ATM is the first of its kind to be deployed in China. OKI hopes to distribute more of the machines globally, capitalizing on a worldwide need for the prevention of identity fraud and forgery. In China, the demand for such a product is clear as there is a growing demand for increased security and safety.
OKI’s new ATM is based on their ATM-Recycler G7. The finger vein authentication module was developed in conjunction with OKI by Mofiria Corporation. The module operates quickly and is more effective than devices which merely scan the surface of the finger. The Bank of Lanzhou, impressed with OKI’s ATMs, now has the finger vein authentication modules in a “trial run” period. If successful, look for OKI to market the machine in overseas markets.
For ISOs and FIs seeking new advertising and branding outlets, look no further than the ATM itself. Video Toppers are bringing new business, awareness, and enlightenment to customers while they transact. In a society raised on video imagery, incorporating video advertising and messaging at the ATM seems like a natural. It’s more affordable now, too. Initially over $1K, a good display monitor can be obtained for as little as $300. Marketing teams can update remotely, too, to keep messages fresh and effective.
The machines themselves can be “wrapped” in imagery and textual advertising, maximizing their potential as branding vehicles. Even receipts can be imprinted automatically with advertising and messaging.
Tap ‘n’ Go Technology
Consumers may soon leave debit and credit cards at home. With Tap ‘n’ Go technology, one simply waves their cell phone in front of the product they wish to buy and a small microchip-imbedded sticker on the phone logs the purchase. Funds are then withdrawn directly from a checking or savings account and an instant balance update appraises the purchaser of their financial status.
It’s catching on fast and may one day surpass the use of cards. Tap ‘n’ Go cuts down on fraud and reduces identity theft. The microchips have no personal information on them. Business owners can save money, too, doing an end run around unregulated interchange fees.
Areas of Change, Concern, and … Opportunity
New EMV standards have instigated big changes requiring thousands of machines to be refitted with new Card Readers and cards to be affixed with chips in order to be operative and pass a new world standard for ATMs. Unfortunately, some older machines are not able to be upgraded and must be replaced outright.
The Durbin Amendment and the “swipe fee” controversy have definitely put a crimp in the ATM industry’s implementation schedule. As the liability shift deadlines draws nearer, some merchants are souring on EMV for myriad reasons, including cost, fraud prevention worries, and debit routing concerns. Some feel clients may be increasingly subject to liability and that some form of coverage may be necessary, which is a big concern for ISOs.
There’s no going back now in this global marketplace.
DEBIT CARD SWIPE FEES
The Federal Reserve Board has finally ruled on Debit card swipe fees. The fees paid by merchants and retailers to large banks will now be capped at 21-cents. The long-standing fight has seen credit unions and banks battling retailers in a conflict that has been highly politicized for months.
Though the back-and-forth bickering over prepaid card fees has calmed down recently, there is still an air of uncertainty. Employers continue to debate prepaid’s profit and loss projections.
Encouraging paperless transactions still remains an important effort. Discontinuing the use of slips and envelopes not only simplifies banking procedures for customers, but also benefits the environment. It is estimated that in 2011 alone ATM machines used 1,500 metric tons of paper envelopes.
ADA (AMERICANS with DISABILITIES ACT)
The ADA has definitely caused some upheaval in the ATM industry as thousand s of ATMs across the nation needed refitting or outright replacement. The changes center on accessibility concerns as machines are adjusted and redesigned to meet audio and height requirements. Of course, these changes are monumentally expensive.
Still, some feel in the long run it will pay off. In addition to better serving Americans with disabilities, a noble pursuit in its own right, the ‘boomer’ population is aging and will need easy access to ATM services as the years go by.
Projections on the Year Ahead …
2014 will see financial institutions attempting to get consumers ready for a new kind of ATM interaction. Customers know all about ATMs and cash, but they will need to be educated on everything else ATMs can do. We’ll see the emergence of less typical ATM services such as bitcoin distribution, prepaid cards, and even virtual storefronts.
Some say major hacking operations will occur along the lines of the Target debacle, as the U.S. remains one of the last holdouts as far as magnetic striped cards are concerned. ATM operators will continue to get ready for the EMV-age , but it’s not here yet.
ATM security will be in the forefront this year with PCI, EMV, and Windows 7 compliance gaining new urgency. Above and beyond industry regulations, financial institutions will continue to develop security measures to provide additional anti-fraud protection.
New regulations and EMV implementation will undoubtedly cost a lot. At the same time opportunities exist for revenue generation through branding, no-surcharge networks, and maximized functionality of the ATM.
From a marketing standpoint, 2014 will see ATMs employed to spur promotions and revenues. CRM integration will allow for more intimate, one-on-one marketing to customers with specialized incentives and offers. Ever more accurate analytics will assist banks in truly understanding their customers and in delivering new products and services to them faster and more effectively.
Customer’s access to cardless mobile cash will definitely impact the ATM industry now and in the future. It does away with royalties and fees paid to Mastercard and Visa and allows for ATM use without the issuance of any association branded card.
As common data and software assets are increasingly shared, the ultimate goal will be to provide consistency, options, and ease-of-interaction for customers. Financial Institutions that reliably deliver on these fronts will have the best chance to distinguish themselves from the rest of the pack.
ATMs will soon be able to self-diagnose their own technical problems, enabling technicians to pinpoint which machines need replacing or servicing.
Peripheral Apps will continue to proliferate adding enhanced functionality to mobile devices with things like lottery, pre-paid minutes, bill paying …
The bank cards we’re familiar with may soon be a thing of the past as our Apps and phones utilize QR Codes to do things like pre-staging withdrawals and otherwise make our ATM experiences easier and happier.
Soon enough, the ATM itself may face obsolescence as consumers increasingly use their smart devices to make mobile payments.
2014 sees the end of Windows XP support and the coming to the mainstream of Windows 7.
With an economy that doggedly remains sluggish and increased regulatory demands, out-of-network fees will continue to climb and customers will continue to use self-service banking and seek out fee free opportunities. Some believe the by nurturing innovation and implementing pricing strategies that meet customer’s desires for affordable self-service banking, greater success will result in the long run. In line with that, self-service will have to do more, in more places, and become the accepted way that banks do business.
This year, check and cash deposits will be loaded onto prepaid cards issued by the ATM. For those who lose their debit card, emergency services will provide a code which tells an ATM to issue a temporary replacement card.
Lottery tickets, PIN-less transactions, cell-phone interaction, cardless transactions … 2014 is the year that all the things that have been talked about become reality. Increasing opportunities and rapidly developing technologies paint a picture of a positive future there for the taking.