ATM manufacturers and independent sales organizations see nothing but an open road ahead as they expect growth in 2011 and beyond.

Manufacturers Diebold Inc., NCR Corp. and Wincor Nixdorf AG expect to benefit particularly from smaller financial institutions replenishing their ATM networks with intelligent-deposit, or envelope-free, machines. And ATM operator Cardtronics Inc. is riding the momentum of a growing prepaid debit card market that is helping to drive increased use of its machines.

“There are a lot of things that one can be bullish about” as it pertains to the ATM industry, says Bob Meara, senior banking analyst at Celent, a Boston-based consultancy.

The economy potentially could play a factor, especially from the manufacturers’ perspective. Smaller financial institutions will invest in better machines, but only if the capital is available.

The most-lucrative opportunity for manufacturers in North America rests with intelligent-deposit machines, according to Meara. “Those are fairly hot items with banks that need to refresh their ATMs,” he says.

And the ATM makers have begun to crank up their marketing engines to help drive that market. For example, Wincor Nixdorf, which stands to benefit from reporting such information, says the results of a recent survey it sponsored suggest consumers appear ready to embrace intelligent-deposit machines.

Some 70% of respondents indicated they use envelope-free cash and check deposits at least two to five times per month. Some 67% believe this feature is an important function of their bank’s machines, the ATM maker says.

For its research, the Paderborn, Germany-based ATM maker surveyed 200 U.S. consumers online who typically use an ATM more than three times per month. It published the results earlier this month. Marketing firm Zer0 to 5ive LLC worked with Wincor to develop the questions and launch the survey. Zer0 to 5ive provided the responses to marketing research firm e-Rewards Inc., which entered them into its consumer database and administered the survey.

Consumers with second-tier banks will begin to see envelope-free machines in the coming months, according to David Hadesty, Wincor vice president of strategic alliances and product management. Those banks are adding the machines “in direct response to their [larger] competitors,” he tells PaymentsSource.

Executives with other manufacturers agree smaller banks could begin to order and deploy intelligent-deposit machines in the near future.

“We are beginning to see a pickup in the mid-majors, the regional banks,” William Nuti, NCR CEO, told analysts during a conference call to discuss third-quarter earnings (see story).



Smaller banks are seeing the rollout successes of their larger competitors, Nuti said. “So there’s a bit of healthy paranoia that’s leaked into that mid-major segment,” he noted. “I expect that 2011 and ’12 will be rollout years for the mid-majors. And the regional banks, I expect them to pick up materially in those two years.”


The economy, however, could delay any such growth, analyst Gil B. Luria of Los Angeles-based Wedbush Securities told PaymentsSource in October. “If another crisis happens around banks or mortgages, they might step back,” he said. “But right now they’re thinking about investing in the future.”

Banks that lack envelope-free machines may experience problems with consumers who believe they already have them, Wincor’s Hadesty contends. One bank executive told him customers were trying to insert checks and cash into the slot reserved for envelopes. In some cases, checks and cash had to be discarded because the machine printed information on what it believed to be an envelope, he says.

“We’re going to quickly see a change in prioritization with banks that don’t have them because it’s going to be the new cost of doing business,” says Hadesty.

The economy’s affect on consumers also is having a say in what smaller banks do about updating their ATMs, Wico van Genderen, Diebold vice president of global marketing and product management, tells PaymentsSource.

“The recession has moved many consumers back to using cash,” Genderen says. “And because they are using cash, where are they going to get that cash?”

Indeed, cash use stands to get a boost now that the Federal Reserve Board released proposed rules that would dramatically restrict the interchange fees issuers receive for most debit card purchases. Some observers believe cash use could increase if issuers grow less interested in promoting debit cards. And increased cash use would only benefit ATM manufacturers and operators in the long run, executives agree.

“We think [the legislation] potentially has a direct benefit to us,” Rick Updyke, president of Cardtronics Inc.’s U.S. business group, tells PaymentsSource. “Even beyond that, cash is not going away.”

The central bank is seeking to cap debit card interchange fees at 12 cents per transaction, far below current levels (see story). For a typical $40 PIN-debit Interlink purchase, for example, the interchange fee for retail merchants now ranges from 30 cents to 45 cents, depending on volume, while the interchange on a $40 Visa check card signature-debit transaction ranges from 37.8 cents and 56.8 cents, according to PaymentsSource calculations using Visa Inc.’s published rates.

If banks decide to forgo debit cards altogether and just issue an ATM card for cash access after determining they no longer could make a profit off interchange, that ultimately gives cash more power, Mercator Advisory Group analyst Ben Jackson told PaymentsSource in September.

Cash is still seen a great alternative to credit card use in a struggling economy, Updyke says. “The economic situation has greatly reduced the line of credit in this country,” he adds.

Some observers, however, disagree that cash use will rise because of changes in debit card interchange policy.

“There are going to be lots of things that are positive and negative about the impact of financial regulation, but the bottom line is that people are not moving back to cash,” especially for younger shoppers, Todd Ablowitz, president of Double Diamond Group, a Centennial, Colo.-based consulting firm, told PaymentsSource in September, citing consumers’ payment preferences. “Ask a [consumer] under the age of 25 if they are carrying cash on them.”

While the potential for increased cash use is debatable, industry data suggest prepaid debit card use continues to grow, and Cardtronics believes it stands to benefit from the boost.

Increased government interest and growing consumer adoption will help push the total funds loaded into prepaid card accounts to $672 billion by 2013, concludes a November Mercator report. That figure is more than double the $330.03 billion loaded into prepaid card accounts in 2009.

Cardtronics is making moves to ensure it captures a piece of that growth.

In October, MasterCard Worldwide partnered with Cardtronics’ Allpoint Network to offer surcharge-free ATM access to its issuers and program partners. Allpoint has 32,000 surcharge-free ATMs in the United States located primarily at retail stores such as Target Corp., Costco Wholesale Corp. and 7-Eleven Inc.

Even before the deal, Cardtronics saw increased transaction volume occurring from prepaid debit card users, according to Updyke.

“Whether the prepaid card is used for government benefits or payroll, that was a consumer we were not seeing before because they were receiving a check and going to a check-cashing location,” Updyke says.

Giving consumers the ability to reload prepaid debit cards at an ATM is likely the next step, Updyke says. “It’s just a matter of getting more cash-acceptance devices out there,” he adds.

Cardtronics does not plan to add such functionality to its machines.

Celent’s Meara believes the foreign market also could prove lucrative for the ATM makers and managers. Brazil, China, India and Russia are emerging markets and “will represent the bulk of new shipments over the next couple of years,” he says.

All three major ATM manufacturers have branched out into other areas to grow their business.

Hancock Holding Co.’s Hancock Bank is using an NCR-developed mobile banking product to support its mobile banking initiative (see story).

In August, Barclays Bank PLC agreed to outsource the management and maintenance of 550 ATMs to NCR, illustrating the need to build business overseas (see story).

Diebold also has developed a mobile banking product. Corpus Christi, Texas-based NavyArmy Federal Credit Union plans to deploy it for its customers (see story).

Wincor is attempting to advance ATM technology. The manufacturer and HID Global, a provider of secure identification systems, on Dec. 13 introduced an ATM system with a contactless smart card reader, allowing a single piece of equipment to process ATM and automated fare-collection transactions for transit agencies (see story).


 The major manufacturers experienced slow sales in 2010, while Cardtronics did well thanks to Allpoint. Success the next few years might depend on consumers’ increased preferences for automation and cash.

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