To Diebold Inc., the nation’s largest ATM maker, the ongoing shift to omnichannel commerce is as much a threat as it is an opportunity.
For the 157-year-old North Canton, Ohio-based company, combining its financial services prowess with the emerging frontiers of retail dovetails with recognition of the fact that as consumers rely less on cash and more on digital payments, demand will continue to fall for clunky equipment like safes, cash registers and ATMs.
“Omnichannel hits both sides of the [financial services and retail] equation,” Andy Mattes, Diebold’s CEO, told analysts during a conference call this month discussing the company’s fourth-quarter earnings.
Over the last couple of years, Diebold has dramatically shifted its focus to developing lighter-weight technology, so its North American business is now about 70% focused on software and services, Mattes said. The company plans to work with retailers to pilot a line of self-service kiosks combining the core features of ATMs with mobile contactless payments.
“[This omnichannel pilot] gives us an opportunity to drive use cases in environments that are not quite as heavily regulated as the banking environment,” Mattes said.
Diebold hasn’t disclosed the names of the retail partners it’s working with on the self-service kiosks, and it could take years to develop that side of the business, analysts suggest.
And Diebold isn’t the only ATM maker reinventing its strategy. NCR and Paderborn, Germany-based Wincor Nixdorf also are developing new different types of self-service checkout modules for retailers. Diebold is in the process of purchasing Wincor Nixdorf for $1.9 billion, with plans to finalize the transaction this summer.
But Diebold has high hopes that the pilots it plans with retailers will invigorate business. “This will help us get real-life feedback and input, which will help us to expedite innovation cycles,” he said.
At the Mobile World Congress in Barcelona, Diebold’s software will be on display with mobile payments platform developer WiseSec, which is presenting a solution that uses Diebold software to enable Bluetooth-enabled contactless payments on smartphones and even lower-tech devices like flip phones, at the ATM.
Diebold faces tough competition in the packed field of payment industry players making a showing in Barcelona, all working to reinvent the way consumers shop and pay online, as mobile commerce increasingly expands consumers’ all-channel expectations for accessing goods and services.
Visa, MasterCard, Discover, American Express, PayPal and a host of other providers are building out digital wallets to enable secure payments across channels.
Retailers, meanwhile, are building their own mobile payment apps with similar goals. Walmart this year plans to roll out a proprietary mobile wallet that will bridge in-store and online payments, and various merchants participating in the Merchant Customer Exchange's Ohio pilot of CurrentC hint that the mobile payments app will offer omnichannel versatility.
What Diebold predicts can set it apart is its ability to blend newer mobile tech with its old-school expertise in handling cash and checkout, said Frank Natoli, Diebold’s executive vice president in charge of self-service technology, in an interview.
The rise of mobile payments is certainly displacing cash use in some sectors, but despite the predictions of some in Silicon Valley, we are nowhere near a cashless future, Natoli said, citing Forrester Research that suggests cash use will rise 3% worldwide over the next five years.
This trend provides an opportunity for Diebold to artfully blend the concepts of the ATM, low-labor in-store self-checkout services and the push for shopping and paying via mobile devices.
“Old world and new world payments are going to coexist for a long time to come, with banked and unbanked consumers conducting transactions in cash and on smartphones alongside one another in all kinds of environments, from farms to small shops to billion-dollar businesses, and payment models need to accommodate them all,” he said.
Gil Luria, an analyst with Wedbush Securities, points out that Diebold isn’t the first ATM maker to tackle the retail self-checkout market, though he notes it’s an “appealing” market for the company. “Diebold has a vision that combines the current functionality of the ATM in an omnichannel world,” Luria said.
Diebold is also applying the omnichannel concept to its core ATM services for banks. Citi is conducting a pilot of Diebold’s cardless, iris-scanning “Irving” model ATM that has no screen, keypad or printer. The device enables consumers to authorize a cash withdrawal by entering a PIN into a smartphone mobile app, and tapping the phone on the ATM to get the cash, and Mattes said results so far have been positive.
Diebold expects to be profitable in 2016, and though Mattes said the company has “a lot of heavy lifting in front of us,” net income for the fourth quarter of 2015 was $35.7 million, up % from $30 million during the same quarter a year ago, while total revenue was down 21% to $615.4 million versus $778.6 million year earlier.