March 18, 2008

ATM Market Flat for 2008

New report from FTN for North American ATM market issued today. Duopoly of NCR and Diebold still in place though Wincor is beginning to edge in. New spending is expected to be flat. Interesting is that "operational CRM which refers to ATMs, call centers, and tellers/etc is becoming focus as opposed to "analytical CRM" which are tools that drive customer-centric business decisions. Worth noting to that Service Costs for a full-function ATM average between 8K and 12K a year. Key points follow.

Key Points:

• Our most recent annual ATM deployment survey indicates overall spending for ATM hardware and software in 2008 will be flat to slightly up compared to 2007.

• At this time a catalyst does not exist for financial institutions to increase spending for ATMs.

• The results of our survey indicate national financial institutions will increase spending, but community banks will curtail their budgets for ATMs.

• The primary reasons for spending in 2008 are replacement and deployment of new ATMs.

• The U.S. ATM market remains a duopoly; however, Wincor Nixdorf is receiving greater mention.

• Financial institutions will pilot image-enabled ATMs; however, we believe significant deployment will not occur until 2009 and 2010.

• ATM transactions on average are continuing to decline 3-5% and almost all respondents believe this trend will continue.

• Financial institutions are increasing their leverage because of consolidation.

• There is little difference in hardware between the two primary vendors. The difference is software and service.

Other excerpts:

Check Imaging
Check imaging technology continues to be a topic of discussion. Over the past several years financial institutions have indicated a desire to deploy image-enabled ATMs; however, for numerous reasons extensive deployment has not occurred. It appears that financial institutions remain concerned about the cost of the technology, monies were utilized for other projects, and some question the business case for the technology. Although deployment has been delayed we do believe financial institutions will eventually embrace the technology. We believe significant deployment will occur in 2009 and 2010.

leaders in the industry and NCR goes offshore
DBD and NCR remain the clear market share leaders worldwide, and we believe Wincor gained market share last year. DBD remains the market share leader in the United States, especially in the community financial institution market. In 2007 NCR spun out is Teradata division, thus placing greater focus on its ATM and retail businesses. NCR also decided to outsource its ATM manufacturing in North America, which should result in a lower cost structure for the company.

ATM Transaction Growth Is Slowing
Industry statistics indicated that ATM transactions per month/per machine were down roughly 4% in 2006, this is generally in line with our expectations but was down from 2005. There was a mixed response from the participants in our survey for ATM transaction growth. Some financial institutions are witnessing transaction growth primarily for “on us” transactions. We believe the increase in surcharges has resulted in customers focusing on using their bank’s ATM to mitigate surcharges. This is a slight change from our survey last year when many of the survey respondents indicated they witnessed a decline in ATM transactions. We believe transactions per ATM will once again decline 3-4% in 2007 because the increase in credit and debit card usage and customers’ using ATM’s less frequently

John Healy,
Research Associate
Phone (216) 592-1944

Posted by staff at March 18, 2008 06:50 AM