With sales of automated teller machines slow, some manufacturers are promoting outsourcing agreements to encourage small and midsize banks and credit unions to deploy advanced-function machines.
NCR Corp. has signed a three-year outsourcing agreement with the credit union service organization Co-op Financial Services that will enable Co-op's members to lease new ATMs instead of buying them, eliminating a major capital expense.
NCR will lease ATMs to the credit unions through GE Capital, said Bill Allen, an NCR marketing director. Co-op ATM Managed Services, a unit of Co-op Financial Services, will manage the companies' leased ATMs.
NCR, of Duluth, Ga., also will provide maintenance services for the leased machines.
"If the ATM breaks down, we fix it," Allen said.
Bill Prichard, a Co-op spokesman, said the Rancho Cucamonga, Calif., company operates a network of 28,000 ATMs. Nearly 3,000 credit unions nationwide are members of the organization.
NCR said the deal would provide credit unions with an alternative to buying machines. "Leasing ATMs is a lot more attractive for some financial institutions because leasing agreements are not carried on the books as a capital expense," Allen said.
Prichard said the NCR deal would benefit Co-op's members. "We believe that this is going to make it easier for credit union members to own new ATMs," he said. "Time and the economy will tell us whether it will work, but we went forward with the agreement because we are confident Co-op members are interested in this program."
NCR will promote its SelfServ line of intelligent-deposit ATMs to the credit unions when the outsourcing program begins in early 2010, Allen said.
The move to ATM outsourcing also is well under way at Diebold Inc. and Wincor Nixdorf AG, NCR's top rivals, Bob Meara, a senior analyst with Celent LLC, said via e-mail. "There's been a clear move toward ATM outsourcing, and ATM manufacturers have initiatives in that area," Meara said. "Manufacturers have introduced additional services as hardware-sales growth has been increasingly challenged across the globe."
Regional banks' reluctance to upgrade their ATMs has created opportunities for Diebold's integrated services unit, which focuses on outsourcing ATMs to banks and other financial companies, Thomas Swidarski, Diebold's president and chief executive, told analysts last month during the company's third-quarter earnings call.
"We've had a lot more activity in terms of [requests for proposal] and responses, and we've had symposiums across the United States where we've gotten momentum in that regard, and we've seen a lot of that turn into some activity here in 2009," Swidarski said.
Diebold, of North Canton, Ohio, is managing 1,000 bank-owned ATMs, Swidarski told analysts. Besides the U.S., it also has signed outsourcing agreements with banks in China, India and the European Union, he said.
Meara wrote in a blog post in April that Diebold's emphasis on integrated services signals a shift away from its primary role as a hardware manufacturer.
"Collectively, Diebold, NCR and Wincor Nixdorf are making it easier for financial institutions to replace aging cash-dispenser ATMs with more capable self-service devices," Meara wrote.
Wincor Nixdorf, of Paderborn, Germany, devoted five pages of its 2008/2009 annual report to its outsourcing business.