As major banks updated their ATMs with advanced features, manufacturers predict a strong influx of business from smaller financial institutions playing catch-up.
Manufacturers Diebold Inc., NCR Corp. and Wincor Nixdorf AG expect to benefit from smaller players installing intelligent-deposit, or envelope-free, automated teller machines. And ATM operator Cardtronics Inc. said it is riding the momentum of a growing prepaid debit card market that is increasing use of its machines.
Banks that lack envelope-free machines may experience problems with consumers who believe they already have them, David Hadesty, Wincor's vice president of strategic alliances and product management, said. 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 said.
"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," said Hadesty.
Consumers with second-tier banks will begin to see envelope-free machines in the coming months, Hadesty said. Those banks are adding the machines "in direct response to their [larger] competitors," he said.
The economy is now a positive factor, especially from the manufacturers' perspective, observers said. Smaller financial institutions will invest in better machines as capital becomes available.
"There are a lot of things that one can be bullish about" as it pertains to the ATM industry, said Bob Meara, senior banking analyst at Celent.
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 said.
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, said the results of a survey it sponsored suggest consumers are ready for intelligent-deposit machines.
Seventy percent of respondents indicated they use envelope-free cash and check deposits at least two to five times per month, according to the survey, which was published in December. Sixty-seven percent said this feature is an important function of their bank's machines.
The Paderborn, Germany-based ATM maker surveyed 200 U.S. consumers online who typically use an ATM more than three times a month. Marketing firm Zer0 to 5ive LLC worked with Wincor to develop the survey. The marketing research firm e-Rewards Inc. administered the survey.
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's chief executive, told analysts during an October conference call to discuss third-quarter earnings.
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 said 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."
