(From ATM&Debit News)
U.S. demand for automated teller machines in recent years has come mainly from financial companies and independent sales organizations replacing old machines rather than deploying new machines in new locations.
Now it appears the ATM replacement market is flattening, a study concludes. Indeed, two ATM makers, Lipman Electronic Engineering of Israel and Fujitsu Ltd., have all but left the U.S. market.
According to a study by the newsletter ATM&Debit News, new shipments of ATMs in the past few years were driven in large part by bank deployers replacing old machines with ATMs that met new requirements, such as the Triple DES encryption standards. Banks were also busy migrating from ATMs running the outdated OS2 operating system to the more flexible Windows operating system.
The survey found that total U.S. ATM shipments in 2005 were 71,866, up 9%. That is much lower than the 17.5% growth rate from 2003 to 2004.
The nation's largest ATM maker, Diebold Inc., had an estimated 5% decline in ATM shipments in 2005, to 17,180, from 18,084 in 2004. Diebold executives told investors during its fourth-quarter earnings call that its 2005 ATM revenues were harmed by a decline in sales to regional U.S. banks.
Diebold's main competitor, NCR Corp. of Dayton, Ohio, appears to have taken market share from Diebold in 2005, said Andrew Orent, a vice president for NCR's financial solutions division. "Last year NCR picked up a huge amount of U.S. business in terms of ATM product and services," he said.
NCR shipments were up 30% in 2005, to an estimated 15,869 ATMs, from 12,220 in 2004.
Though a small number of banks and retail deployers have yet to upgrade their ATMs to Triple DES, the migration is almost complete at banks, said Kartik Mehta, an analyst with First Horizon National's FTN Midwest Securities Corp.
Mr. Mehta predicts that NCR and Diebold will both have flat growth in ATM shipments in the United States this year. Diebold said in its fourth-quarter report that it did not expect the ATM market to recover until 2007 or 2008, when banks are expected to begin buying ATM hardware and software for imaging checks.
To help improve margins in its ATM business, Diebold is investing in its ATM service offerings, such as its maintenance business, said Ken Justice, its vice president of global product marketing. Last year Diebold bought Fujitsu Ltd.'s U.S. ATM hardware service business.
NCR is targeting merchants that have not yet replaced old ATMs. Having bought Tidel Technologies Inc.'s cash dispenser unit in January, NCR has the largest installed base of ATMs in the country, Mr. Orent said.
Sherry Marsh, the marketing manager at NCR's Tidel EasyPoint ATM unit, said that her company's low-priced products could help NCR pick up replacement orders from retailers with low transaction volumes.
Bill Nuti, NCR's president and chief executive, said in his fourth-quarter earnings call that he expected the first half of 2006 to yield weak ATM revenues because of weak pricing.
NCR signed a five-year deal last year to provide 7-Eleven Inc. with its advanced ATMs, known as Vcoms, which include check-cashing and bill-payment capabilities. NCR also won new contracts to supply ATMs to SunTrust Banks Inc. of Atlanta and First Citizens BancShares Inc. of Raleigh.
Mr. Orent attributes NCR's growth to better sales efforts and interest in ATM check imaging. "Through 2002 and 2005, the size of NCR's U.S. ATM sales force rose from eight to 53," he said. All but five of the 135 U.S. ATMs that currently offer check imaging were supplied by NCR, he said.
Last year, Diebold's ATM deals included orders from Suncoast Schools Federal Credit Union in Tampa and Consumers National Bank. In November, Suncoast began the first U.S. trial of Diebold's deposit-automation technology using Diebold's Opteva ATMs. Suncoast says it will add the technology to its 200 Diebold ATMs by mid-2006.
Two ATM vendors left the U.S. market last year. Fujitsu, which shipped only 125 ATMs in the United States in 2005, against 738 in 2004, is focusing on the more lucrative Far East market, according to its U.S. marketing manager, Kent Schrock.
A spokesman for Lipman Electronic said the point of sale terminal vendor is getting out of the ATM business altogether. "Lipman sold very few ATMs in 2005," he said, without giving a number. (VeriFone Holdings Inc. of San Jose announced Monday that it was buying Lipman for $793 million. The acquisition, set to close in October, would make VeriFone the world's largest point of sale terminal maker.)
Among ATM vendors serving the retail market, Triton, the largest U.S. maker of cash dispensers, had its best year in 2005. Though Hurricane Katrina cost the Long Beach, Miss., company three weeks' worth of sales, it increased shipments by 21% in the United States.
Triton attributes some of that growth to increased sales to banks - the traditional NCR and Diebold market. Brian Kett, its president, said, "We've seen that many banks are ordering ATMs which were historically bought by ISOs or retailers."
Both Triton and Tranax, of Fremont, Calif., which had a 17.5% rise in ATM sales from 2004 to 2005, are developing full-service ATMs for banks and retailers that will enable them to move beyond the cash dispenser market. Tranax's full-function model will be introduced this quarter, offering banks drive-through and walk-up versions with deposit taking, check scanning, and other advanced banking functions, said Bill Dunn, vice president of sales at Tranax. This article originally appeared in ATM&Debit News.
