A Tough Sell For ATM Makers

  The ATM industry made a small gain last year after an abysmal 2001. Now manufacturers hope that new services planned by banks will translate into more revenue.
  Buyers of automated teller machines are a cautious bunch these days as ATM transaction volumes stay flat.
  But emerging functions and services, new regulations and technological advances appear to have helped to increase sales slightly in 2002. Manufacturers last year shipped 50,954 ATMs in the United States, up 3.5% from 49,241 in 2001 when shipments declined by 17% from the previous year's total, the results of CCM sister publication ATM&Debit News' annual U.S. ATM shipment survey show.
  Shipments for North Canton, Ohio-based Diebold Inc., the leading U.S. ATM maker, declined about 6%, based on company financial reports and analyst interviews. While Diebold would not provide U.S. shipment data, ATM&Debit News estimates that Diebold shipped 13,560 ATMs in 2002, down from 14,400 in 2001.
  Diebold arch-rival NCR Corp. eked out an estimated 1% gain in 2002 after suffering a 13% shipment decline in 2001.
  Slow U.S. ATM sales have affected not only manufacturers that primarily serve banks, such as Diebold and NCR, but also producers of off-premise cash dispensers such as Long Beach, Miss.-based Triton Systems of Delaware Inc. and Fremont, Calif.-based Tranax Inc. Triton last year shipped 9,867 ATMs, up about 3%. Tranax shipped 7,600 ATMs in 2002, virtually unchanged from 2001.
  Most ATM buyers or resellers, which primarily are banks and independent sales organizations, say the industry is demanding more service-oriented products that can be mixed and matched on existing and new machines, regardless of make or model.
  Leon Majors, president of Salisbury, Md.-based ESP Consulting Inc., which conducts marketing surveys for ATM ISOs and financial institutions, believes major ATM turnover will occur in a year or two as off-premise deployers increasingly offer such value-added services as dispensing cellular-telephone time, check cashing and bill payment to capture unbanked customers.
  New Conveniences
  At the other end of the spectrum, observers expect banks to replace thousands of ATMs to offer their own customers such new conveniences as bill payment and check imaging through ATM deposits. And both groups are likely to replace ATMs to comply with new Triple Data Encryption Standard transaction security protocols, Majors predicts.
  "The total sales may be down from what they once were, but I am seeing more optimism on 2002 and 2003 than in 2001," he says.
  NCR Vice President Bob Tramontano agrees, but says it was too early last year to reap the benefits of such technological upgrades. Many banks held back on purchasing ATMs because they are unsure of debit networks' technical requirements for Triple DES, according to Tramontano, adding that deadlines to meet the new standards are closing in.
  "We see it ramping up this year," he says.
  Mike Tharp, Diebold senior marketing manager, also believes many financial institutions will be considering big replacement packages to comply with Triple DES and to enable customers to conduct more banking services. "We had a mix of people deciding to upgrade or going ahead with replacements because of Triple DES," he says.
  There are increasing demands, however, to offer with the machines low-cost software so operators may set up new services in multivendor environments, Tharp notes.
  Diebold recently began promoting its Agilis multivendor software, while NCR offers its APTRA multivendor program.
  As imaging hardware and software become more economical, Tharp and Tramontano believe there could be a big future in check imaging at ATMs. Chicago-based Bank One Corp., for example, earlier this year started a pilot using check imaging on 10 NCR machines.
  ATM makers once could count on off-premise ATMs to drive sales, as thousands of merchants bought cash dispensers for the first time. But those times are mostly gone.
  And, as with bank ATMs, makers of off-premise machines are seeking to market to ISOs that already have ATM clients.
  "Whatever you gain is at the expense of someone else," says Paul Kim, a vice president of Tranax, which distributes cash dispensers made by Hyosung Computer, a South Korea-based computer manufacturer.
  Brand Replacement
  Indeed, New York-based NexTran Inc., a subsidiary of Chungho ComNet Co. Ltd., also based in South Korea, is targeting existing users of Tranax ATMs. Many NexTran sales last year went through distributor ATM America, formerly a top Tranax distributor, says Eric Park, NexTran president.
  Hundreds of NexTran ATMs are in mom-and-pop convenience stores owned by Korean Americans in New York City. The Money Marketing Inc. ISO, a NexTran sister company, deployed the ATMs.
  Another example of brand replacement involves Germany-based Wincor Nixdorf Inc. Wincor supplied a major contract with Menlo Park, Calif.-based E*Trade Group Inc. for 1,000 ATMs deployed in Target Corp. stores.
  E*Trade several years ago bought the Card Capture Services ISO, at the time the nation's largest ATM ISO. Card Capture used Triton ATMs almost exclusively.
  Triton machines, however, are in new locations, such as ChevronTexaco Corp. gas stations and AMF bowling alleys, that once had deployed other vendors' brands, says Triton President Brian Kett.
  As ATMs become dated, even in the relatively new off-premise market, old partnerships often die, notes Saul Caprio, Wincor's U.S. marketing chief.
  "Nobody wants the old stuff," he says.