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ATM manufacturer Nautilus Hyosung Inc. is known throughout Asia as a major supplier of ATMs to banks and other financial institutions. In South Korea, for example, where the company is based, Nautilus Hyosung controls 40% of ATMs shipped to banks.
In the U.S., however, Nautilus Hyosung America Inc., Nautilus Hyosung Inc.'s U.S. subsidiary, is known as the market leader in shipping off-premise ATMs to retail outlets, including restaurants, grocery stores and movie theaters. Its biggest seller is the Mini Bank 1500 cash dispenser, some 18,000 of which the company sold between February 2007 and May 2008.
Nautilus Hyosung America now wants to use the financial muscle gained through its sales to banks in South Korea to sell ATMs to U.S. banks. Last year, the Coppell, Texas-based manufacturer shipped more than 20,000 ATMs in North America, including 2,000 to Citibank Inc., one of the nation's largest bank deployers of ATMs (ADN, 2/26). The Citi contract was the company's first major U.S. bank-ATM deal.
Nautilus Hyosung is entering the U.S. bank ATM market at a challenging time because ATM sales are falling. Moreover, the Ohio twins—Diebold Inc. of North Canton and NCR Corp. of Dayton—long have dominated the U.S. market for bank ATMs.
Despite the up-hill battle, Nautilus Hyosung has begun taking steps to build the financial side of its business through several key hires that include former Diebold and NCR executives.
The company hired Steve Bruno, previously a vice president within the Citibanking Technology Solutions Group, as vice president of solutions development and support; Eric Durfeld, previously worked for Diebold in direct sales for regional, national and key accounts. He joined Nautilus Hyosung as regional sales director for the southeastern U.S. market; Greg Schneider, previously NCR executive services manager, as regional sales director for the southwestern and western regions of the country; and Mark Miller, formerly NCR major account manager, joined Nautilus Hyosung as value-added reseller channel manager.
Nautilus Hyosung announced the new hires May 12. They join Mark O'Rourke, who was hired earlier as sales manager for the northeastern region.
The company, however, is still interviewing candidates for the position of vice president of sales for financial institutions, a process that began last June (ADN, 6/12).
"We have not hired a vice president of sales for [financial institutions] yet, but we did not want to delay building out our financial institutions team," Randal Lawrence, Nautilus Hyosung America marketing manager, tells ATM&Debit News.
Nautilus Hyosung is not being picky about the banks it is targeting, Lawrence says.
"We're going after everyone-large banks, small banks and credit unions," he says. In August, the company's American unit announced plans to compete with Diebold, NCR and Wincor Nixdorf AG in selling ATMs to U.S.-based financial institutions, including banks and credit unions (ADN, 8/31/08). The company disclosed its intentions after it signed an agreement to buy Triton Systems of Delaware Inc., an ATM manufacturer based in Long Beach, Miss. (ADN, 7/31/08).
The U.S. Department of Justice still has yet to approve the deal and has not returned calls to ATM&Debit News, seeking to find out why. Nautilus Hyosung had expected to close the deal in October. If the government approves the purchase, Nautilus Hyosung would control 60% to 70% of the nation's off-premise ATM market, say analysts.
Though Nautilus Hyosung may dominate the off-premise ATM market, moving into the bank-ATM market is more like moving from the minor leagues to the major leagues.
"The bank ATM market is 10 times larger in annual sales than the retail ATM market, and the standards are much tougher," says Gil Luria, an analyst with Wedbush Morgan Securities in Los Angeles. A bank ATM costs between $20,000 and $30,000; an ATM for the retail market can cost as little as $2,500. "Banks also expect their ATMs to operate 99.9% of the time," Luria says. Level Four Software released survey results Tuesday that suggests combating network downtime topped the list of banks' ATM priorities.
Nautilus Hyosung achieved some success with the Citi agreement, though Luria calls the deal an anomaly and not a sign of smooth sailing ahead for Nautilus Hyosung.
"Citibank was unique because it made its own ATMs in-house," Luria says. "The contract does not mean that the banking industry is open to having a fourth supplier."
The Citi contract called for Nautilus Hyosung to replace ATMs that Citi made in-house by buying parts from NCR and Diebold.
Other observers, however, contend winning the Citi contract was significant for Nautilus Hyosung.
"Citibank is the first big bank to try a lower-tier vendor in a core role," says Leon Majors, president of the payments systems practice at Phoenix Marketing International in Salisbury, Md. Majors contends the Citi deal could signal that major banks may be open to having a fourth supplier to spur competition and keep prices competitive. However, Diebold and NCR dominate sales to U.S. banks, controlling about 95% of the installed base of ATMs. Wincor Nixdorf controls about 2% because of its contracts with Wells Fargo & Co. in San Francisco and JP Morgan Chase & Co. in New York, say analysts. The balance of the business is spread among other ATM suppliers.
"If Nautilus Hyosung were to win contracts selling ATMs to banks, the company primarily would have to win business from Diebold and NCR," Dominic Hirsch, managing director of Retail Banking Research, a London-based ATM strategic marketing firm, wrote in an e-mail message.
"The fact that Nautilus Hyosung is a major bank supplier in South Korea definitely adds credibility for other markets, but South Korea is also very different from other ATM markets." Hirsch says. In the U.S., ISOs deploy more than half of ATMs, but in South Korea, which has more ATMs per capita than the U.S., banks deploy 80% of ATMs, Hirsch wrote.
Analysts also wonder how Nautilus Hyosung would service the ATMs it sells to banks. "If a bank purchases a manufacturer's ATMs, the company prefers that the manufacturer service its ATMs," says Kate Monahan, an analyst with Aite Group LLC in Boston. Nautilus plans to partner with third-party vendors and build its own service organization, Lawrence says. But building a service organization is a significant investment, Luria says. ATM
