ATM Deployers diversify to offset declining ATM withdrawals

Since hitting a peak of 78 million ATM cash withdrawals in December 2008, and following the introduction of direct charging in March 2009, ATM transactions have been on a long downward spiral. The increasing use of contactless payment cards in recent years has accelerated the decline, resulting in a 14% decrease in cash withdrawals in the last two years alone. As EFTPOS contactless cards are rolled out more widely, this trend is expected to continue.

Despite this trend, since December 2008, the total number of ATMs deployed has increased by about 5,800 ATMs (21%) to 32,879 as at December 2016. This increase has come from independent ATM deployers (IADs). The combined effect of rising ATM numbers and declining withdrawals has resulted in a dramatic drop during this period in the average monthly cash withdrawals per ATM from 2,896 to 1,649 (a 43% decline).

While both financial institutions and IADs have been impacted, IADs have more levers to pull to try to mitigate the impact that this decline has on profit margins. The main tool being the direct charge fee. The RBA reported direct charge fees at IAD ATMs were $2.57 in July 2015, up from $2.00 in 2009, an increase of 29%, and the fees have continued to rise since then.

The major IADs have also increased in size (both organically and via acquisition) to achieve further economies of scale. DC Payments acquisition last year of the Cashcard ATM business (the previous 2nd largest IAD), took the combined business to over 11,000 ATMs in Australasia. DC Payments was itself then acquired by Cardtronics, the world’s largest IAD with over 231,000 ATMs owned or managed. Globally, Cardtronics has an increasing focus on extending the services offered to financial institution clients; ATM managed services, ATM branding arrangements and fee free network access (e.g. the Allpoint Network). While such service provision by IADs is not new to the Australian ATM marketplace, there is likely to be a greater push over the coming years by IADs to target the financial institution sector.
Diversification, both geographically and into new business lines, has also become an important strategy in the IAD sector. Two interesting examples are Banktech (Australia’s 2nd largest IAD) and Next Payments (3rd largest):

  • Banktech
    •  In Australia, Banktech has continued to expand the range of technology solutions that it offers its primary target market (predominantly hotels, clubs and casinos), beyond just ATMs. As an example, in June 2016 it acquired Global Gaming Industries, a gaming systems provider.
    • Internationally, its wholly-owned subsidiary, BTI Payments, has deployed more than 4,000 white label ATMs in India over the last two years and in 2016 started to deploy payment kiosks in the Philippines. The Indian business, like all Indian IADs, was hit with cash shortages when the Indian government demonetised the 500 and 1,000 rupee notes last November but is now close to its pre-demonetisation transaction volumes.
  •  Next Payments
    • Next has been implementing Sendrato’s contactless payments wristband technology. A recent success was deployment of the solution at Oktoberfest Brisbane last year which had over 43,000 patrons.
    • Both Next and Banktech also deploy intelligent safe solutions targeted at the gaming industry to improve back-office efficiency, reconciliation and security.

With the ATM transaction decline expected to continue, this is likely to result in further innovation and shifts in the competitive landscape as the industry adjusts to these changes

Mangala Martinus, Managing Director, Sydney

With over 26 years experience in the financial services and payments industries, Mangala has a proven track record in developing and executing innovative and practical business strategies. He also chairs the Australian ATM Round Table, which meets every six months.