Trends in Off-Site ATMs Market

Trends in Off-Site ATMs Market

13,OCT, 200813,OCT, 2008

ContentsContents

• Trend in Off-Site ATMs

• IAD Market

• Off-Site Locations

• Off-Site Markets and Driving Factors

• Business Models

• Strategy for IADs and Banks

• Conclusion

• Trend in Off-Site ATMs

• IAD Market

• Off-Site Locations

• Off-Site Markets and Driving Factors

• Business Models

• Strategy for IADs and Banks

• Conclusion

Global ATM installations Global ATM installations

Since the emergence of ATMs in 1967, growth of ATMs have been rapidly growing in numbers worldwide especially from 1983. Now the number of ATMs reach up to 1.8 million and number is expected to hit 2.5 million mark in installations in 2013 according to RBR. We can imply from this trend that ATMs are still being needed around the globe.

Retail Banking Research, August 2008

19671968196919701971197219731974197519761977197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013

Compound Annual Growth Rate

• 2001 ~ 2007 : 7.5%

• 2007 ~ 2013 : 5.9%

• 2007 ~ 2008 : 7.5%

2.5

1.0 million

0.5

1.5

2.0

7.5%

5.9%

Global Off-Site ATM installations

Globally, offsite ATMs are growing in numbers as opposed to different locations. In 2007, the off-site ATMs take up about 47% of the entire ATM installations.

Between 03~07, the growth in off-site ATMs have been rising sharply.

7.2%100%1,779,965100%1,349,021Total

3.3%53%949,55262%834,210Onsite

12.5%19%330,74315%206,194TTW

0.8%3%51,5674%49,864Drive Up

-0.5%31%567,24243%578,152Lobby

12.7%47%830,41338%514,811Offsite

%ATMs%ATMsCAGR

20072003

2003 2007

Off-site : 12.7%

On-site : 3,3%

Retail Banking Research, August 2008

Latin America

North AmericaCentral & Eastern EuropeWestern Europe

Middle East & AfricaAsia-Pacific

2003' 2005' 2007' 2003' 2005' 2007' 2003' 2005' 2007'

2003' 2005' 2007'2003' 2005' 2007' 2003' 2005' 2007'

Global Off-Site ATM Trend Per Region

Overall

Off-Site

37.2%23,23462,45824.4%21.4%Middle East and Africa

41.8%237,485568,14614.8%8.7%Asia Pacific

32.2%64,282199,63524.0%8.3%Latin America

69.7%321,011460,53224.4%2.2%North America

30.0%108,143360,4792.3%4.9%Western Europe

57.3%72,717126,90738.9%29.3%Central & Eastern Europe

%OffsiteOverall OffsiteOverall

2007 InstallationsGrowth Rate 03~07

Retail Banking Research, August 2008

Off-Site ATMs in Europe

24%35%793 4,065 3,272Poland

9%44%332 4,174 3,842Netherlands

11%39%547 5,712 5,165Portugal

0%12%-6 6,232 6,238France

11%17%719 7,262 6,543Italy

10%41%702 7,776 7,074Turkey

5%14%413 8,364 7,951Spain

37%57%3,219 11,969 8,750Ukraine

4%21%406 11,812 11,406Germany

39%64%9,190 32,972 23,782Russia

9%71%3,852 45,392 41,540UK

Off-siteGrowth

(‘06~’07)

Off-siteShare(2007)

AbsoluteGrowth

2007 Off-Site ATMs

2006Off-site ATMs

Few of the European countries have experienced a growth in off-site ATM Installations especially in Russia, Ukraine and Poland.

Retail Banking Research, August 2008

1. Cardtronics (USA): 28,825 Installations

2. Innovus Inc.(USA) : 21,555 Installations

3. ATM Express (USA): 16,700 Installations

4. Hanco (UK): 8,641 Installations

5. Payment Alliance International (USA):

8,500 Installations

6. TRM (USA): 7,833 Installations

7. Euronet (Poland, Germany,

Czech Republic, Slovakia: 1301 installations

Off-Site ATMS by RBR 2007

1. Nautilus Hyosung (KOREA): 155K supply

(Retail : 108K supply)

2. Triton (USA): 118K supply

(Retail: 100K supply)

IAD (Independent ATM Deployers) Market

Emergence of IADs (Independent ATM Deployers) have played a key role

in boosting the number of installations worldwide especially in North America.

Due to this Trend, large IADs, and ATM Manufacturer specializing in low-cost ATMs have emerged.

However in Europe, IADs take up only 21% of the total off-site ATMs but there are increasing number of ATMs that are being deployed by IADs in UK, Germany, Czech Republic, Poland, Sweden, Slovakia, Norway among European Countries according to RBR offsite ATMs 2007

Leading IADs (2007)Leading IADs (2007) Manufacturer of Low Cost ATMsManufacturer of Low Cost ATMs

Popular Locations of Off-Site ATMs in Europe, 2007

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

Supermarket

Factory/ Office

Other Retailer

Convenience Store

Shopping Centre

Bar/Pub/Nightclub

Petrol Station

Municipal Building

Street/Square

Hypermarket

Entertainment Centre

University

Rail/ Underground Station

Hospital

Department Store

10.1%Shopping Centre

10.7%Convenience Store

10.8%Other Retailer

11.2%Factory/ Office

12.1%Supermarket

Share(%)Location

Having an ATM at supermarkets and retail environment seems like the most

popular choice for off-site locations.

Retail Banking Research, August 2008

118933,089 2,405 Average

1211322,874 3,540 Turkey

1351152,900 3,699 Denmark

1801284,478 3,734 Norway

1031125,934 3,824 Netherlands

1341227,483 4,153 Ireland

78774,889 4,615 Poland

2431483,215 5,172 Switzerland

97859,845 8,029 Sweden

84849,314 10,105 Finland

Average Branch Value

Average Off-Site Value

Average Branch Volume

Average Off-Site Volume

Country

Monthly Transaction Volume and Value per ATM in Europe, 2007

European avg of monthly transaction volume at off-site is 2,405 transactions

and avg value at off-site is about 93 Euro per transaction.

Prominent Off-Site Markets

� Ireland73% off-site, highest in WE due to low cost ATMs by Banks (BOI, Ulster, AIB) Geographic population distributions: high pop in east low in West, low population in west could not justify the installation of the traditional off-site ATMs where Retail ATMs did. No Surcharge, Branding is popular

� UKIADs responsible for 69% of the off-site growth from 95~07 (42,500 installations) Low cost atms justifies an installations (merchant fill ATMS)

�USAAbout 70% of the installations are off-site. 25% of off-site is deployed by banks the the rest by the ISOs convenient store being the most popular off-site location.

What are the Driving Factors?

Prominent Off-Site Markets

�Australia Active IAD Market 12,500 (76.4%) out of 26,067 total installations.

�Canada 72% are off-site. 62% are ISOs. Major IADs,Lo Cost ATMs prevalent.

�Russia65% are off-site, Cash Driven

�JapanConvenient Store ATMs over 30,000 installations (17%) with diverse services with an average of 3,000 transactions per ATM per month.

Offsite account for 46% of the ATM installations.

What are the Driving Factors?

Geographies and Populations: More people = more ATMs

Geographies and Populations: More people = more ATMs

Cost of building Branches:

ATM cost < Branch cost

Cost of building Branches:

ATM cost < Branch cost

Low Cost ATMs By IADs:

Initial Investment is Low

Low Cost ATMs By IADs:

Initial Investment is Low

Surcharging Practice (Interchange): Surcharging as a Biz

Surcharging Practice (Interchange): Surcharging as a Biz

Cost of IP based communications:

Cost of communication is cheaper

Cost of IP based communications:

Cost of communication is cheaper

Traffic and Revenue Generator (Retail): Attract Customers

Traffic and Revenue Generator (Retail): Attract Customers

What is driving the growth of Off-Site Installations?

Proliferation of Deposit Automation

(More Off-Site Deposit ATMs)

Proliferation of Deposit Automation

(More Off-Site Deposit ATMs)

IAD Business Models – Seven Bank (Japan)

• 7 Bank Deploys 12,000 ATMs throughout Japan, an avg. of 2,950 transactions per ATM/Month

• 7 Bank ATMs has tie up contracts with 547 financial institutions across Japan and FI charges

their own amt to customers

• Offer Electronic Money, Prepaid Cards, Top-ups, Advertisements, Own-Bank Screens

• 7 Bank Deploys 12,000 ATMs throughout Japan, an avg. of 2,950 transactions per ATM/Month

• 7 Bank ATMs has tie up contracts with 547 financial institutions across Japan and FI charges

their own amt to customers

• Offer Electronic Money, Prepaid Cards, Top-ups, Advertisements, Own-Bank Screens

Seven Bank

CustomerSeven Bank ATMs

CashDepositsPaymentBalance InquiryTransfersAdvertisementsIC CardsOwn Bank ScreensE-Money (Cards)

BankWith

Tie-UpContracts

(547Banks)

Service charge for transactionPaid directly to banks with contracts

Seven Bank

ATM service Fee

Source: 7 Bank

• Store owners purchase ATMs and replenish

cash

• ATM users pay both surcharge and intercharge

• Store owners purchase ATMs and replenish

cash

• ATM users pay both surcharge and intercharge

Card Holder

Surcharge

Bank

NSP

Interchange

• Cirrus, Star, AMEX, Plus, etc

Switch

• Line Connection

• Low operation costs by using store’s cash

• Multiple players are involved

• Low operation costs by using store’s cash

• Multiple players are involved

• Service Co. provides total service from

installation, A/S and cash management

• Only surcharge for usage

• Service Co. provides total service from

installation, A/S and cash management

• Only surcharge for usage

Korea

Card Holder

Service Co.

Merchant

Surcharge

• Own machines

• Operation cost such as cash

delivery / Trouble Shooting and

Maintenance

• Provides installation

space

Bank

• Connect to financial

network

• Significant cost for cash management

• Store owners have minimum involvement

• Significant cost for cash management

• Store owners have minimum involvement

Vs.

USA / UK

ISO

• ATM Dealer, A/S

• Own machine and

provide installation

space

• Replenish cash

Merchant

IAD Business Models – Korea & USA

What should be the strategy for Banks and IADs?

Despite rapid growth of ATMs worldwide, Market Situation of ATMs has worsened for banks and IADs due to decreasing Number of transaction from each ATMs and rising costs from operating the ATM network.

There needed to be a way for Banks to reach out to the customers and be effective.

Growth of Non-bank ATMs

InstallationsTransactions per ATM

Declining transactions per ATM Growth Inhibitors (2003~2007)

1. High Operational and Maintenance Costs (CIT)

2. High Purchase Costs

3. Low Transaction Volume (Saturations)

4. High Site Rental

5. Security Concerns (PCI, EMV)

6. Optimization than Number (profitability)

7. Consolidation of Banks and IADs

1. High Operational and Maintenance Costs (CIT)

2. High Purchase Costs

3. Low Transaction Volume (Saturations)

4. High Site Rental

5. Security Concerns (PCI, EMV)

6. Optimization than Number (profitability)

7. Consolidation of Banks and IADs

Low endLow endcash onlycash only

ATMATM

Cash onlyCash onlyATMATM

Full functionFull functionATMATM

RecyclingRecyclingATMATM

MultiMulti--functionalfunctional

ATMATM

� ATM transformation

Cost Savings

Support transactions load

Create More Value Proposition

Generate More Business Opportunities

�

�

� Transformation of ATM role

Strategy for Banks and IADs?

Banks and IADs can look toward creating more value for the customers and

continuously generate business opportunities through the ATMs.

Monimax Series

NH-1500 NH-1800

NH-2100T

5000ce 5000xp 5300 5600

5200T5100T5000T 7600T 7600D

(Drive-up)

8000

8000T5300 withSidecar

5000 withSidecar

Full FunctionFull Function

ATMATMRecyclingRecycling

ATMATM

Mini-Bank Series

Nanocashseries

3000

2000

MultiMultifunctionfunction

ATMATM

3090 3090G

Cash DispenserCash Dispenser

Ubitus series

7600

The various ATM based on customer needs supporting customer’s specific ATM operating locations and their specific needs.

ATM Portfolio

Strong Interface with CustomerStrong Interface with Customer

Multimedia KioskMultimedia Kiosk

Flexible and innovative

approaches of service development

Flexible and innovative

approaches of service development

Generate various business

opportunities

Generate various business

opportunities

Off site ATMs is an ideal platform for various services for customers beyond

banking through strong network with other service providers.

Value Added Services and Biz Opportunity

Check CashingCheck Cashing

Automated DepositsAutomated Deposits

3rd Party Advertisements3rd Party Advertisements

Mobile Top-UpMobile Top-Up

Bill PaymentBill Payment

Camera

Check cashing

Authentication (Fingerprint)

Coin payment

Receipt printing

Withdrawal(Cash dispensing)

Coin dispensing

15.1” TFT LCD displaywith touch screen

Card reader

Bill acceptor

Barcode reader

Printed card dispensing

Encrypting PIN pad(PCI compliant)

Card printing and dispensing

Voice Guidance Wireless card contact

“ One stop service ”

Multi-Functional ATMs for off-site locations

BankBank

Credit CardCredit Card

InsuranceInsurance

AffiliationAffiliationAffiliation

Financial Service

Cash Withdrawal,

Wire transfer, Inquiry,

Cash Service (Credit Card),

Insurance,

Contract Inquiry etc.

Financial Service

Cash Withdrawal,

Wire transfer, Inquiry,

Cash Service (Credit Card),

Insurance,

Contract Inquiry etc.

Non-bank ATM Services

Payment Service

Utility, Rent, Tax, GIRO etc.

Payment Service

Utility, Rent, Tax, GIRO etc.

Other Value Added Services

Airline ticket,

Credit Rating Information,

Advertisements, Membership Support,

Cyber Money Transaction, etc.

Other Value Added Services

Airline ticket,

Credit Rating Information,

Advertisements, Membership Support,

Cyber Money Transaction, etc.

ServiceServiceService

Securities Company

Securities Company

Service Co.(Non-bank ATM)

Service Co.Service Co.(Non-bank ATM)

Other Service Providers

(Airline, Railway, Movie, etc.)

Other Service Providers

(Airline, Railway, Movie, etc.)

Non-bank ATMs meet customer’s diverse needs by establishing strong network with

banks, insurance companies, securities companies and other service providers.

IrFM (Korea) RF Card, RF Mobile phone (Korea) Mobile barcode (Korea)

Card payment(Thailand)

Card, bill& coin payment (Mexico) Advertisement & information(Korea,USA)

� Mobile Banking

� Various payment options � Dual display � Image processing

Business ProcessReengineering (Korea)

Offering more diverse ways for customers to engage with the ATMs

Various Ways for Engagement

In order for off-site ATMs to take off, all three aspect of ATM values (Basic Service, Value Added Services, Outsourcing) needs appeal to the deployers.

Synergy

Model

Value Value AddedAdded

ServicesServices

ATMATMOutsourcingOutsourcing

ServiceService

BasicBasicServiceServiceModelModel

More Transactions

More

Tra

nsactio

ns

More S

ervice

Revenues

<Future outlook for Off-Site ATMs>

Basic Service ModelBasic Service Model

Value Added ServicesValue Added Services

ATM Outsourcing ServiceATM Outsourcing Service

Proliferation of Off-Site ATMs

Thank youThank you