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ATMmarketplace 2010 ATM Software Trends and Analysis Guide

For 2010, ATMmarketplace.com has once again surveyed key individuals to update the “ATM Software Trends and Analysis” guide to highlight trends in major global markets. The purpose of the guide is to build a comprehensive, global view of ATM software and the role it plays in the financial services industry, assisting Financial Institutions in developing their own software strategies. Download the full 2010 ATM Software Trends guide here

In addition to providing a generaloverview of the results of the study, there is also an in-depth regional focus:

  • Americas: “Cost control and new functionality present competing priorities in mature markets”
  • EMEA: “Fast-growing EMEA markets present challenges for FIs”
  • Asia Pacific: “Asia-Pacific leads in innovation”

The 2010 report surveyed approximately 250 global ATM executives across all major regions. Respondents included executives from leading Financial Institutions (39% of which almost half are in the global top 100 by assets), ATM manufacturers and ATM vendors (27%), independent ATM deployers, transactionprocessors, and electronic-fund-transfer networks,

Results of this year’s study show that the view of multivendor software within the Banking Industry has moved on significantly since the inaugural publication (2007-2008 ATM Software Trends). Aided in large part by the migration of ATM software platforms to Microsoft Windows, awareness and acceptance of hardware-independent ATM software iswidespread.

There are now approximately 450,000 ATMs globally running multivendor software, more than 20% of the installed base anda 60% increase over the past two years. KAL is the one of the top three vendors (*) alongside NCR and Wincor Nixdorf in the multivendor ATM software market with a 21 percent share. Outside of the top three companies, the other multivendor ATM software companies eachaccount for 7 percent or less of the market. KAL is the also the only company among the leading ATM vendors to focus solely on ATM software.

It’s clear that Financial Institutions understand the value of a hardware-independent ATM software application, regardless of whether it’s provided by an ATM manufacturer or an independent software vendor such as KAL. Now, FIs are looking for more than technological efficiency from their ATM software and they want to leverage their ATM networks for a much greater competitive advantage. The widespread deployment of Microsoft Windows has aided the acceptance and use of XFS, the global banking software standard that enables multivendor ATM software.

Aravinda Korala, chief executive officerof KAL, compared XFS to the TCP/IP protocol that makes the Internet possible. Most current ATMs are XFS compatible. Even FIs that don’t use multivendor software specify that capability in the ATMs they purchase. 

“Evenif the FI is not going to use multivendor software immediately, they want their ATMs to be XFS compliant for the future,” Korala said.

Certainly, the repercussions of the financial crisis that swept the industry in 2009 stillinfluence spending and marketing decisions by FIs. In the United States, as well as othercountries, instability and even failures among FIs has led to new corporateentities that have resulted from merged operations.

“However, the financial crisis doesn’t seem to have slowed things down or stopped people from doing the things they want to do with ATM software,” Korala said. “Cost reduction for the ATM network is even more important than it ever was.”

FIs consider multivendor solutions for a variety of reasons, but the most common is to reduce cost and improve efficiency for the ATM network. That’s especially true if an FI operates ATMs from multiple manufacturers.  If each type of machine operates proprietary software, then software updates, security upgrades and new features must be managed foreach variant of the software.

“We do not have full control over functionality now, but would like to have it in the future,” said Pam Hasara, vice president and ATM relationship and product manager for BankAtlantic (US $6 billion). 

The Fort Lauderdale based institution has struggled with the cost of managing its fleet of 305 ATMs, which includes 136 on cruise ships. “We have put a lot of controls into our current ATM operation and have reduced locations because of the cost of equipment and servicing involved,” Hasara said.

On the other hand, XFS-capable machines running multivendor software across allhardware types can be managed with a single software application.

 “In the past, you had different software fordifferent ATM types, and that was just untenable for a big bank,” Korala said. “There are so many things FIs needto do; they want to be able to do it all just once.”

Managing a complex, perhaps international, ATM network presents myriad challenges for an FI. From a simple information technology perspective, the task is daunting and expensive. Any way to reduce that complexity has a guaranteed return on investment, as well as making FIs more independent from a procurement and cost-control perspective.

In just a few years, the multivendor concept has been transformed from a technology solution to one that supports an FI’s overall strategic approach. FIs look for software that supports new functions at the ATM and integrates with other channels such as online and mobile banking for better one-to-one marketing. A multivendor approach makes it easier to integrate and deliver consistent customer-facing enhancements throughout a network.

Atla Caixa (EUR 243,517 million) the leading savings bank in Europe and the third-largest financial entity in Spain, the ATM is a way to reduce operating costs and improve the customer experience. 

“The ATM is strategic for us in order to reduce branch repetitive and time-consuming transactions and let our employees spend their time in commercial tasks,” said Pere Ràfols, ATM and ticketing IT manager for la Caixa. 

Instead of expanding branches and ATM locations, the Spanish bank expects to cut costs and retain customers with additional functions. Its customers enjoy nearly 200 functions at la Caixa’s ATM network of nearly 8,000 ATMs, which is larger than its competitors. 

“We expect to add more functionality if necessary to reduce low value-added transactions in our branches and do them through our ATMs,” Ràfols said.

“We want to integrate the ATM channel with the other ones in the organization, such as electronic banking, branch, mobile and so on,” said Miguel Angel Cámara López, project manager of self-service for CECA, the Spanish Confederation of Savings Banks, which operates 3,500 ATMs. 

The client must feel the organization the same way, regardless of the channel he orshe chooses.”

For FIs faced with rising costs, increasingly strict regulatory environments and ongoing security concerns, multivendor software gives them the opportunity to take backcontrol of their ATM networks. Multivendor software allows FIs to manage the ATM network with fewer technology resources than using proprietary software foreach ATM type.

Asian FIs such as China Construction Bank and ChinaEverbright Bank adopted KAL’s Kalignite multivendor software across their portfolios of more than 32,000 ATMs and 1,500 ATMs, respectively. China Everbright Bank rolled out Kalignite over only eight months. The installation allows CEB more flexibilityin growing its ATM fleet. 

One major advantage for us is a much greater choice of ATM hardware now that we have the Kalignite multivendor ATM platform installed,” said Li Jian, general manager of the China Everbright E-banking department.

“An FI can do what makes business sense for them to do and not yield control to vendors unless they choose to,” said Steve Hensley,executive vice president of global sales for KAL. “Banks can take control of their networks and exercise as much control as they want.” 

With greater control provided via multivendor software, an FI can add transactions, enhance functions and conduct marketing campaigns much more efficiently. “An FI can use the ATM channel as a competitive edge, as opposed to it being a commodity,” Hensley said.

Although the economic pressures on FIs have not subsided, the focus has shifted to customer-facing enhancements to gain a competitive edge. Retaining existing customer relationships and building deposits become higher priorities. FI executives seemingly understand how vital customer and member relations are when it comes to retention. Customers have many choices — in many cases the relationship comes down to the experience the customer has in transacting business.

Increased security once again tops the list of reasons for FIs to change their ATM software. Increasing sophistication on the part of criminals and increasing pressure from regulators combine to make security a top priority for any entity involved in financial services. Compliance with the PCI Data Security Standard as well as developing technologies such as EMV and remote key loading are important aspects of ATM software.

BankAtlantic (US $6 billion), like FIs everywhere, faces security challenges. “Skimmingis our biggest issue, but we are also concerned with software hacking,” said Pam Hasara, vice president and ATM relationship and product manager at BankAtlantic). 

“We guard against all security threats,but now our main focus is software hacking and sensible data encryption,” saidla Caixa’s Ràfols.

Close behind is support for other new technologies and cost reduction in operating the ATM network. FIs also value the benefits from multivendor software that allow them to operate more efficiently and offermore to their customer base.

Not surprisingly, the study found that alongside branches the ATM is now considered to be the most important touch point for an FI’s customer interactions. For many customers the ATM is the most common interaction with an institution.

The study concludes that multivendor ATM software allows FIs to take control of their ATMs and make them a competitive advantage for the bank.

Download a full copy of the 2010 ATMmarketplace Software Trends and Analysis here.

Find out about the 2011 Software Industry and Trends Guide

[*] RBR MultivendorSoftware Research Report 2010

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