Latin Finance - July 2008 - (Page 38)

guide investment banking A New Face For ATMs By Jan Smith, Managing Director, Kroll-InfoAmericas he most significant expansion of technology within Latin America’s financial sector is perhaps also the most ubiquitous. It is the ever extending presence of the automatic teller machine (ATM). Not only is the number of ATMs in the region growing, ATMs are also increasing in sophistication and affecting the service and transaction landscape offered to customers. Analysis of the ATM and electronic payment market in Latin America by KrollInfoAmericas reveals that financial institutions are exploring new business models and services for the ATM channel. The ATM in Latin America is now much more than just a costreducing means of dispensing cash. Many machines offer dynamic service options ranging from tax payments to reloading of cellular telephones. There is some debate as to whether the first machine was introduced to the region in 1972 or 1973 and if that was in Mexico or in Brazil. Regardless, since then, the number of ATMs has grown to 250,000, of which three-fifths are in Brazil. The exact figure is a moving target particularly because, unlike credit and debit cards, that require registration with federal authorities, most countries in the region do not record growth of ATMs. Lack of official records combined with the wide variety in the type of networks operating in the region, translates into many records being kept in private silos. Most countries in the region have two to four ATM networks but some may have up to nine. Size of the country is not necessarily a factor in determining the number of networks. Brazil has four large networks and El Salvador recently had six spread across less than 500 machines. T From Closed to Open It is estimated that 65 to 70 percent of the ATM networks in the contents KROLL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 38 COBIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 40 IBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 43 TERREMARK . . . . . . . . . . . . . . . . . . . . . . . page 46 Associate publisher: James Norton Tel: +1.305.357.4227 • e-mail: jnorton@latinfinance.com Michael Brosgart: Editorial Director - Conferences & Special Projects Tel: +1.305.357.4229 • mbrosgart@latinfinance.com LatinFinance Guides are partially underwritten by sponsors and reflect the views of the individual contributors and/or their institutions. region are open access, including the nearly 15 percent of ATMs owned by government banks. Open access networks allow customers to administer their accounts from machines other than those operated by their bank. In contrast, restricted access networks have ATMs that only allow transactions from cards that are issued by the owner of the ATM network – most usually a bank. Although usually not linked to other national networks, most restricted access networks in Latin America do allow access to international networks. The largest example of this type of network is Brazil’s Banco Itaú. The tendency is for closed access networks to incorporate into open access networks where the maintenance costs can be outsourced or defrayed amongst various bank partners. Latin America has high crime rates and large geographies that make access to ATMs difficult (even in urban areas). These factors affect safety and maintenance costs for ATMs that can exceed in some cases, $24,000 per year. Not surprisingly, the number of ATMs within limited access networks shrank 7% in 2007. The majority of this resulted from banks entering open access networks and adding their ATMs to the joined network. Nonetheless, banks such as Itaú are reducing their older ATMs for newer models and thereby reducing costs while increasing efficiency. Open access networks are growing by 10,000 to 15,000 machines per year. A significant part of this growth is derived from previously restricted access ATMs, but sales of new machines are also brisk. Caixa Econômica Federal in Brazil ordered 9,600 ATMs from Diebold in April 2008, and delivery of new ATMs to Mexico is expected to surpass 5,000. In the case of Mexico most of these machines are slated to substitute older stock that is prone to security breaches and has limited service options for customers. Mexico has some of the oldest ATMs in the region, averaging 10-12 years compared to 5-7 years for the rest of the region. Deriving Income from Transactions Dynamic service capacity is a critical component to the new wave of ATMs shipping to the region because they provide banks with a means of deriving income from transactionbased services. Banks across the region anticipate a softening of income derived from fees and commissions derived from Kroll-InfoAmericas Jan Smith, Managing Director Telephone: +1.305.569.9133 Email: jansmith@kroll.com Website: http://www.infoamericas.com/ 38 LATINFINANCE 2008 http://www.infoamericas.com/

Table of Contents Feed for the Digital Edition of Latin Finance - July 2008

Latin Finance - July 2008 Contents Investment Banking Outlook Compensation Survey Colombia Investment Banking Borrowers vs. Investors Banorte Profile Braskem Financing Strategy Brazil Hydro Finance Peru Port Privatization Panama Money Flows Argentina Local Markets Guide to Banking Technology Who Said That?

Latin Finance - July 2008

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