ATM: Strategies for Lowering Total Cost of Ownership

August 26, 2005


Montreal, Canada August 26, 2005

Celent estimates that US financial institutions will spend over US$3.3 billion in 2005 in total operational costs (including asset depreciation) for their on-premise and off-premise ATM fleets, and that this number will reach US$3.9 billion by 2008.

The ATM market is undergoing a period of rapid change. After years of frenzied growth in transaction volumes and the number of ATMs deployed, the market is entering a period of maturity. The pace of change in the ATM industry has increased dramatically, driven by a number of industry issues including compliance and technology catalysts. They are forcing banks to consider new approaches to lowering the total cost of ownership (TCO) of a maturing channel. With ATM revenues declining, financial institutions are taking a more circumspect view of this critical retail channel. Faced with the competing pressures of lower revenues and the need for significant investment to upgrade aging infrastructure, banks are exploring alternative operational strategies for their ATM business.

In a new report, "ATM: Strategies for Lowering Total Cost of Ownership," Celent examines two frameworks that it believes to be key trends in ATM operations. The first is a trend of banks outsourcing significant portions of their ATM operations妖riven by a desire for cost savings, cost certainty, and service consistency. The ATM channel has become increasingly commoditized, with limited differentiation between financial institutions in terms of features used by customers (who remain largely focused on cash withdrawal). At the same time, the move toward more open, standards-based ATM technology continues and further facilitates the decoupling of ATM ownership from ATM operations. The trend to outsourcing is illustrated via an in-depth case study of TD Bank Financial Group痴 decision to outsource its ATM business process in an end-to-end manner.

The second framework reviewed is a trend toward branding of third-party ATMs by financial institutions. Banks want to enhance customer convenience by having a presence in high-quality retail locations, and branding existing machines allows them to do so quickly and cost-effectively. Celent predicts significant growth in bank branding of off-premise ATM machines by 2008.

According to Madhavi Mantha, senior analyst and author of the report, "As ATM outsourcing providers continue to increase their scale and hone their operations, the economic benefits of outsourcing and branding will become increasingly compelling for banks facing declining ATM revenues and increasing costs."

The 31-page report contains 9 figures and 5 tables.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


Montreal, Canada August 26,  2005

ATM: Strategies for  Lowering Total Cost of Ownership 

Return to report Abstract

Executive Summary 3
Introduction 4
The Dynamics of the ATM Channel 6
  Industry Drivers 7
  Compliance Drivers 8
  Technology Drivers 9
  ATM Spending by Banks 9
The Role of Outsourcing in Lowering TCO 10
  Outsourcing: A Fresh Examination 11
  End-to-End Outsourcing: The Case of TD Bank Financial Group 14
Branding: Cost-Effective Off-Premise ATM Deployment 22
  Cardtronics: An Early Mover 23
Conclusion 28
Objectivity & Methodology 30

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