IADs see significant opportunity despite falls in some large markets

At first glance, analysis of data from RBR’s recent global ATM research paints a mixed picture for independent ATM deployers — the number of independently operated ATMs actually fell by 2.5% last year, but at the same time 32 of the 41 countries that have IADs saw an increase in IAD ATMs.

These contradictory indicators reflect complicated industry dynamics, which are creating opportunities, as banks rationalize fleets, and challenges, especially because of changing fee structures and competition from electronic payments.

The two countries that saw the greatest declines in IAD numbers were China and the U.K., and in both cases there are specific factors that explain the falls. In China the number of IAD ATMs fell by 14,000, as banks continue to bring IAD machines in-house — in truth, IADs in China were exclusively outsourcing partners for the banks and as such vulnerable to exactly this sort of change in bank strategy.

In the U.K., a controversial reduction in interchange fees, combined with falling ATM usage following rapid adoption of cashless payments, made a number of sites unprofitable. Concerns about access to cash and whether greater incentives are now needed for ATM deployment make the situation in the U.K. unpredictable.

The China and U.K. examples highlight one of the biggest challenges for IADs, namely that they are exposed to changes and decisions that are beyond their control. At the same time, there remains a significant opportunity for IADs.

On a global level, the traditional drivers of ATM growth, namely economic growth and increased banked populations, are still present. Regulations allowing and supporting IADs are generally increasing, creating an environment where IADs can both compete with traditional bank ATMs and increasingly also work with banks to improve services for customers.

In more developed markets, IADs typically face the same usage issues as banks, but their lower cost operating models often allow them to function in locations where banks are not present, and furthermore, if banks withdraw ATMs this creates gaps for IADs to exploit.

RBR is forecasting that the number of IAD ATMs worldwide will grow by 2.1% per year through to 2024 — the road will not be completely smooth, but there are still plenty of opportunities out there for IADs that can adapt to the changing industry dynamics.

A version of this story originally appeared in RBR’s Banking Automation Bulletin.