In the first installment in this series of blogs, I described my general impressions of the Payments Knowledge Forum in London last fall. I specifically focused on the ATM Smart Client roundtable in which Barclays and HSBC participated with their vendors to compare and contrast their approach to similar projects. As mentioned in the conclusion of the previous blog, in this posting I will provide my interpretation of the two different approaches.
In Barclays approach, Auriga’s Smart Client architecture, the WWS server, is seen as the primary point of integration with the rest of the enterprise’s systems. By contrast HSBC is at present focused on the PC in the ATM as the critical point of integration.
Arguably, it is not surprising that an ATM hardware supplier would focus its attention on the role of the ATM PC. Conversely, it is quite logical that an independent software vendor like Auriga would want to boost the role of the Channel Manager. Both categories of supplier choose to serve the interests of their clients in a different way. The key is which category’s interests align most closely with those of the market place?
KAL CEO Aravinda Korala said: “There is no doubt that innovation in the ATM channel will focus more and more on what the software can do, while the hardware plays a supporting role in providing the physical essentials. We are seeing software cycles quicken in ATMs with new ideas being tried and tested, and time to market becoming the key. The debate about thin-client vs fat-client becomes moot in this context – what matters most is how quickly innovations can be brought to market and how best that software can subsequently be managed.”
In my discussions with banks and ATM processors, most are focused on reducing the cost and complexity of managing the central transaction switch as well as the cost of new hardware purchases. They are also striving to extend the capabilities of their networks through the implementation of new and more complex transactions managed within the Bank’s application infrastructure. To me, this is a strong indication that the Smart Client/Channel Manager architectural model is what the market is seeking.
Where a Bank has XFS-compliant ATMs already deployed, the Smart Client/Channel Manager model appears to offer the capability to deliver enhanced services while reducing the maintenance costs of the transaction switch without requiring costly ATM hardware upgrades.
Auriga CTO Carmine Evangelista commented, “A Smart Client Channel Management architecture offers banks the best of both worlds - the ability to reduce their hardware costs and unlimited freedom to fully automate their transactions and client services.”
Aside from the complexities of software capability and architectural choice, new ATM sales by the established vendors are seeing increasing competition from new, predominantly Asian, providers. For details of this phenomenon, see a recent article by Felix Kronabetter on atmmarketplace.com called “RBR study: What does the future hold for NCR, Diebold and Wincor?”
Research by marketing theorist Igor Ansoff showed that all markets eventually consolidate into a single Market Leader, with one or two Attackers, and a number of smaller Guerrilla companies that are able to achieve local dominance, but lack the resources to dislodge the Leader and Attackers. In this context the merger between Diebold and Wincor is just another step along a well-established road. Which of these traditional ATM giants ends up as the single Market Leader remains an open question - NCR or the newly formed Diebold-Wincor conglomerate? Without doubt, whichever wins will continue to experience growing attacks from the newer suppliers from Asia, putting continuing price pressure on ATM hardware.
Against this background of hardware commoditization and major mergers, the impending architectural transition from ATM Fat client to Smart Client/Channel Manager promises to open up new opportunities for Independent Software Vendors in the market for ATM software. ATM user organizations will await with interest the outcome of the Wincor-Diebold merger into Diebold Nixdorf, and the resulting hardware/software strategy and roadmap. In addition to Wincor Nixdorf’s family of solutions, Diebold offers Agilis and mPower as well as the recently acquired Phoenix Interactive Software, each with its own merits.
NCR by contrast noted recently that they embarked on a software centric strategy several years ago and point to the acquisitions of Alaric and Digital Insight as evidence of this. However, in my experience, banks want greater freedom of supply. They want vendor independence not greater dependency on a single vendor. NCR’s strategy makes a lot of sense from a vendor’s perspective – ATM hardware prices have been in steady decline for years and it is only going to get worse. But how are banks going to see this? Inevitably some banks will be comforted by a “one stop shop” and will embrace the NCR vision end-to-end. However, the unstoppable global trend towards vendor independence and greater choice suggests that the majority of banks will probably invest in freedom of choice and implement a multi-vendor (best of breed) infrastructure for their next generation service platforms.
However, the really interesting players to watch in any market are the Differentiators. They are those vendors who seek to split the mainstream market and achieve dominance in their own niche. Following the acquisition of Phoenix, only two names spring to mind in this regard, KAL and Auriga. Both of these vendors have consistently enabled freedom of choice for banks in their selection of ATM hardware.
I would be interested in the reader’s views of how these various interests are shaping and evolving the future of ATM software. It seems nothing ever stands still even in a delivery channel that has been a part of delivering financial services to consumers for decades.