Webinar: ATMs in China 2014 July 16 th , 2014 - 17:00 – 17:45 Beijing Standard Time The webinar will start in a few minutes. For more information about the topics covered in this webinar or Kapronasia, please visit www.kapronasia.com or send us an email: research@kapronasia.com. Twitter: @chinafintech ¡
ATMs in China 2014 Prepared by Fiona Zhao Moderated by Paul Robinson Presented by Zennon Kapron July 16 th , 2014
Section 1: Industry Overview Section 2: ATM Purchasers and Manufacturers Section 3: Risks and Opportunities Section 4: Future trends Section 5: Conclusions
ATM Industry in China – Deployments Number of networked ATMs in China growing • Average annual growth rate: 20% • Install base peaked at 520,000 in 2013, surpassing the U.S. ¡ ¡
ATM Industry in China – Penetration of ATMs Number of ATMs deployed vs. population • 382 units per million people; growth from 307 per million in 2012 • Surpassed global average level of 346 units for the first time • Lags behind developed markets (786 in Western Europe) • Still room to grow?
ATM Industry in China – Density Average number of payment cards per ATM • In 2013, every ATM served 8086 payment cards • Better performance than in 2012: 8504 • Behind international average of 4000 -> still room for growth ¡ ¡ Current locations and density of ATMs • Most of China’s ATMs located in large / middle-sized cities rather than in small cities and rural areas • ATM per million citizens 765 in Beijing and 648 in Shanghai; developed economies (795 sets/million) • Sichuan province: just over 50 units/million
ATM Industry in China – Functionality & Differences Withdrawal • Cash first, then card • …but doesn’t represent all the ATMs in China Transfer • Most banks’ ATMs can be used for transferring to other banks’ payment cards. ICBC’s transfer is only within ICBC’s payment cards. However, this will change in 2014. Commission Charge • If using ICBC’s payment card to withdraw from an ICBC ATM in a different city, ICBC charges a 1% commission. The minimum amount is RMB 1, the maximum amount is RMB 50. • If using ICBC’s payment card to withdraw from another banks’ ATM in a different city, the ICBC charges are higher. So, for each transaction, ICBC charges 1% commission, plus RMB 4 as a cross-bank transfer fee.
Section 1: Industry Overview Section 2: ATM Purchasers and Manufacturers Section 3: Risks and Opportunities Section 4: Future trends Section 5: Conclusions
ATM Purchasers and Manufacturers – Buyers ATM Buyers • Pretty much everyone is buying: national-owned commercial banks, joint -stock banks, postal saving banks, city commercial banks, rural commercial banks and rural credit cooperatives • Purchasing volume: more ATMs were purchased in 2012 than needed, drop in 2013 ¡ ATMs Purchased by Banks: 2009-2013 120000 100700 100000 85600 74800 80000 60000 54000 60000 40000 20000 0 2009 2010 2011 2012 2013
ATM Purchasers and Manufacturers – Buyers ATM Buyers • Characteristics: • Largest clients: Big Five banks ICBC, ABC, Bank of China (BoC), CCB and Bank of Communications -> share of overall market down in 2013, but still more than half the market • Massive purchases from rural financial institutions in recent years (stimulated by China’s government support policy) • ABC, rural credit cooperatives, rural commercial banks and postal saving banks: 44.5% market share in 2013 • Specifically, rural credit cooperatives and rural commercial banks: 21.76%, the largest ATMs purchaser. • Main product purchased: Cash Recycling System (CRS) • CRS allows for cycling cash deposited -> withdrawal • ATM deposits much more common in China • Less maintenance required
ATM Buyers and Manufacturers – Manufacturers ATM Manufacturers • Top Five Players • GRG Banking Equipment Co.,Ltd (GRG), Hitachi, Shenzhen Yihua Computer Ltd (Yihua), Diebold, NCR => 70% market share • Domestic GRG is the largest seller in the market with 23% in 2013; led market for successive 6 years ¡ ¡ ¡ Market Share of Key ATM Suppliers in 2013 Others Cashway Kingteller 5.35% 3.63% Wincor 3.64% Nixdorf 4.56% GRG Eastcom 23.28% 4.12% OKI 5.85% Hitachi Diebold 18.37% 9.16% NCR 9.19% Yihua 12.85%
ATM Buyers and Manufacturers – Manufacturers ATM Manufacturers • CRS may determine future competitive marketplace in China • The core competitiveness: the core cycling technology in CRS • Current situation: – Domestic CRS manufacturer: GRG & Yihua -> strong research and development capability – Hitachi ->targeted at CRS from the very beginning / led among foreign ATMs manufacturers • Domestic ATM suppliers may replace foreign peers • Robust performance of domestic ATM suppliers (GRG & Yihua) • China government’s encouragement in purchasing domestic ATM brands -> Hitachi was reported to have stolen information from ATMs in China
Section 1: Industry Overview Section 2: ATM Purchasers and Manufacturers Section 3: Risks and Opportunities Section 4: Future trends Section 5: Conclusions
Risks and Opportunities Potential IT risk: • Outdated Windows systems: • Microsoft announced end of security update services for Windows XP system as of April 8th 2014. • Problem for ATM industry as 95% of ATMs are on Windows XP • ATM manufacturers have stop-gap solutions in place • Different case in China • China ATMs only connects to interbank network rather than external: relatively difficult to be attacked but doesn’t mean absolutely safe • Solutions: • Some banks choose Window 7 system for new ATMs • For the old ATMs: bring opportunities for companies like Jowto Technology->launches “XP Suo”, to enhance ATM system security immune ability as well as to prevent attacks from Hackers and virus-> unknown whether this will be a long-term solution ¡ ¡
Section 1: Industry Overview Section 2: ATM Purchasers and Manufacturers Section 3: Risks and Opportunities Section 4: Future trends Section 5: Conclusions
Future Trends ATM Outsourcing Services • China ATM market: largest in the world • Banks need to focus on core business • Many have outsourced: ATM location selection, bank outlet construction, maintenance services, operations management, cash management, etc.. • Currently ATM service providers tend to be small and not terribly sophisticated • Performance of GRG Banking and Guangzhou Hui Tong, subsidiary of GRG, steadily increasing ¡
Future Trends Potential growth in cross-bank funds transfer • Using the ATM to transfer money between banks; promoted by China Unionpay • Popular among commercial banks and cardholders: CCB’s growth in cross -bank payment transaction volume via ATM reached 279% in 2013 • In 2013, the large commercial banks, except for ABC and ICBC, all opened ATM transfer funds services. ABC and ICBC in 2014 Convergence of ATMs and Mobile Technology • ICBC ATMs->Users can withdrawal and transfer with mobile phone numbers • User enters either the destination phone number to make a transfer or their own to pick up money that has been sent. • For instance, after making withdrawal reservation via mobile banking, users can withdraw cash via any ATM, using mobile number, reservation number and code from ICBC ¡
Future Trends The Potential Future of ATM: VTM? • Virtual Teller Machine (VTM) or iTM: HD screen / camera, scanner for reading ID cards, document, signatures; 24-hour virtual counter services • Large increase in VTM Install base in 2013 • Since CGB deployed the first VTM in June 5th 2012, more banks joined in this game -> BOC, ICBC, CEB, Minsheng Bank, China Commercial Bank, ABC, Baotou Bank, Kunlun Bank, etc. (More data on VTM deployment in the ATMs in China report) • VTMs will replace traditional counter service gradually – Provides comprehensive financial services including foreign exchange, financial products etc – Save costs – Estimate: 95% counter services will shift to VTMs; VTMs market capacity, 2-3 times of ATMs ¡
Section 1: Industry Overview Section 2: ATM Purchasers and Manufacturers Section 3: Risks and Opportunities Section 4: Future trends Section 5: Conclusions
Conclusion • Potential sizable growth in China’s ATMs market • ATMs installed per million citizens still lags behind developed • Payment cards served by one ATM far less than international • ATMs Buyers market • Big five banks still dominate the ATM purchase market. • Purchases from rural financial institutions large; government support • CRS purchases dominate • ATMs Manufacturers market • Dominated by domestic brands such as GRG and Yihua and foreign brands including Hitachi, OKI and Diebold • Domestic ATMs manufacturers will further expand market as Chinese government encourages banks to use domestic technology • VTM---the potential future? • The future of banks will be on the way of “intelligent” ATMs • VTM seems to help joint-equity commercial banks more as they lack in number of outlets • Largely promoted by China’s largest ATMs supplier – GRG ¡
Webinar: ATMs in China 2014 Q&A For more information about the topics covered in this webinar or Kapronasia, please visit www.kapronasia.com or send us an email: research@kapronasia.com. Twitter: @chinafintech
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