Webinar: ATMs in China 2014 July 16 th , 2014 - 17:00 17:45 Beijing - - PowerPoint PPT Presentation

Webinar: ATMs in China 2014

July 16th, 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 16th, 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.

¡ ¡

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 – Penetration of ATMs

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 – Density

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.

ATM Industry in China – Functionality & Differences

Section 1: Industry Overview Section 2: ATM Purchasers and Manufacturers Section 3: Risks and Opportunities Section 4: Future trends Section 5: Conclusions

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 ¡

54000 60000 74800 100700 85600 20000 40000 60000 80000 100000 120000 2009 2010 2011 2012 2013

ATMs Purchased by Banks: 2009-2013

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 Purchasers and Manufacturers – Buyers

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 ¡ ¡ ¡

GRG 23.28% Hitachi 18.37% Yihua 12.85% NCR 9.19% Diebold 9.16% OKI 5.85% Eastcom 4.12% Wincor Nixdorf 4.56% Kingteller 3.64% Cashway 3.63% Others 5.35%

Market Share of Key ATM Suppliers in 2013

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

ATM Buyers and Manufacturers – Manufacturers

Section 1: Industry Overview Section 2: ATM Purchasers and Manufacturers Section 3: Risks and Opportunities Section 4: Future trends Section 5: Conclusions

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 ¡ ¡

Risks and Opportunities

Section 1: Industry Overview Section 2: ATM Purchasers and Manufacturers Section 3: Risks and Opportunities Section 4: Future trends Section 5: Conclusions

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
• wn 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

• f ATMs

¡

Future Trends

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

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

Q&A