Add flexibility, improve ROI, reduce total cost of ownership, and reduce risk by leasing your ATM technology 

One of Dr. Phil McGraw’s common sayings is “the best predictor of one’s future behavior is relevant past behavior.”  This rings true with most people, and it isn’t much of a stretch to extend it to the technology sector: the best predictor of future technology trends is relevant past technology trends.  Below are a few of the changes in the ATM technology space in the past few years:

• Legislative acts requiring ATM design changes (Americans With Disabilities Act)
• New network security requirements (3-DES encryption)
• New site and device security features improving safety and mitigating fraud
• Continuous changes in currency and media design
• Shift from OS/2 to Windows operating system
• New open standards for the ATM device and network architecture
• Significant advances in processing speed and computing capacity
• Significant advances in LCD viewing technology
• Significant component design changes to improve reliability, serviceability, and operating costs
• New fascia and footprint designs to improve utility

Increasing globalization, diffusion of Internet technologies, new clearing methods, additional security requirements, and the blurring of borders between financial and retail industries are among the significant changes taking place in the financial services industry today which will drive ongoing changes in ATM hardware and software technology.   One significant security change: according to the international biometric group, biometric industry revenues are expected to nearly triple from $2.2 billion in 2006 to $5.7 billion by 2010 as consumers push for cutting edge identity protection at the ATM and other transactional devices. 

What other changes can you expect?  Consider the following recent comments from Steve Ballmer, CEO of MicroSoft:

“The next few years are going to see a real revolution in how information and communications technologies fit into our lives. In fact, I believe we're going to see more change in technology over the course of the next five years than we have in the past decade. Just remember, a decade ago most people didn't have a cell phone, a PC and didn't know what the Internet was.

 “I feel like we've just barely begun to tap the potential in computing and software.”

 “The pace of technological change has actually accelerated …… product cycles have been shrinking for at least 30 years, but in the past few years it's unbelievable how short cycle times have become.”

 “Almost everyone I talk to in the industry agrees we can expect Moore's Law style advances in every technology area for at least another decade.”

The ATM is a technology based device which has changed significantly in the recent past, and can be expected to change significantly in the near future.  Common sense dictates that the ATM you acquire today, while both functional and reliable – may well be technologically obsolete for the bank’s objectives in a few short years.

Given the recent and expected pace of technological change and the expected continuing trend of falling technology and hardware service pricing, financial institutions should be seriously looking at a planned ATM replacement cycle of five years or less.  This planned replacement cycle is further supported by a 2003 ATM Industry Association survey of 400 banks in 19 countries, showing the following consensus:

• Five year life and accounting depreciation period on all makes manufactured after the year 2000. 

• That competition among manufacturers is spurring innovation which may well lower the ATM depreciation period further.

• That the technology regarded as closest to ATMs for benchmarking its lifespan was ther personal computer.

You may be saying, “Okay, I agree that ATM hardware and service prices have been declining over the past few years, and the pace of technological change has accelerated and will likely continue.  Why should we consider lease financing for our ATM acquisitions?  Answer: Because lease financing (a) facilitates the future asset decision process with greater flexibility than purchasing (b) lowers the total cost of ownership and improves ROI and (c) ultimately transfers asset risks to a Lessor.

Facilitating future asset decision process

Lease financing facilitates planned replacement by matching the lease term to the expected useful life.  The future asset decision is made easier with various lease end options including renewal, upgrade/renewal, replacement, or equipment return.  Diebold Global Finance (DGF) further enhances decision flexibility by providing these options on an asset level, vs. a total contract/schedule level typically provided by most equipment finance companies.  DGF proactively works with each customer to ensure that their objectives are achieved in the asset decision process.  With DGF, you don’t have to worry about automatic term extensions or unreasonable charges for wear and tear that might put you in an economically adverse position.

Improve ROI and reduce TCO

The use of lease financing inherently improves return on investment (ROI) analysis calculations, since lease financing effectively removes or reduces the denominator (investment) compared to a capital purchase.  Typically, the “investment” used in a lease financing scenario would be the present value of the required aggregate payments; normally a much smaller amount than the comparative purchase price.

Lease financing typically reduces total cost of ownership (TCO) through added asset flexibility.  There is a natural propensity to continue to invest in technology that a customer “owns” through an ongoing path of hardware and software upgrades.  Upgrades can often be both expensive and disruptive, as well as result in higher maintenance costs over time.  With falling new technology and service prices, TCO can be greatly reduced with a planned replacement strategy and the periodic cost advantages of lease financing.  Financial institutions better serve their shareholders by investing capital in “earning” rather that “depreciable” assets to further improve ROI. 

Reduction of your risk by transferring asset risks to Lessor

Residual risk/obsolescence risk – DGF assumes significant residual risk positions inherent in our ATM lease offerings, translating into low cost payment structures for our customers.  Through our specialized ATM refurbishment center and global customer base, we are able to maximize the value of ATM equipment and parts that may be outdated for one customer’s purposes.

Disposal risk – Equipment returned off a DGF lease is either completely refurbished and remarketed, or disposed of in a way that is environmentally sound.  DGF utilized EPA certified recycling processes for all ATM components.  No need for you to worry about the impact on Mother Nature.

Data security risk –  Any data stored on equipment returned off a DGF lease is removed using a process that is Department of Defense compliant.  Hard disk drives are further destroyed and recycled, no need for you to worry about identity theft or data security issues.

Summary

There will continue to be significant change in self service hardware and software technology; that is a certainty.  DGF lease financing programs provide financial institutions funding alternatives to optimally plan for and manage change with greater flexibility, lower cost, and reduced risk.

With rising interest rates, the opportunity cost of acquiring ATM technology with cash is much greater than it was in the past few years.  By using lease financing, a financial institution can invest its cash in traditional earning assets to grow revenue, while taking full advantage of new self service technology at a reduced cost.  This helps improve financial performance.  ATM lease financing through Diebold Global Finance is just smart business.