Finland the pioneer, Sweden the catalyst

It is not an easy decision for banks to agree to pool their ATMs – they are, after all, giving up control of one of their key channels. So what is it about the Nordic countries which means they embrace ATM pooling in a way that other countries find difficult?

I ask the question because five of Sweden’s largest banks – Danske Bank, Handelsbanken, Nordea, SEB and Swedbank – have announced that by the end of 2011 they will transfer ownership of their ATMs to a separate company, Bankernas Automatbolag, that will operate ATMs on their behalf. This initiative follows similar developments in Finland, where all bank ATMs have been operated by a single outsourcing organisation since the mid-1990s.

There are several factors which make Nordic countries suitable for ATM pooling, but two of the most important are economies of scale and the role of the ATM. Countries with fewer than 4,000 ATMs have reasonable economies of scale as a whole, but individual banks do not. Furthermore, ATMs in the Nordics are seen as rather utilitarian and offer relatively few functions – particularly in comparison to countries such as Spain and Brazil where banks have competed to make the ATM an integral element of their brand image and customer offering.

If Finland was the pioneer of this type of ATM pooling, it may well be that Sweden is the catalyst for similar initiatives elsewhere. Smaller countries with mature ATM markets are particularly suitable, but there is also significant potential in larger countries. While it is unlikely that large ATM markets will go down the road of a single unified network (this has not happened in Sweden yet), there is significant potential for two or more banks to pool their ATM fleets in numerous countries.

There may have been a decade and a half between the Finnish and Swedish pooling initiatives – it will not be nearly so long before the next one.

Reprinted from Banking Automation Bulletin