MegaLink initiates ATM switch outsourcing

MANILA, Philippines - By next year, banks will slowly but surely, outsource its automated teller machine (ATM) operations to technical experts like MegaLink.

“The idea is to free banks and allow them to focus on their core banking business, and let experts like MegaLink to take care of non-core interests like the ATM business,” Benjamin P. Castillo, president and chief executive officer of MegaLink, said.

Castillo, in fact, confided that they are wrapping up talks with two commercial banks to re-launch its outsourcing bid next year.

A few years back, it had already started the process for the International Exchange Bank (iBank) and the AIG Savings Bank. However, the iBank was acquired by the Union Bank of the Philippines (UBP) while East West Banking Corp. (East West Bank) took over AIG Savings Bank.

“MegaLink will now be the ATM switch of the banks, leading to significant productivity gains and cost savings for banks, that will allow them to stick to their core business. We become the business process outsourcing (BPO) of the banks,” Castillo, a former banker himself, said.

Previously, each bank would have an ATM switch that will connect to its ATM units located mostly in their branches, and to other ATMs of other member banks. It became an extensive, complicated and extremely expensive practice for banks although it was “a necessary evil.”

It gave birth to organizations like MegaLink to become the central switch linking all the central switches of each bank.

The new system being introduced by MegaLink is to take over all the switches and just operate one mega switch linking all the ATM machines of all the member banks. “It relieves the banks of cost, traffic, complications, and allows them to concentrate and improve on their core banking systems,” Michael Dennis F. Asiddao, head of information technology and operations group of MegaLink, pointed out.

Likewise, the new system becomes an equalizer.

Castillo explained that any bank, whether commercial, thrift or rural in nature, can have its own ATM network, or just join the network and issue its own ATM cards co-branded with MegaLink. That would likewise open the doors for non-banks and other non-financial institutions to own ATM machines.

Likeiwse, the introduction of a point-of-sale (POS) system by MegaLink will also expand convenient banking for cardholders as it will not only recognize credit and debit cards but also the ATM cards.

In the last quarter of 2008, ExpressNet outsourced its ATM switching operations to BancNet.

ExpressNet and BancNet are both ATM network operators with the former bannered mainly by the Bank of the Philippine Islands (BPI) and the Land Bank of the Philippines (LBP) as its principal members. The third ATM network operator is, of course, MegaLink.

ExpressNet chairman and BPI president Aurelio R. Montinola III explained that their decision to outsource its ATM switching operations to BancNet allows its member banks to stay focused on their respective core banking business.

“The Filipino banking public will benefit from two ATM switches for three networks, simplifying backroom operations and other activities related to running an ATM switch,” Montinola said.

All ATM units are interconnected thus allowing the public to utilize any ATM unit regardless of bank affiliation.

Meanwhile, mobile phone owners will be able to buy load from MegaLink’s ATMs starting January. Smart Communications Inc. (Smart) and Globe Telecommunications Co. have already enrolled in the process.

MegaLink operates 2,800 terminals with an average of 11 million transactions per month, from an average of nine million transactions per month in 2007. It has nine million cardholders from 20 member banks and non-banks.

Of the total ATMs nationwide, nearly 7,000 are owned by the universal and commercial banks. Thrift and development banks operate over 800 ATMs while rural banks and cooperatives account for the balance.

Roughly 60 percent of the ATMs are located within the bank’s premises while the remaining are located offsite such as shopping malls.

Seventy percent of the terminals are located in the greater Metro Manila area with the balance located in areas outside of Metro Manila.