Startup Vidyo Finds Growth in Video-ATMs as Banks Close Branches

  • NCR taps Vidyo for 'Interactive-Tellers' amid slumping sales
  • Video conference startup expanding into banking, healthcare

The rise of online banking has left lenders puzzling over how to maintain relationships with customers who no longer frequent their branches. Vidyo, a startup whose video technology is used in Google Hangout and Xiaomi Corp.’s new smartphone, is finding growth amid the transformation.

Vidyo said Tuesday it was tapped by automated teller machine-maker NCR Corp. to provide video conferencing software for NCR’s 250 bank and credit union customers. The Hackensack, New Jersey-based company’s technology will be used in ATMs with video screens that connect people with bank tellers, and in future products made for web and mobile devices, said Jed Taylor, general manager of interactive banking at NCR.

Banks “can still maintain a meaningful personal presence without having a large real estate investment and a large, fixed labor pool,” he said in an interview. “Video is a critical component of not being disconnected from your customers.’’

‘Perpetual Startup’

Eran Westman, who took over as chief executive officer of Vidyo last February, is hoping partnerships such as the deal with NCR can help boost growth at the 11-year-old company. Vidyo established itself as a competitor to Cisco Systems Inc. and Polycom Inc. with software that compresses video into bits of data so small, they can travel over the Internet without using much bandwidth. The result is high-quality video that works even with a weak Internet connection. While the company’s technology is unique, it has struggled to get beyond “perpetual startup” mode, according to Raymond James & Associates.

Eran Westman

Source: Vidyo

“The video conferencing industry is kind of mature, not really growing anymore,” said Tavis McCourt, an analyst with Raymond James in Nashville. “They’ve really pivoted to using that tech for embedded video on devices that traditionally didn’t have video.”

Westman is pinning his hopes for growth on banks and financial services, healthcare, and the federal government, he said. He wouldn’t disclose how much revenue Vidyo brings in or whether it’s profitable, but explained that the company is trying out different revenue models to attract new customers.

Business Model

He used to charge clients a one-time fee to install Vidyo’s software, and then only maintenance fees on an annual basis (Bloomberg LP, the parent company of Bloomberg News, is a customer). Now that he’s expanding beyond corporate conference rooms, he’s trying to move Vidyo to a “recurring revenue” business model, favored by software companies that want to license their services over the Web. In some cases, Vidyo splits revenue with a company embedding its software in its own end product.

“We are trying to be more flexible,” Westman said. “We’re a small company, and if we partner with big companies, they can take us to market with their salesforce around the world.”

Vidyo has raised $163 million to date from investors including Menlo Ventures, Rho Ventures, and Sevin Rosen Funds, which backed Compaq Computer Corp. in the 1980’s and more recently, Splunk Inc. It took a $10 million strategic investment in December from Kaiser Ventures, the venture capital arm of insurer Kaiser Permanente, which uses Vidyo for telemedicine.

For NCR, whose stock has slumped in the past two years amid lackluster growth, replacing bank tellers with automation kiosks is a bright spot, albeit a small one, said Gil Luria, an analyst at Wedbush Securities Inc. in Los Angeles. NCR gets about $200 million in sales from interactive ATMs, compared with overall revenue of $6.4 billion in 2015, Luria said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE