What next for the ATM?
Paul Volker, former Chairman of the US Federal Reserve, was once reported as saying that the ATM had been the banking industry’s biggest innovation of the past twenty years. Although his tongue-in-cheek comment was clearly intended as a side-swipe at bankers for their perceived reluctance to change, it may have had some truth about it – after all, over the past 10 years or so, there has been an increase of around 60% in the number of machines deployed, while 86% of British adults used an ATM in 2012 at an average of more than five visits per month, writes Anthony Duffy.
However, given that bank customers are unlikely to increase significantly their usage of ATMs and now that opportunities to deploy large numbers of additional dispensers are limited, what does the future hold for the ATM and where does its next phase of growth lie?
Fujitsu works with banks and financial institutions all over the globe: we don’t see ATMs as one market, but as several, separate, over-lapping businesses. Over coming years, we believe that the market will divide between simpler, and cheaper, cash dispensing machines, which will usually – but not always – located in off-premise locations. More sophisticated “self-service” equipment will also emerge which will be particularly attractive to banks seeking to secure savings via changes in the shape and form of the branch network.
The key area of focus will increasingly be in minimising the cost of deploying, maintaining and upgrading each of these estates. Margins are already thin for the independent deployers of ATMs, while many financial institutions are concerned that revenues will be lost as day-to-day banking is increasingly undertaken remotely. They fear that, as transactions shift to a widening range of self-service distribution channels, opportunities for relationship-enhancing conversations could be lost. With 75% of the UK population soon expected to own a smartphone that can easily be enabled to make and receive payments, many banks expect demand for cash – and thus ATM usage – to fall. This will then leave them with estates which are, proportionately, less well used and more expensive to maintain.
Expect to see high-quality ATM designs and the deployment of cost-efficient machines which blur the distinction between cash dispensing, internet banking and advanced marketing. With each machine increasingly being built from individual components, they can be made to appear bespoke to the user by making their shape, casings and colour consistent with the needs and brand identity of the deploying bank.
For instance, the machine we have deployed in Spain in conjunction with La Caixa, has seen the ATM repositioned as a cost-efficient distribution tool through which the bank’s self-service agenda is implemented. Key innovations include a double screen, which is used to communicate both general and personalised marketing information; a two-dimensional barcode reader, used for bill payment; and an optional biometric palm reader capability, by which the transaction is authenticated.
As the market increasingly looks for ways of lowering the costs associated with maintaining an ATM estate, products have been developed with high-levels of operating efficiency in mind. This can be seen, specifically, in terms of power and energy savings, easier installation and simpler maintenance. In particular, with the costs associated with cash replenishment and machine maintenance becoming a growing challenge for banks. This is evident through the development of the “cashless ATM” which issues a printed QR code rather than money which can then be “redeemed” nearby, say at a hotel concierge. Machines equipped with banknote recycling capabilities are being deployed, for use in markets where regulators permit such a capability.
The quality of the underlying ATM software will increasingly be viewed as an area of potential competitive advantage. As financial institutions branch networks change and banks become even more dependent on the quality of the self-service devices deployed, the ability to update offerings quickly and to update marketing communications will demand an increasingly fast and flexible operating infrastructure.
With returns in retail banking under continuing pressure, the widespread deployment of self-service devices throughout the branch network offer banks a real opportunity to reshape their cost base. Perhaps Volker should have said that an evolved ATM, one which extends and enhances self-service into banking areas beyond cash handling, could be the biggest innovation of the next twenty years?