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ATMs can become thing of past

The first bank to introduce ATM was Barclays in UK some five decades back. In last 50 years, the Retail Banking industry across the globe embraced it as must to have cash dispensing outlet with more than 3 million ATMs operating as of date.  Because cash remains a crucial part of most people’s day-to-day lives even today, ATMs are considered to be the most convenient form of Retail banking where the banks allow customers to withdraw cash 24x7 from their account by just swiping a plastic card. There is literally no down time except for the time when the cash is loaded in those ATMs. The next level of transformation came where the operability restrictions were removed thereby allowing customers to use any ATM as per their convenience (albeit with a small fee in some cases).

With the ongoing digital disruptions in Retail Banking, ATMs or Automated Teller Machines will become obsolete in few years from now. Let’s look at some facts. So, what do we do with ATMs? Withdraw cash or check account balance or may be do some funds transfer, do some basic servicing like changing card pin or placing a check book request etc. Well, not all ATMs support such wide variety but for the sake of understanding the ATM functionality, let's assume all ATMs provide these services.

So let's just analyze a little more detail to understand why we need ATMs.

Cash Withdrawal - ATMs are widely used for this purpose - a currency dispensing machine. 95% of the people using ATMs use it only for this purpose. Our senses are so tuned that whenever we run out of cash, we start looking around for ATMs. Why can't the money be withdrawn from any available point of sale. Just walk to a POS operating vendor (it could be a Walmart or a small mom and pop store) and swipe your card. The merchant can give that required cash in a much shorter duration than the ATM at no cost. For the time being let’s discount the service charges or commission factor. Is it not possible? It is very much possible so far as the merchant operating POS has required amount of cash. And we are not talking about a huge amount of cash here. As per a recent survey in US, more than 90% of people withdraw less than or equal to $100 on every card swipe in ATMs. So, the value of cash withdrawn from the ATMs are not necessarily high and manageable.

Other services – Less than 5% of the people using ATMs use it for other purposes. It could be either for funds transfer or changing card pin or checking account balance. With the mobile banking gaining popularity and the onset of social media channels, this numbers are further likely to come down. Why would someone go to ATM to change the card pin or do a fund transfer if he can do it conveniently from his mobile or by just sending a WhatsApp message.

 Now, let’s compare the investment that is required to setup and maintain the ATM versus the potential revenue that the Bank may earn on levying commission for cash withdrawals at a point of sale. The capex for setting up the ATM and maintaining it is a huge infra cost for a Bank specially in Metros where the real estate is expensive.  If all the cash withdrawals are made commission free added with some incentive for the merchant, ATMs will become an obsolete piece of machine. Coverage of POS will be far more than ATMs and the investment required by Bank will be nil.  The cash transacting merchant will be happy to offer this service as he doesn’t have to worry about carrying over his cash

So what do we do with all the ATMs – Well, one thought could be to convert the ATMs into full-fledged Banking Kiosks thereby eliminating or reducing number of branches. But that’s another topic of discussion and will touch upon that in my next post.

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Comments: (4)

Ambrish Parmar
Ambrish Parmar - Digital Strategy and Transformation Director - London 10 April, 2019, 11:27Be the first to give this comment the thumbs up 0 likes

Hi,

Thank you for sharing your post and prespective, always a sensitive area - ATMs and their use/ relevance. It would be intetesting to establish the views from the rest of the community. Ambrish, community group owner.

 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 11 April, 2019, 13:29Be the first to give this comment the thumbs up 0 likes

From my personal experience of getting "cashback" from POS machines at supermarkets in UK, I'm sorry to say this is a very naive proposition and displays utter lack of appreciation of UX. I could walk in to an ATM and be out with my cash in 30 seconds. At a supermarket POS, I'd have to stand in a queue until I reached the POS, which took 10-30 minutes, depending on time of day and day of week. Not surprisingly, there were 3-4 ATMs installed inside the supermarket to fulfill the cash demand in a manner convenient to customers. The real solution to the high cost of installing and operating the ATM real estate is to drive greater adoption of cashless methods of payments - not shift the point of dispensing cash from ATM to POS. And that's what banks have been doing, with reasonable success, in the last 4-5 years. 

Ron Delnevo
Ron Delnevo - Cash & Card World - Leatherhead 13 April, 2019, 05:34Be the first to give this comment the thumbs up 0 likes This blog, in focusing on the UK, makes assumptions that are incorrect. ATMs elsewhere on the planet ARE substitutes for bank branches. The fact that UK ATMs do NOT offer a variety of financial services transactions points to a lack of investment in community customer services, something considered unacceptable in many other countries. Even in the UK, it is wrong to suggest cash withdrawals are the only service on offer. Balance enquires and similar services account for more than 1/3rd of all ATM activity. The recent Access to Cash Report revealed 97% that 97% of UK adults continue to carry cash and nearly half of them - 25 million adults - would have their lives seriously disrupted if cash is not conveniently available. Cash is not a Minority Interest - the majority of people continue to choose to use cash and MUST be free to do so. They are entitled to have Payment Choice. As regards how this vital cash is supplied ATMs are the ONLY channel that works for the vast majority of the public - which is why ATMs meet over 90% of the UK’s cash needs today. Cash from retailers tills - “cash back” - Can augment cash from ATMs BUT never replace it. The figures are easy to understand. The average free-to-use UK ATM delivers £3 Million cash per annum; a local community shop, usually (from Association of Convenience Store figures) achieving total sales of less than £1 Million a year - and 25% or more of those sales are card-based. So, clearly, such a shop cannot possibly deliver £3 Million per year via “cash back”. What we - the UK Public -need is not misguided and unworkable schemes to replace ATMs. What we DO need is legal protections put in place to guarantee the future provision of Smart ATMs - allowing deposit, recycling and withdrawal of cash - in EVERY community, ATMs which CAN replace the dodo-emulating bank branches. Such legal protection will safeguard ACCESS to cash for individuals and businesses around the UK. We also need ACCEPTANCE of cash guaranteed by law, so that no business which accepts in-person payments is permitted to refuse cash for payment. Other markets have success laws. The UK must follow their lead, in the Public Interest. No further blogs required. The answers are provided in what I have just keyed.
Ron Delnevo
Ron Delnevo - Cash & Card World - Leatherhead 13 April, 2019, 06:43Be the first to give this comment the thumbs up 0 likes This blog, in focusing on the UK, makes assumptions that are incorrect. ATMs elsewhere on the planet ARE substitutes for bank branches. The fact that UK ATMs do NOT offer a variety of financial services transactions points to a lack of investment in community customer services, something considered unacceptable in many other countries. Even in the UK, it is wrong to suggest cash withdrawals are the only service on offer. Balance enquires and similar services account for more than 1/3rd of all ATM activity. The recent Access to Cash Report revealed 97% - YES, 97% - of UK adults continue to carry cash and nearly half of them - 25 million adults - would have their lives seriously disrupted if cash is not conveniently available. Cash is not a Minority Interest - the majority of people continue to choose to use cash and MUST be free to do so. They are entitled to have Payment Choice. As regards how this vital cash is supplied, ATMs are the ONLY channel that works for the vast majority of the public - which is why ATMs meet over 90% of the UK’s cash needs today. Cash from retailers tills - “cash back” - can augment cash from ATMs BUT never replace it. The figures are easy to understand. The average free-to-use UK ATM delivers £3 Million cash per annum; a local community shop, usually (from Association of Convenience Stores own figures) achieves total sales of less than £1 Million a year - and 25% or more of those sales are card-based. So, clearly, such a shop cannot possibly deliver £3 Million per year via “cash back”, to replace a lost ATM. What we - the UK Public -need is not misguided and unworkable schemes to replace ATMs. What we DO need is legal protections put in place to guarantee the future provision of Smart ATMs - allowing deposit, recycling and withdrawal of cash - in EVERY community, ATMs which CAN replace the dodo-emulating bank branches. Such legal protection will safeguard ACCESS to cash for individuals and businesses around the UK. We also need ACCEPTANCE of cash guaranteed by law, so that no business which accepts in-person payments is permitted to refuse cash for payment. Other markets have such laws. The UK must follow their lead, in the Public Interest. No further blogs required. The answers are provided in what I have just keyed.
Huzefa Cutlerywala

Huzefa Cutlerywala

Director, Business System Analysis

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This post is from a series of posts in the group:

Banking Strategy, Digital and Transformation

Latest thinking in respect to Banking Strategy, Digital and Transformation. Harnessing our collective wisdom to make banking better. Ambrish Parmar


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