ATM – The rise of ATMs

A report from Retail Banking Research (RBR) details how rising numbers of ATMs worldwide are having a direct impact on demand for cash. RBR found that the installed base of ATMs across the world is forecast to grow by 44% between 2012 and 2018, taking the number of ATMs worldwide to 3.7 million by 2018.

Correspondingly, global cash withdrawal volumes are predicted to increase by 65% over the forecast period, compared to growth of 44% in the number of ATMs – writes Victoria Conroy.

There are several reasons for the continuing growth of ATMs worldwide, both in developed

and developing markets, including a persistent preference for cash when making low value payments, personal budgeting, anonymity and segments of the population who mostly operate outside of the traditional banking system.

Not surprisingly, less developed markets have greater cash usage. What is of note is that even when people in these markets have debit cards which could be used for payment at the POS, they often only use their cards for making cash withdrawals, either because of a lack of POS terminals in the places where they make most of their payments, or because they simply prefer to pay with cash.

It is in the previously underpenetrated emerging markets that the most rapid growth in ATM numbers is taking place, with the Asia-Pacific and Middle East and Africa regions expected to see increases of over 75% in their installed bases. Strong growth is also predicted for central and eastern Europe and Latin America.

At a country level, China will account for the largest share of total growth worldwide, driven by a small number of very large banks. Chinese banks are issuing a million new cards every working day, creating unprecedented demand for ATM services. In particular, demand for quick deposit and cash withdrawal is extremely strong, leading to heavy bank investment in ATM infrastructure.

It is only in North America and western Europe that ATM market growth remains subdued,

partly due to the ongoing effects of the financial crisis, which have limited the budgets of many deployers, but also because in these regions, consumers are already well served by ATMs. Many banks have turned their attention from growing their ATM fleets to other aspects of their ATM operations, such as improving functionality and customer service, increasing efficiency and reducing costs.

Looking to the future, the sizeable unbanked populations in many countries present especially strong potential for new ATM users, given that banks see ATMs as a way of attracting people who have not so far been able or willing to access traditional financial services. Examples of countries where previously unbanked customers are having a particularly notable impact are Bangladesh, India and Nigeria, which are forecast to be the fastest growing markets worldwide, the former two expanding by over 300% by 2018.

Unbanked as an opportunity

Ben Thorpe, director of global marketing and strategy at cash management technology company Glory Global Solutions, told PCM: “There are an estimated 360 billion cash transactions in the European Union every year, with ATM cash withdrawals forecasted to rise from 62 billion to 94 billion globally in 2015. As such, it’s fair to say that cash is still growing rapidly and will continue to do so in 2014. From greater use of data-driven technology to enable better cash management, to ATMs with biometric capability and increasing use of mobile devices by staff in branches, 2014 will see banks plant seeds sown for a high performance future.”

Regardless of what the future holds in terms of the evolution of branch-banking and self-service, the ATM will remain a key facilitator of bank and customer interaction, according to Aravinda Korala, CEO of ATM software provider KAL.

“When you consider that your highest value customers and the rest of your customer base as well transact with the bank almost exclusively through the ATM and the website, that tends to be their complete perception of the bank. The transactions you offer are very important as is the look and feel of the application. If you’ve got green screens with black-and-white text versus an up-to-date user interface, your customers are going to view you as outdated,” Korala said.

According to the 2013 ATM Software Trends and Analysis survey published by ATM

Marketplace, many financial institution respondents cited their most important consideration for their ATM strategy as creating a better customer experience at the ATM, which incorporates targeted marketing of bank products. In other words, it’s not enough to simply use the ATM screen as a delivery vehicle for advertisements. Those messages not only must be relevant to the customer but relevant to the customer’s relationship and prior interactions with the institution.

However, the survey also found that recent interest in features such as biometrics appear to be on the wane. The survey cited a fear among consumers about banks having access to such sensitive information and the association in consumers’ minds of “fingerprints” with “criminal.” In addition, for biometrics to become widespread it would be necessary for institutions to not only agree on standards for biometrics but to share that information between institutions.

Another area that hasn’t quite gained the anticipated traction is videoconferencing. Although video interactions with offsite call centres has potential in the branch of the future, it’s not likely to be part of the street corner ATM due to consumer privacy and safety concerns.

Integration of new channels

Respondents ranked the ability to perform banking services via smartphone at or near the top of their concerns. In addition, many in the industry see the smartphone becoming an integral component of the ATM channel.

Increasing the promotion for using smartphones and/or the bank website to do banking services was listed as a plan for extending the use of self-service by 64% of survey respondents in the Americas followed by a tie between adding new transactions at the ATM and the use of new devices at the branch to deliver bank products and services. Adding new transactions on the ATM was listed as a plan for extending the use of self-service by 64% of respondents in Europe, the Middle East and Africa, followed by increasing the promotion for using smartphones and/or the bank website to do banking services at 44%.

Using new types of devices to deliver bank products and services was listed by 39% of respondents from Europe, the Middle East and Africa. Around 60% of respondents from the Asia-Pacific region listed adding new transactions at the ATM as a plan for extending the use of self-service followed by use new types of devices to deliver bank products and services inside of the branch at 55% and extending the number of ATMs in the network at 50%.

Integration of mobile phone transactions with the ATM was indicated by 50% of survey respondents as the most important future capability of the ATM channel in Europe, the Middle East and Africa, followed by contactless card support at 39% and a customised user interface based on transaction history from CRM data at 38%. Mobile phone integration was the top driver at 51% in the Americas followed by a tie between electronic receipts and targeted 1-to-1 marketing at 35%. Integration of mobile phone transactions with the ATM was the top driver in the Asia-Pacific region at 55% followed by a customised user interface based on transaction history from CRM data at 33% and touch screen/multi-touch screen capability at 29%.

One player which is capitalising on the opportunities in the ATM and self-service areas is money transfer specialist Western Union, which through the Western Union, Vigo and Orlandi Valuta brands offers a combined network of approximately 115,000 ATMs globally.

In December 2013, Western Union announced a major milestone with more than 80,000 ATMs and self-service terminals around Europe and the CIS region with Eastern Europe being the strongest contributor to this number. In Russia, Western Union has recently successfully launched Western Union money transfer sending service through Petersburg Social Commercial Bank (PSCB) payment terminals and Comepay self-service terminals network.

Instant payments via self-service terminals are a very popular and at the same time quite a unique service for Russia as they are not that much penetrated in other parts of the world. According to a research by J’son & Partners Consulting, in 2012 self-service terminals represented the most popular way of making electronic payments in Russia.

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