Allpoint Blog

Digital Revolution Triggers Bank - and ATM - Transformation to Meet Customer Needs

[Editor’s Note:  A condensed version of this post was published by ATM Marketplace earlier this month.] 

Sparked by a societal digital revolution, a massive banking industry transformation – technologically, operationally and culturally – is underway as financial institutions scurry to meet shifting customer needs. For bankers, this transformation reflects consumers’ increasing demand for convenience, digital engagement and self-service. And it’s made re-evaluating what is, and what isn’t critical infrastructure essential for all financial institutions. 

It’s a daunting task to execute for an industry slow to change, but it is necessary to serve digitally-savvy customers. Most visibly, the transformation is embodied by shrinking bank branch networks, trimming the associated costs and redeploying that capital to digital initiatives. And yet this creates an infrastructure problem – ATM attrition – prompting banks to rethink and to seek more flexibility in how they operate.
 

Cash Demand Strong, Despite Digital Revolution


Despite the disruptive evolution of mobile banking and payments, the demand for cash has continued to grow. Indeed, a recent MasterCard report, “Measuring Progress Toward a Cashless Society,” concluded: “Yet despite this progress, cash today remains the most commonly used method of payment when looked at from a global perspective.”

As for the American perspective, cash continues to play an important role in the payment landscape. When Mercator Advisory Group, in its 2016 report “Self-Service, ATM and Other Channel Banking: Expand My Options,” asked respondents if their use of cash increased, decreased, or stayed the same within the past year, cash usage had a strong showing at the polls.

While most consumers noted that their cash use stayed the same (64 percent), which taken by itself is a mobile payments myth-busting statistic, when it came to increasing or decreasing, more consumers reported their cash use increased (21%) than decreased (15%) during the previous year.

With cash continuing to play an important role in consumer payments, and ATMs becoming the most popular method of obtaining cash, it’s quite logical that Mercator also found the ATM to be the most popular self-service banking platform. 

ATMs: At the Center of the Self-Service Revolution

 
Today’s ATM is the foundation of the self-service, digital revolution and an essential complement to the convenience of mobile banking. The definition of critical infrastructure, the ATM is central to many consumers’ self-service banking world. 
In seeking to continue to have a significant presence, but still rationalize costs, a growing number of banks – including larger financial institutions – are supplementing their in-house ATM services, and in some cases outsourcing ATM operations altogether. Increasingly, they are turning to ATM specialists to help them deliver always-on access to cash for their customers. 

For instance, Fifth Third Bank, the nation’s 15th largest bank holding company, which already owns and operates 1,200 branch offices and 2,600 ATMs, greatly expanded surcharge-free ATM access for its customers by joining Allpoint Network. It is a significant milestone. Like many transforming banks, Fifth Third is investing in digital channels. At the same time, Fifth Third customers want what all consumers want, convenient surcharge-free access to cash, despite going digital in other areas of their banking relationship.

The fact that Allpoint now has relationships with five of the top 25 U.S. retail banks is compelling evidence that the ATM channel is critical infrastructure, inter-woven into the fabric of digital transformation and how best to serve and reach today’s digitally inclined consumer. 

Digital & Cash Convenience: A Demand for All Ages


The consumer has decided that on-demand access to banking services and convenience are important to them, and banks must adapt to their changing needs with more ATMs, mobile offerings and other digital services. As financial institutions embark on this transformation, strategies like partnering with ATM specialists to cost-effectively offer a national footprint with density of coverage allow banks to engage with customers where they want to be reached and with the services they need. 

Banking leaders must grasp the swiftness of the changes in the needs of their customers, especially Millennials who favor digitally-enabled financial services primarily because they value convenience and on-demand services.  

A 2013 Federal Reserve Board study served as an early wake-up call. It showed that the ATM channel accounted for more withdrawals and deposits within the United States than branch tellers. Speaking to the value of ATM services, a 2014 Visa study indicated that 57 percent of consumers consider ATM convenience the No. 1 reason they choose their financial institution; for many of the rest, it’s the No. 2 reason. 

A Chase Bank investor day presentation earlier this year revealed a greater percentage of Millennials (80 percent) use the ATM channel than non-Millennials (63 percent); and the aforementioned 2016 Mercator research similarly found ATM use is rising among young adults and mobile banking users.

Specifically, Mercator found that ATM use is widespread (4 in 5 consumers use ATMs at least a few times a year) with rising use among young adults and mobile banking users, with half of young adults (up from 2 in 5 in 2014) using ATMs weekly or more. 
For digitally engaged Millennials, the ATM is part of the digital service delivery model, and cash is part of their life.

Conclusion


Against the backdrop of digital revolution, branch office reduction and bank transformation, ATMs are a critical part of the solution for lowering costs and providing the convenient self-services consumers demand. 

In spite of the hype surrounding mobile payments and digital P2P, these payment alternatives play on the margins in comparison to cash and cards. And that’s reflected among Millennials, a generation raised on technology that, perhaps not so surprisingly, use ATMs to get their cash.
 
Alongside a pull back on physical assets, perhaps it’s difficult for bankers to justify growing their in-house ATM fleet, but that’s exactly why the partnering trend of financial institutions working with ATM specialists to supplement their in-house networks has emerged.

ATMs are the physical component of the digital banking mode; they are critical infrastructure. And as banks reduce branches, the ATM only becomes more valuable. Credit the digital revolution. 

Bill Knoll
Executive Vice President and Managing Director
Allpoint Network

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