Allpoint Blog

The ATM: The Old Becomes the New

(Editor’s Note:  This is the third installment of a three-part series on the transformation of banking industry and its impact on the ATM. Click the links for Part 1 and Part 2.)

In a recent webinar sponsored by Cardtronics and hosted by Credit Union Journal, financial services distribution expert Jon Voorhees talked about the importance of the ATM in the transformation of the banking industry and strategies FIs can use to maximize the value of their ATM channel.

Why is the ATM important?  

First, the ATM continues to be a primary source of a preferred payment option:  cash. 

Cardtronics’ own 2016 Health of Cash study and other studies have shown that cash is a prominent form of payment, and around 40 percent of U.S. adults get that cash from an ATM.   A 2016 Mercator Advisory Group’s CustomerMonitor Survey Series survey also concluded that ATMs remain a popular and vital channel for FI cardholders to access that cash from their checking accounts.

Second, the ATM attracts new customers and helps retain current customers, Voorhees pointed out in the webinar.  In the same Mercator survey cited above, the presence of ATMs in a consumer’s community was the second most influential factor in choosing a banking institution.  Voorhees added that the ATM is also “the first or second greatest expense and the most visible aspect of an institution’s brand.” 

Third, as FIs strive for greater efficiency, branches are being closed.  A net of more than 6,100 branches closed between 2009 and 2014 and 1,766 closed in 2015 alone.  What usually happens when a branch is closed?  The ATM is removed. 

Voorhees maintains that FIs need a replacement strategy in place because cash and convenient access to it are still highly valued by consumers.

Facets of the Successful ATM Strategy

In designing the ATM strategy, Voorhees recommends that credit unions and banks:

  • Leverage a balance of branch and remote ATM sites to lower the average cost of distribution.

  • Locate in highly trafficked retails sites.

  • Offer additional functionality beyound balance inquiries and withdrawals in the future, such as accepting deposits.

  • Present the illusion of a large network through inclusion of remote or off-branch ATMs.

  • Leverage online and mobile channels to automate account servicing activities.

Choosing the Best ATM Strategy

Five primary ATM strategies are used today.  They include, with advantages and disadvantages briefly noted:  

  • Deploy-and-maintain Proprietary ATM Network - offers FIs greater control; capital and resource intensive.

  • Brand Independent ATMs in Choice Retail Locations to Create Physical Points of Presence - low expense; standard ATM functionality.

  • Offer ATM Surcharge Rebate Program - less complicated for the customer; fluctuating, variable costs for the FI; customers could be lured by competitors' marketng tactics when using their ATMs.

  • Participate in Shared Surchage-free ATM Network - easy to implement and low-to-no costs; less control over customer experience.  Similar to rebate programs, customers could be lured by competitors' marketing tactics when using ATMs at another financial institution.

  • Join Independent Surcharge-free Network - access to large number of ATMs in popular retail locations; as with previous strategies, standard ATM functionality.

Each strategy offers additional advantages and disadvantages depending on the type, size and strategic direction of the financial institution.

To learn more about these strategies, download this free whitepaper, Cash Access for Cardholders: Defining the Optimal Surcharge-Free ATM Network Strategy.”

As it relates to the transformation of the banking industry – and as we approach its 50th anniversary – the ATM serves as an important physical component of the evolving digital banking model. It is the bridge between pure-digital automation and tasks, such as cash access that can be automated to a degree but still require a physical touch point.

Looking ahead (but not too far in the future) to a more mature evolution of digital banking, the value of the ATM will increasingly be contingent on how well it can help consumers perform digital-to-cash and cash-to-digital transactions. Look for future posts on this blog on how the ATM industry, and Cardtronics specifically, will be making those transactions possible.  

Brad Nolan
Executive Vice President, Global Product & Marketing

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