Never trust anyone over age 30? If that's the case, dump your ATM card. As noted on page 6 of this issue, the automatic teller machine-an exclusive privilege for only the most trustworthy of bank customers when it was introduced-has just turned 30. The machines that were initially expensive and which were limited in number can now be found in just about every convenience store in America, and indeed the world.
As the ATM turns 30, three experts were asked by eFunds Corp. to share their thoughts concerning the future of the ATM and its effect upon the financial community and consumers. Below are excerpts from some of their insights:
Q: What is the short-term (one to five years) prediction for the ATM as it will effect financial institutions?
Jerry Silva, senior analyst-retail banking, TowerGroup: I think some financials will have to deal with the fact that their ATMs have become utility machines and that for those financials the strategy will be to lower costs as much as possible, leading to increased outsourcing opportunities and shared networks to spread those costs among a number of smaller institutions. For independent service organization (ISO) ATMs, surcharging will continue to drive revenue opportunities, but less so going forward as the market becomes saturated and fewer potential locations are identified. Banks have tried, and will continue to try, to "back into" the convenience market by white-labeling ATMs, but I think they'll have difficulties matching the revenue models used by the ISOs while at the same time dealing with the inherent contention with their own bank brand.
For other banks, the search continues for the killer application that will raise the ATM's value. The check-truncation legislation in the U.S. will have a significant impact on the use of automation to process check deposits at the ATM, and lower costs significantly for financial institutions. But financials will have a challenge retraining the consumer to use the ATM for that purpose. I also believe that the ATm's value as a communications device between the financial and the customer/member is being seriously under-used. With over 40-billion global transactions annually, financials should be able to leverage that time spent with the consumer to do some personalized marketing. Even common courtesy-type communications will increase the goodwill between the financial and the consumer, increasing retention.
Richard Bell, research manager, retail channels, Financial Insights: The impact will vary significantly depending on geography. In the U.S., where the market is largely saturated, there is some potential for shared depository networks.
Brad Adrian and Stessa Cohen, analysts, Gartner Financial Services: Multifunction ATMs with greatly extended functionality are not going to be the norm in the near future. Consumers are not necessarily demanding additional ATM features, so financials will add those that can most directly create cost savings. For example, financials are increasingly interested in offering check deposit imaging at the ATm and "envelope-less" deposit capabilities to speed processing and reduce ATM replenishment costs. As banks move toward holistic payment management and implementation of software solutions that consolidate all of a bank's payment systems, banks will use fewer systems to process transactions that originate from disparate sources, such as ATMs, point-of-sale, etc., in a similar way and to capture richer transaction-related information.
What is your short-term (one to five years) prediction for the ATm as it will effect consumers and members?
Silva: Consumers have more choice and convenience with regard to the ATM than ever before. While debit-based POS and cash-back will continue to erode ATM transaction volume, cash will still be king and consumers will still rely on the increasing size of ATM networks to obtain that cash. The use of machines to deposit checks will get some pushback from consumers, but I believe that particular behavior will change if the educational processes and, perhaps incentives, are put in place to help them along. The other concern will be the timeliness of the ATM transaction if more functionality is moved there, making transaction times longer and delaying the member who just wants their $60.
Adrian & Cohen: Consumers will continue to view ATms as offering primarily cash-related transactions. There are a few new ATM functions that consumers will desire and use, though. For example, in the U.S. consumers desire the ability to top-off prepaid mobile phone accounts, but financials will only offer these additions if no hardware modifications are required and customers/members will only use them if the transactions can be performed quickly and easily. ATM "ubiquity" will reach "saturation" as more non-financial organizations place ATMs wherever possible. Consumers will never be far from an ATM, but fees for using non-member ATMs will remain relatively high.