Deep Dive: Why ATMs-As-A-Service Could Be The Future Of The ATM Industry

ATMs offer crucial financial services, allowing most bank customers to quickly access cash on demand without traveling far to do so.

More than 10 billion ATM transactions occur in the U.S. each year, with the average ATM used 300 times per month and 40 percent of bank customers visiting ATMs eight to 10 times each month. Most retailers that host ATMs on their premises are happy to have them, with convenience stores that offer these machines noting that ATM users spend up to 25 percent more when visiting, for example.

The ongoing pandemic’s effects on the financial space have impacted the ATM industry, however. ATM use in many areas has taken a hit due to social distancing and stay-at-home regulations, and banks, stores and ATM providers are beginning to reexamine how they deploy these machines during this time of unprecedented financial upheaval.

Some are looking to reduce costs and provide augmented experiences for their customers by exploring ATM-as-a-Service solutions, which consist of third-party providers taking over ATM maintenance, cash management and other responsibilities. The following Deep Dive explores how the pandemic has rocked the ATM world and why ATM-as-a-Service solutions are becoming more tantalizing to many legacy providers.

How The Pandemic Has Affected The ATM Industry

ATMs are no exception to the sea change currently affecting the global financial industry. The machines themselves require no contact with other humans and only minimal interaction with touchpads and other interfaces, but transactions are nonetheless slipping in some markets.

Many of these declines can be blamed partly on record-low cash use. Getting cash from ATMs may be considered safe, but handling hard currency in stores can create health concerns as funds are passed from customer to cashier. Customers’ fears of infection have prompted them to use cash up to 5 percent less during the pandemic than they did before it began, which — coupled with overall payments revenues declining by 22 percent — could account for the lion’s share of declining ATM use.

These changes have left banks, ATM developers and the stores and businesses that host the machines in a bit of a quandary. Each ATM can cost upward of $55,000 to produce and install, and they depreciate at an average rate of $11,000 per year. A continuing decline in cash use could make these ATMs less appealing to deploy en masse, but the rise of ATM-as-a-Service solutions could be key to ensuring ATMs remain advantageous to implement and available to the customers who need them.

The Myriad Advantages Of ATM-as-a-Service Offerings

ATM-as-a-Service essentially enables financial institutions (FIs) to outsource the entirety of their ATM operations to third-party operators. The provider handles all aspects of ATM sourcing, distribution and operation, including installation, maintenance, security, compliance and cash management. This not only frees up bank staff to deal with other issues, like customer relations or cybersecurity, but also allows FIs to realize significant cost savings. One industry study found that in-house ATMs can account for up to 35 percent of a given FI’s entire annual operations cost, but outsourcing can save them up to 25 percent.

Shifting the task of managing ATM operations to a third party can also boost customer satisfaction. This benefit stems from the increased range of services that ATM-as-a-Service solutions can offer, such as envelope-less deposits, interactions via mobile device and bill pay functionalities via debit card. Implementing these services in-house can require a massive development team, quality assurance testing and a large innovation budget, however. Many banks are already struggling to maintain their basic ATM operations during the pandemic, giving them much less wiggle room to overhaul their functionalities. This makes ATM-as-a-Service options particularly appealing as ways to drive customer satisfaction and loyalty.

Compliance is another key area in which ATM-as-a-Service solutions can provide notable advantages over in-house operations. Fraudsters are always working to spoof ATM software and abscond with customers’ funds and personal details, and oversight agencies are introducing ATM regulations to ensure providers are adequately protecting their customers. Keeping up with these innumerable regulations and thwarting fraudsters is a ceaseless task for ATM security professionals, who must often work full time to keep their systems up to date. Outsourcing these tasks to a third-party ATM-as-a-Service provider can offer relief to bank staff and be a money-saving move for banks themselves.

The end of the pandemic may be in sight, but customers’ shifting attitudes regarding ATMs are likely to remain for some time. Investing in ATM-as-a-Service solutions could help banks move forward by providing key services to their customers while keeping their budgets in order.