Most of PYMNTS readers in the Northeastern U.S. today (Jan. 27) will be enjoying all the latest news on what’s next in payments and retail innovation from their homes. Why? Well, depending on where they are in the Northeast, they are currently sitting under 1-3 feet of fresh falling snow. Readers in and around PYMNTS world headquarters in Boston are, in fact still watching the snow fall, and will likely be doing so for the rest of the day through tomorrow morning – if forecasts can be trusted.
It is hard for most people over the age of 12 to get excited about a blizzard, since for most of us 2-3 feet of snow means shoveling, power outages and some serious potential for cabin fever. And though the media is calling today’s weather event “Winter Storm Juno,” it’s easy to imagine those who work in retail and payments collectively calling today “Winter Storm Q1 Revenue Killer.” As a rule, major storms are not good for business, both through the direct damage to property they cause, and the opportunity costs associated with them. Economic activity in five major American cities will essentially be on hold for the next 24 hours.
And yet while blizzards can be hard things to love, as it turns out even massive amounts of snow can be surprising fertile field for innovation ignition. Don’t believe us? Then PYMNTS has a question for you to ponder while you watch the snow or wait for a quarter of the country to thaw out and get back to work.
Do you have a debit card in your wallet that you’ve ever used at an ATM?
The Blizzard Of ’78 And The Automatic Teller Machine
The history of the automatic teller machine, aka The ATM, should sound a little bit familiar even to everyone who’s obsessed with mobile. Starting in the 1960s, various entities in the United States, Japan, Sweden and the United Kingdom were all working independently to develop self-service banking technology. Generally speaking, IBM is credited with the invention of the first modern ATM, which first rolled out in England in the early 1970s.
ATM technology spread through out the U.S., but slowly, throughout the 1970s. The big concern about early ATMs was fraud, and the fact that consumers would not feel secure using a code and card to withdraw money from an unmanned terminal. Remember, back then, the way that people got cash was from a teller in their bank. A friendly teller in a brick-and-mortar bank, between the hours of 9 and 5, when the banks were opened. And, back then, cash was actually a method of payment that people used and used a lot.
When Citibank first installed ATMs throughout their New York locations in 1977, the reception was more or less lackluster. Users complained that interacting with the machines was confusing and impersonal, and that the machines were not quite accurate – even dispensing the wrong amount of money on occasion.
“We got a lot of flak,” says Walter Wriston, the chairman of Citibank at the time the ATMs went in. Wriston went on to receive the Presidential Medal of Freedom, for his banking innovations. “A lot of ads were run saying ‘Our tellers are smiling young ladies who remember your name. Why go to a soulless machine?’ And the answer to that was at 7:30 at night when you’re going to go to the movies and you don’t have any money, you like the soulless machine.”
And over time, that argument won out. That was also an argument that was helped by a very persuasive debater, Mother Nature.
On Feb. 5, 1978, 17 inches of snow fell on New York City in about 24 hours, and the city ground to a screeching hault. Nothing, including and especially banks, was open – which presented a problem for consumers, who started getting cash at supermarkets.
Which promptly ran out of cash.
But what do you know. Right there, ready and waiting, were ATMs. Ready, poised and able to ride to the rescue.
During the storm, the use of the machines shot up 20 percent, more or less, overnight. Soon thereafter, Citibank started running TV ads showing people pushing their way through the snow drifts in New York City.
This was also the birth of Citibank’s internationally recognized slogan, “The Citi Never Sleeps.”
The rest, as they say, is history.
According to recent reports, over 92 percent of consumers say that ATM availability factors into their selection of a bank. There are 283 million debit ATM cards in circulation today.
In fairness, that ubiquity was also greatly aided by the card networks’ 1996 decision to drop their longstanding ban on customer surcharges, which elevated ATMs past customer convenience to potential cash cow.
However, for the user, the ATM got its proof of concept in a blizzard, where suddenly with anyone with a small plastic rectangle with a mag stripe on it could access their money, with or without a bank teller.
Now granted, mobile is not the same as the ATM. ATMs only really had to persuade consumers to use them – all of them had cards that were capable of being used and no one ATM had any bearing on the ability of a consumer to any other ATM. And, at the end of an ATM transaction, the consumer walked away with cash, which every merchant in America has been happy to accept since 1789.
Mobile in physical stores doesn’t quite have it that easy since both consumers need to be convinced to start using it instead of a card, and merchants need to be persuaded to start taking it. And it doesn’t seem likely that a blizzard is likely to bring on anyone’s inner shopper, and particularly in a physical store which are probably all closed anyway. Monetate estimated that net-net all commerce lost money when Hurricane Sandy blew into the Northeast in 2012 – with both physical and e-commerce taking a hit in the aftermath of the storm. That’s typically the result of major power outages that often accompany these storms that wipe out Internet access, thus cramping the style of the e-commerce shopper bored to tears sitting at home.
But, like all storms, a few days later, the sun shines again. And retail sales tend to pick up and move into above average range in the days after a storm, and often to a degree that outstrips the loss incurred during the storm days. This is particularly true of e-commerce firms.
The good news is that bad weather – like a blizzard – generally has shorter and fewer lasting economic effects than a natural disasters – like a hurricane or a tornado. Most analysts are predicting that barring unforeseen tragedy, the effects of today’s storms will be temporary.
Which means that it’s possible that somewhere, possibly buried under a snow drift in Boston’s innovation district, a new payments idea might be getting ready to ignite. It might seem unlikely, but then ATMs becoming ubiquitous seemed equally unlikely on Feb. 4, 1978.