Pundits prophesy a cashless society — and indeed, vast swaths of consumers are migrating to digital and mobile channels for many of their banking needs, as shown by a decline in the number of brick-and-mortar retail bank branches. Viewing account balances, paying bills or depositing checks are now as easy as tapping or swiping and a quick thumbprint scan on the consumer’s mobile device.
Demographics are changing in the U.S., though, and the ways people do business are changing along with them. Millennials are taking a mobile-first approach to banking, driving that transformation. However, older populations — and even millennials — still need the services provided by bank branches. Particularly they need access to cash, despite prophecies saying that cash is either dead or dying. In fact, many customers, regardless of age, desire a personal relationship with a financial manager, illustrating a shift in how branches are typically used.
Since smartphones haven’t learned how to print paper money, people still must turn to ATMs for that. In fact, the number of ATMs in the U.S. is on the rise, surpassing 500,000 over the summer and projected to grow by another 12 percent in the next year.
Yet because of customers’ attachment to the smartphone and all it can do, their expectations for the ATM experience are much higher than they once were — and keeping up can quickly grow more complicated and expensive than banks would like.
In a recent interview with Karen Webster, Suzanne Galvin, senior vice president of product management at Elan Financial Services, said it is not enough for these machines to be simple cash dispensers anymore.
Just like checking out their own groceries, customers want to handle basic banking transactions themselves. Cashing checks, making deposits and similar activities no longer require an expert, and customers don’t want to interact with one unnecessarily. On top of that, they want better security and ease of use, including new technologies like biometric authentication and more granular functions like specifying bill denominations.
Providing customers with an ATM experience that is both useful and simple is anything but simple on the bank’s end. It is complex, expensive and perpetual, with daily attention needed even for working devices to keep them in tip-top shape.
In short, like any device, it provides both opportunities and challenges.
The ATM Opportunity
ATMs allow consumers to do business on their terms and on their schedule, said Galvin.
They are (in theory) open 24/7, and some even offer video chat teller capabilities after hours, enabling financial institutions (FIs) to broaden the footprint and customer base they can reach as well as their hours of service with a relatively minimal investment — although ATMs certainly aren’t cheap, starting around $65,000 for the most basic devices, according to Galvin.
Still, it’s cheaper than staffing branches. As rote tasks migrate to self-service platforms like mobile devices and ATMs, fewer employees are needed in each branch. The ones who remain there must have greater expertise, and will, therefore, be earning more. Since 1992, foot traffic to banks has decreased by 34.2 percent while employee pay rate has grown 100.4 percent, Galvin said.
As a result, ATMs have become almost like mini-branches over the years, she said, with advances in software and technology propelling them forward.
One such advance has been the ability to transact without swiping a card. Instead, some ATMs allow customers to tap their mobile devices to transact. These contactless transactions decrease fraud, which is a critical service with ATM skimmer fraud up 500 percent since 2014.
Galvin sees the screens being added to ATMs as a brand opportunity through which banks and FIs can showcase new services, remind customers why they should feel safe working with that FI — say, by outlining new protective measures the FI has taken — drive donations to emergency relief funds, educate the consumer or reinforce the brand.
After all, a customer standing at an ATM is something of a captive audience, said Galvin, and the opportunity is even greater if customers are just visiting the ATM from other banks.
The ATM Challenge
With a more complicated device, naturally there are more ways for things to go wrong. Banks and FIs must be on top of their ATM fleet, even devices that are not broken or malfunctioning, Galvin said, and fully functional devices still need regular updates and service.
Recurrent downtime is a big enough issue that 28 percent of consumers who experience it will switch banks to get better ATM access, said Galvin. Ideally, said Galvin, no machine should ever be down.
However, practically speaking, not every machine is going to be fully functional at all times. Monitoring that growing number of devices presents an ever-growing challenge. Banks don’t always have the resources to give every machine the attention it needs.
The important thing, said Galvin, is which machines are functional, and when. Highly trafficked devices cannot be allowed to sit un-repaired for long spans of time, and downtime at 12:00 p.m. is very different from downtime at 3:00 in the morning. A strategic approach powered by data is needed to ensure that resources are being directed as efficiently as possible.
Speaking of juggling too many balls, managing a large number of vendors can also prove challenging for banks, Galvin said. Part of monitoring is seeing how well, say, a card reader from Vendor A performs compared to one from Vendor B, and using that data to drive decisions about which vendors to work with in the future.
However, perhaps the biggest challenge of all is security. Presenting the option to tap instead of swipe doesn’t protect swipers from that 500 percent increase in ATM card skimming, Galvin said. Since not every consumer has a smartphone with tap-to-pay capabilities, protections must also be in place for those still using a traditional bank card.
As for the tappers, they face their own set of frustrations, since not every ATM has mobile capabilities. Galvin believes a national standard for ATM capabilities is coming, but since it’s not here yet, both consumers and FIs are left to straddle the new world and the old, never quite certain what to expect or what will be expected of them.
The Omni Strategy
Galvin concluded the ATM is still extremely relevant and is viewed by consumers as an expected touchpoint for interfacing with their banks or FIs of choice. People will undoubtedly adopt new methods of banking as new channels emerge, but that doesn’t mean they’ll abandon the old ways entirely, she said.
Going forward, Galvin believes ATMs will continue to hold a critical place in the omnichannel strategy that banks must adopt to stay relevant — a strategy that will leverage mobile, online banking, call centers (which are able to provide personal interactions at a lower cost) and, yes, in some instances, branches.
“ATMs are a tried and trusted solution within the sophisticated service options available today,” Galvin said. “Over the next few years, they will become even more deeply woven into banks’ and FIs’ structures.”