By Mark Aldred, Banking Specialist at Auriga
Competition for retail banking services is intensifying between traditional banks and an array of digital challengers. Retaining customers has become ever more difficult. Additionally, COVID-19 lockdown measures have propelled more customers to use digital services. This, in turn, has triggered an acceleration of digital transformation within the banking industry.
Taken together, all of these trends have led to a decline in the use of cash. One survey by Mastercard revealed more than one in five customers have stopped using cash entirely. So, is it natural for banks to consider reducing cash-based services via traditional ATMs?
The answer is actually more complex, as banks are beginning to discover as unease about loss of access to cash in communities grows.
Although consumers are becoming more and more familiar with digital payments, the desire for cash has not diminished significantly. After an initial decrease of cash usage in the pandemic, we see worldwide that the trend is reversing and that the amount of cash being circulated through the ATM is now going up in aggregate. Additionally, research from RBR’s Global ATM Market and Forecasts research revealed that the compound annual growth rate (CAGR) of worldwide cash withdrawals will increase by 2.1% between 2019 – 2025.
Nonetheless, ATM closures continue at a pace. There may appear to be some good reasons for this other than falling levels of customer use, for example increased operational costs that might make an ATM less profitable to run. Some might need to be removed because of security worries.
As more places wake up to what the loss of their local ATM means, some innovative initiatives are starting up. For example, in the UK, Community Access to Cash pilot schemes are in the works to help provide access to cash in areas that are underbanked. Projects like this could boost local economies, and put payment choice back into local hands, as well as be a platform for delivering other financial services that help communities prosper.
For this plan to be successful in the future, financial organisations need to take action now, for example policies that enhance ATM security, reduce the total cost of ownership, and improve, modernise, and personalise the customer experience need to be put in place.
Self-services to improve the customer journey
As a device that celebrated its 50th birthday a few years ago, customers might be excused for being a bit blasé about ATMs as just a hole in the wall service. Yet, they remain the most convenient and secure way for customers to get their cash and do other banking services, especially when there is no bank branch nearby. It is the job of banks to make the fundamental service that an ATM delivers as easily accessible as possible. As a consequence, self-service banking will continue to be part of the customer journey.
What needs to happen, is an assurance that those self-service banking devices are fully integrated with other channels and services. When used in conjunction with the correct technology, self-service devices can offer crucial banking and community services, which can include account management, paying bills, and applying for loans. However, in order to make this a reality for communities, the right software and infrastructure is needed, especially since the customers’ needs and demands already exist.
In the context of branch transformation initiatives, multifunctional ATMs are seen as an integral element, as they can offer a substitute to face-to-face interactions in a branch, for example when secure video banking to access advisers to handle complex issues is implemented on the device. They can perform as a “branch in a box”, delivering a range of sophisticated branch banking services digitally 24/7. How this technology can automate branch services also has relevancy in the post-pandemic model of delivering “contact-less” services.
How branches are used to support access to cash and services isn’t all about remote services. There will be investments in assisted self-service terminals that will help branch customers handle their financial affairs with assistance from in-branch advisers and service staff. In fact, according to a 2021 study from RBR, 340,000 assisted self-service terminals (ASST) have already been deployed worldwide. An advantage of ASST roll-outs is how they can allow the workload of branch staff to evolve into more advisory roles that build the bridge between physical and digital channels and foster the human aspect of banking.
Joint ATM services to reduce ownership costs
Cost of ownership and higher operational costs overall are cited as reasons to cut fleets of ATMs especially in more far-flung places. Pooling and collaborating with other banks is a way to achieve operational savings, preserve and even extend ATM networks and services offered.
A good example of this is how the four major retail banks in Belgium have created a new shared state of the art ATM infrastructure for Belgium’s four largest retail banks. The initiative is called Batopin (Belgian ATM Optimization Initiative), which is supported by Belfius, BNP Paribas Fortis, ING and KBC, and aims at providing 95% of Belgians access to a modern ATM service within five kilometres of their home or business.
The problems of low profitability also can be addressed when banks become more imaginative about how self-service banking devices can be used to offer added-value banking services like how mobile banking apps can help make the lives of customers easier.
So much of how older and newer generation self-service devices can be part of the future of banking services depends on how much the underlying technology enables banks to be free to innovate. This has been problematic in the past and ATMs become isolated in technology silos in many cases.
This is why the new ATM acquiring model is going to be so key to how self-service banking flourishes in the future. Its channel integration model that enables both the connection and the isolation of the external channel independent entities (e.g. Transactional Switch, Core Banking, and Services), to make them completely independent and seamlessly usable across all channels. This model offers a cheaper, easier, and standardised system with an interface (usually based on ISO-8583, ISO-20022 or Web Services) that prioritizes business services.
Further operational advantages include a modular approach and accelerated time to market by having a single point of control of the branch automation channel without the need to define, agree, coordinate, and implement across different products.
As a result, banks can deploy new lean branch concepts that automate the transactional banking services, with 24/7 availability, leveraging video banking technology, and focusing branch personnel on consulting and sales activities. The demise of cash services and bank branches is not inevitable. Indeed, investment in digital technologies and self-service banking could preserve and extend financial services within our communities. What’s needed is greater imagination and ambition that, thankfully, we are beginning to see happen in many parts of the world.