ATM cash withdrawals see positive growth

ATM cash withdrawals see positive growth
Tags: North America, Trends / Statistics
April 29, 2010

U.S. consumers are withdrawing more money from ATMs, likely the result of the economic recession, industry insiders say. In September 2008, when the recession was official, consumers started relying more heavily on cash and debit, and less on credit.

Gary Faulkner, the executive vice president and chief marketing officer of Morphis Cash Forecasting Software of Dallas, says it was around that time that U.S. ATM withdrawals started going up. He said many of his ATM customers started complaining that the Morphis forecasting tool was not meeting targets, and ATMs were often low on cash because of increased withdrawal amounts. Faulkner says ATMs that had been effectively managed by Morphis' system for years were suddenly running out of cash.

"Starting in September 2008, customers were complaining that the forecasting was not right," he said. "Nearly universally, our customers saw an increase in transactions and an increase in cash withdrawals per transaction."

Faulkner says the volume of transactions increased as well. In fact, Faulkner estimates that the overall cash withdrawals from each transaction increased from roughly $65 to $75 a transaction to about $100 a transaction.

Arthur McMahan, president of Mobile Express Capital Corp. of Carrollton, Texas, a provider of ATM programs, says he sees fewer overall withdrawals taking place, but higher amounts of cash being withdrawn in each transaction. Before the economic crash of 2008, McMahan estimates the average customer withdrew $78 per transaction. Now, the average withdrawal ranges between $83 and $85 per transaction.

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"We saw a huge public loss of confidence in credit, per se, as the full extent of household and consumer debt levels became apparent, exposed by the financial crisis. As a result, masses of citizens turned to cash, and cash regained its leverage as a time-honored household budgeting tool," said Mike Lee, CEO of the ATM Industry Association.

People became more wary of accumulating debt or taking out loans, Lee says. Because of that, consumers will favor cash over credit cards.

"Cash, in short, makes sense as a popular payment method because it encourages a culture of moderation," Lee said. "Cash is universally trusted, as well as easy and fee-free to spend."

Some of the rush on withdrawing cash from ATMs may come from fear — fear of banks failing and no longer being able to provide cash, or fear of the machines running out of money.

"People were afraid to leave money in the bank," Faulkner said.

Increased prices of other consumer goods also may have caused the increase in cash withdrawals from ATMs. McMahan says something like an increase in gas prices (something almost everyone needs and almost everyone spends money on regularly) could cause people to make higher withdrawals just to cover the increase in spending.

Bryan Bauer, president of Kahuna ATM Solutions of Bloomington, Ill., says he suspects the increase in cash withdrawals could be related to an increase in surcharge fees. If a customer is charged higher fees per transaction, then it would make sense that customers would do fewer transactions, but withdraw more money at each transaction.

The increase in cash withdrawals has not been limited to the United States, either. Faulkner says that machines in Ukraine have seen an increase as well. Cash has always been the favored form of payment in Ukraine, but after the downturn in 2008, Faulkner says increases in cash withdrawals quickly became evident.

"The reason that cash experienced a global bounce-back effect during the recession is that it has the trust of ordinary people who use it to purchase non-luxury and small-ticket items like food and drink," Lee said.

To combat the increase, Morphis has introduced two new tools. One flags any terminal operating outside its expected bounds and then presents specific data to give an analyst more insight into the terminal's behavior. The second tool is a graphical representation of a recommended order compared to multiple years of historical usage for the same period.

"In addition, we present the most recent activity so the cash analyst can recognize a volatile change, up or down, that could influence the order decision," Faulkner said.ã€€

(Photo by Ubi Desperare Nescio)