Feb. 15, 2013
By Lyle A. Elias
When I started out in the ATM business some 20 years ago, the hardest part of my job was convincing convenience store owners that they needed an ATM. A common reaction was, "You mean to tell me that people will come into my store, use my ATM, and walk out with my money?"
A lot has changed since then, but the lesson that I learned early on is that people have an emotional attachment to their money. For better or worse, people feel like the ATM is sitting there, holding their money, just so that they can have access to it whenever they want. This has been a double-edged sword for the ATM industry, because on the one hand consumers love ATMs, while on the other many think that cash access should be free.
Having learned my lesson well on how folks feel about their ATMs, I thought to myself, "What is needed is an ATM that offers all of the financial services that people need and that they are willing to pay a premium for in order to have the convenience and security that an ATM affords."
This has been my mantra for more than 15 years. But in retrospect, I realize that some big ideas take time to catch on — and even then, it's usually out of necessity. I also realized that without a roadmap it is hard to embark on a journey with any certainty that you will arrive at the desired destination.
With these lessons in mind and in partnership with ATMIA, the Payments Forum set out on a mission to map the ATM road to the future. The first thing we found was that there are, in fact, several roads in the payments world, but it is still unclear where they are taking us. And this is where we find ourselves at a fork in the road.
Let's take a closer look at these payments roads:
The first road is that of necessity. The interchange paid by issuers to ATM acquirers has decreased over time and network fees have gone up. This has squeezed margins, as has increased competition for locations and market saturation in many places.
Although average surcharge fees have gone up to compensate, there are practical limits to what an individual is willing to pay for convenience.
Thus ATM operators find themselves in need new revenue streams, but as yet no clear business model has emerged, outside of some niche applications for multi-function ATMs.
Another road is the advancement of technology. Where once getting an ATM to do anything more than the simplest of functions was challenging at best, today new applications can be designed, written, tested and implemented in a matter of weeks.
On the EMV migration road, many legacy ATMs will have to be upgraded or outright replaced. EMV adoption is seen by many industry experts as an opportunity to enable new payment opportunities, such as contactless NFC. Unified mobile and EMV standards may act as a catalyst for innovation and cross-channel payments integration. However, which way the EMV migration road will lead us is still unclear.
The most important road is that of consumer demand. ATM users are increasingly expecting convenience. And they are adopting new technologies and services today at the speed of light. What they used to expect within decades, they now expect in months.
Yet another road is the path of doing business as usual, thinking of all the reasons why something won't work or will tie up too many IT resources. This road leads us nowhere.
The last road leads us down the digital superhighway, but navigating it will require a clear vision, an effective methodology and reliable data.
The ATM industry will have many issues to address in order to create a cross-channel ATM integrated payments network — including but not limited to security, liability and regulatory issues.
In order for ATM integrated payments to become a reality on a large scale, the transaction volumes must be correspondingly large, and this can only be achieved through the development and industry wide adoption of open standards and best practices.
To this end, ATMIA in partnership with the IPayments Forum is organizing the ATM Acquirer Alliance. The alliance brings together a coalition of key industry decisionmakers who share the same vision and are seeking a common ATM roadmap to the future of the ATM industry.
Lyle Elias is chairman of the IPayments forum and a founding member of the ATM Industry Association. Next week at the ATMIA US 2013 conference in Scottsdale, Ariz., Elias will moderate an IPayments Forum workshop on integrated payments and the vision for the ATM Industry. He will also present at an EMV security workshop.