Article

ATMs lose their charm in Chile

The current ATM availability crisis and exchange of public blows highlight the essential nature of ATMs in today's payment ecosystem.

"No money," the sign posted on this ATM in Chile informs would-be users.

December 19, 2014

ATMs loose their charm in Chile

by Bernardo Batiz-Lazo (Bangor University, UK) and Juan Felipe Espinosa (Universidad Catolica de Valparaiso, Chile)

A very public and acrimonious row has emerged in Chile. On the one hand are private retail banks. On the other hand are 16 million consumers and the government. The latter claim that an 11 percent reduction in the ATM stock (or a fall of 1,100 machines from its peak of 9,300 devices in 2012), fails to meet the demand for out-of-hours access to cash.

The latest move in this row has seen the Superintendencia de Bancos e Instituciones, the bank regulator, threatening to introduce a requirement for 95 percent "uptime" for all ATMs.  Other recent measures include rules that set specific time periods for the replacement of damaged or stolen machines, with hefty fines for those who fail to meet new guidelines. 

In spite a reduction over the last couple of years, the density of Chile's cash machine network remains high in comparison with other Latin American countries. According to data from the International Monetary Fund,  Chile's 68 ATMs per 100,000 adults in 2012 was second only to Brazil's (119), and well above the average of 40 ATMs per 100,000 adults for the region (see graph).

Yet the casual observer will work hard to find a through-the-wall ATM in Chile. Most devices are stand-alone, placed behind increasing security — for instance, in subway stations, supermarkets and retail bank branch lobbies. 

The increasing frequency of locked lobby doors and paper signs posted on ATM screens, or a "no cash" message displayed on the screen has fueled public outcry.  Problems are particularly acute in rural areas and on the periphery of large cities such as Santiago, Valparaíso and Concepción.

But machines in city centers, shopping malls and tourist attractions are also left out of order or empty. Adding to the problem are small and medium sized retailers who, in order to avoid increased theft and vandalism, are are widely suspected of placing false "out of order" or "empty" paper signs on top of the machines as well as simply pulling the machine's power plug. However, some banks officers have claim that these signs are organized tactics to move people away from ATMs where organised card-cloning hackers operate. 

Echoing the public's dissatisfaction, politicians are voicing their concerns. These views are receiving wide coverage in newspapers and TV news programs. With the Christmas season in full swing the general public has also taken to the streets and social networks to express their outrage and vent their frustration. Social media campaigns include tweeter hashtags like #CajeroSinPlata (ATMs without cash), or simply #Cajerosautomaticos (ATMs); and a page on  in Facebook.

There are no IADs in Chile. So the response is left to the owners of the three ATM networks: retailer Falabella (with some 400 machines deployed throughout its stores), government owned Banco Estado (with 2,400) and private retail banks (making up the rest).

Message on an ATM screen: "At the moment this cash machine      cannot supply cash. Do you wish to make another transaction?"

Retail banks are unwilling to assume the increasing cost of attacks, hacks and vandalism, and are suggesting that the general public should make greater use of the growing point of sale withdrawal facilities — i.e., a correspondent network built by Banco Estado based in mom and pop shops called Caja Vecina.

Banks have also recomended that the public withdraw cash before 4 p.m., as it is often the case that machines are found empty by 6 p.m. Banks are making no promises to refill ATMs in the evenings nor during the night. No advice has been offered on how to proceed during weekends, public holidays or coming the Chilenean summer season in February.

For its part, Banco Estado advertised plans to deploy at least 300 new machines (70 of these on retail shop floors), chiefly to replace those that have been stolen. On Dec. 6, Banco Estado began deploying 60 additional machines inside police stations, partly as a theft deterrent and partly to reassure users of their safety and well being while making withdrawals. 

Clearly the response by Banco Estado will not solve the problem of accessing cash. Nor is greater use of plastic cards the solution, as Chile is subject to frequent earthquakes that together with its rough, long and narrow geography result in a frail communications infrastructure.

It is also not clear who will be responsible to implement international guidelines such as know your customer within the Caja Vecina correspondent network, thus opening the door for it to be used for money laundering and other illicit activities.