Feb. 11, 2013
By Mike Lee, CEO, ATM Industry Association
There are sure signs that the ATM industry is moving to higher ground as storm clouds gather on the horizon. Let us examine these two aspects.
Our industry is much more professional, innovative and organized than at any time since I joined it in 2000. At the same time, there is a very healthy global demand for cash, the lifeblood of the ATM. In addition, there is a shift toward a concerted effort to fight for more competitive ATM networks.
Meanwhile, recycling ATMs are reducing the overall costs of cash. And finally, the ATM is combining beautifully with emerging powerful technologies in the mobile and online space. The symbiosis between the mobile phone and the ATM has already been established and is going to increase in importance. The relationship between online commerce and the ATM will also grow as transactions commenced online are completed at ATMs.
These examples represent the higher ground that I can see the ATM reaching in these times.
But we can also see storm clouds. There is fierce competition between payment types and payment providers, some of which is a clear case of creative destruction, such as the decline of the check and, in the future, the threat to plastic cards of new cardless technologies for initiating payments. There is the steady decline of interchange as Visa and MasterCard try to tighten their duopoly. At times, there is hyper-competitive toxicity in the system which is not good for the vibrancy, health or freedom of the payments eco-system.
Then there is the competitive and regulatory pressure on surcharging. There are rising compliance costs. The massive U.S. industry is set to begin the long, hard migration to EMV compliance. And there is a looming global migration of the ATM industry to Windows 7, a project fraught with uncertainties and complexities, as well as costs.
Susan Matt, chairperson of the ATMIA U.S. board and president of ThoughtKey, has identified the threat of FDIC regulations creeping further into the ATM world. "Banks are beginning to view the FDIC requirements around third-party management as applicable to the acquiring world," she said.
"In summary, they are viewing these entities as 'branches' of the bank and therefore subject to the same requirements (to some extent) as a [sponsor bank]. This is very concerning for a couple reasons: One, these entities are not banks and do not have the same infrastructure; two, there will be a burden on the ATM IAD's infrastructure to support these requirements with little return on their investment; three, some of the requirements may simply put ATM ISOs out of business — the cost and pain to maintain or meet these requirements is too burdensome."
And in Europe, ATMIA executive director Flora Hamilton believes that direct charging could well gain credibility as a revenue model across the European Union, especially in light of the European Commission's legislative proposals on access to basic banking services, given that ATMs have everything needed to become Europe's "cost-effective" route to the delivery of basic banking services.
As you can see, sometimes regulatory storm clouds can have silver linings if you look closely enough.
If we assess these challenges in the context of the rise of the ATM to a position of power within payments, it may be concluded that our industry is re-positioning itself — for the better, for the future — in 2013. We are starting to bargain from an overall position of strength, the competitive higher ground.
I am convinced that our powerful 2.3 million-strong global infrastructure has put us in an unassailable position to benefit from exciting new technologies, including online and m-payments, as we all slide along into the new mobile-digital era we will hit by about 2015, when it is expected that more people will access the Internet with mobile phones than with PCs.
The future of cash is assured and has received a huge boost from the effects of our Great Recession from which we are slowly emerging. "Despite nearly 40 years of so-called "experts" predicting the rapid death and irrelevance of cash, it is still the most preferred and widely-used form of payment in the United States and the entire world," said Sam Ditzion, CEO of Tremont Capital Group. "Cash will remain the world's dominant payment mechanism for years and years to come, and ATMs are hands down the most convenient and efficient means to access cash."
You see, as I've been arguing for the last few months, the ATM is the only technology in the payments industry that bridges the divide between high tech and high touch*, between high tech and low tech, between e-cash and cash, and between the haves and have-nots of this great, mixed, divided world.
High tech is when you watch a sports event on satellite TV, high touch is being at the live event soaking up the atmosphere, cursing the referee and eating hotdogs. E-cash is high tech and cash is high touch. The ATM is both high tech and high touch.
We have amazing multi-functional ATMs that can perform dozens of alternative transactions for the cardholder, and we have innovative rural ATMs in India that operate on biometric identification in order to reach the illiterate unbanked. Individuals can pay utility bills, play the lottery, book tickets, apply for Forex and invest funds using high tech ATMs. Or migrant workers can simply send remittance payments back home to be redeemed in cash at an ATM.
You see, cash is low tech as well as high touch. That's why PayPal wants online accountholders to be able to withdraw value stored in digital wallets in the form of cash from ATMs. And that's why the ATM bridges the gap between rich and poor, between the digital haves and the digital have-nots.
In a world in which the majority of people are actually poor and unbanked, this is incredibly powerful. The ATM is truly a great retail banking channel, a boon to the whole society.
We in the ATM industry are moving up to higher ground. At the same time, we are striving collectively to reduce the costs of cash through innovations such as deposit automation, improved end-to-end business models, cash analytics and the growing global trend of ATM outsourcing.
David Tente, executive director of ATMIA US said, "The industry is at a pivot-point right now and will see some significant changes over the next five years. EMV migration is in the unique position of being a huge challenge in the months ahead and the vehicle for long-term change that will impact many areas of ATM technology development. All that is in addition to the emergence of the ATM as a payments hub."
My main message for 2013: We are in a growing position of strength and we are organizing our industry for a new era of growth whilst overcoming our numerous obstacles. For example: What's the best long-term way to deal with declining interchange? ATMIA and the International Payments Forum are working on a new initiative called the ATM Acquirers Alliance. The purpose of the group is to provide a united voice for ATM acquirers in areas of mutual interest, particularly in cross-industry integrated payments.
IPF founder Lyle Elias, encapsulated the vision: "The day of the 'banking transaction only' ATM is waning as interchange becomes less relevant, and the dawn of the ATM as a payments hub is upon us. As an industry we need to break the shackles of being just a banking retail delivery channel, to becoming self-service financial networks for cash vending and payments acceptance."
We will increase both the number and kind of transactions at ATMs and thereby bring in new revenues to compensate for falling interchange. We will fight fire with fire.
Tente elaborated on the dawn of a new era of widened functionality that we foresee for ATMs: "The beginning of this sea change was the widespread introduction of automated deposit-taking about six years ago. More than anything else, this has caused consumers to begin thinking about ATMs as more than just a convenient source of cash. With that technological challenge behind us, putting cash into one ATM so that someone else can withdraw it at another would seem to be a fairly straightforward extension of the process — and personal payments at the ATM become a reality."
We see this higher ground around and above us. We see the storm clouds, but some have silver linings. Bring on 2013. We are ready. Get ready for the ride of your life.
*This is a distinction made by the brilliant futurist Dr. Michio Kaku. He rightly believes that all other factors being equal, human beings will always choose high touch.
Mike Lee is CEO of ATMIA, an ATM industry organization with nearly 4,000 members in 60 countries. He is a futurist and a blogger for the World Future Society. His book, "Knowing our Future — the startling case for futurology," was published last year and is available at Amazon.com.