The future of cash, ATMs and electronic payments are inextricably intertwined. The relationships are not straightforward, which makes it difficult to predict how the payments industry will evolve.
While it seems certain that electronic payments will continue to grow, it is not clear which technologies will succeed or what new solutions will emerge. There is also huge uncertainty over how growth in electronic payments will affect the use of cash.
It is often argued, or at least implied, that this growth will lead to the demise of cash, and with it, ATMs. This logic is both flawed (because this is not a zero sum game) and not backed empirically (cash payment volumes continue to grow in most countries).
RBR recently conducted a study of deposit automation and recycling ATMs, and these devices are the key to understanding the link between physical and virtual payments. They facilitate the transfer of cash to electronic value and vice-versa.
ATM cash-in/cash-out functionality has wide applicability beyond account deposits and withdrawals. It is the enabler to a range of additional functions that link the physical and virtual worlds — for example loading/withdrawing funds to/from prepaid cards, making/receiving P2P payments and topping up/withdrawing funds from mobile phones.
Retail banks have always managed this physical/virtual interface. On the dispensing side, use of ATMs is well established, although often restricted to card-based transactions for customers. This is now opening up to include cardless withdrawals and service to non-customers and the unbanked.
The bigger transformation is on the deposit side however. Traditionally conducted at expensive-to-operate branch counters, deposit transactions are now increasingly being made at sophisticated automated deposit terminals. RBR’s latest research shows that 670,000 such terminals are now deployed worldwide — a 45 percent increase from two years earlier.
In many ways this revolution is more significant than the higher profile developments in electronic payments that receive far greater publicity. Do you agree?
Reprinted by permission from Banking Automation Bulletin.
Dominic Hirsch is managing director of Retail Banking Research, a London-based strategic research and consulting firm.