Article

ATM, Debit & Prepaid Forum session explores state of ATM consumer market

Research finds that consumers are becoming more open to financial self-service.

November 3, 2011 by Kim Williams — Reporter, NetWorld Alliance

At the 19th annual ATM, Debit and Prepaid Forum, held in Las Vegas Nov. 1-4, the CEO of Synergistics Research Corporation talked how the ATM industry will need to adapt to a changing marketplace, citing Apple and Blockbuster as examples of what to do and what not to do.

In his session, titled "The Current State of the ATM Consumer Market," William H. McCracken told the audience that Blockbuster's downfall was its unwillingness to change its business model, whereas Apple listened to the marketplace and anticipated its needs.

"Today we're talking about ATMs, so what is it that's occurring in this space? Regulations have had a huge impact on our industry and costs are increasing. There is a need and a drive from financial institutions to develop automation in a more robust way in order to reduce costs because of the heavy regulatory burden," McCracken said.

McCracken added that consumers have become accustomed to self-service, which gives the ATM industry an opportunity to develop and deepen that part of the consumer interaction. He went on to say that cash remains king, with consumer cash usage growing 27 percent from 2008 to 2009 in the midst of a crippling recession, according to the Federal Reserve Bank of Boston.

Consumer ATM usage

In a survey Synergistics administered regarding ATM fees, eight out of 10 consumers said they pay some type of surcharge fee. Of those that pay a surcharge fee, 76 percent said they didn't think they should have to pay a fee or that the fee amount was too high. Only 7 percent didn't consider fees to be an issue.

"The silver lining is that 40 percent of people surveyed didn't say they shouldn't have to pay fees, but just that the current level of fees are too high," McCracken said. "They are open to paying fees, they just think what they're being charged now is a little too much."

Another survey question asked respondents what would be the likelihood of switching to a bank that offered free ATM services. About half of the respondents said they would consider changing banks based on free ATM services, with about 60 percent of the 18- to 34-year-old segment saying they were receptive to the idea of switching to a surcharge free network.

Research found that when respondents were asked what types of financial services they wanted through the self-service channel, the top four answers included check ordering, product information gathering, video teller services and changing account information such as address.

"There wasn't a lot of variability across the answers. Consumers didn't take a strong stance as far as what they would like to see offered," McCracken said. "However, they like the concept. They just don't have a great idea of what they want."

As expected, consumers rated convenience as the most important factor for using self-service. McCracken said U.S. consumers "just aren't there yet" when it comes to the concept of using the self-serve channel to perform the majority of banking functions.

In Asia and Latin America where financial kiosks have wide ranging capabilities and are also widely used and accepted by consumers, a clearer picture develops of what the self-service channel can actually provide, McCracken said.

"It's about enabling the consumer to manage a large part of their finances through this channel. In Asia or Latin America, you can truly see how it can transform the way you relate to your financial institution," McCracken said.

As far as what type of enhancements respondents would prefer in the ATM, customization, ability to withdraw any denomination, remembering past transactions and preferences were among the most popular.

Respondents were also receptive to advertising through the ATM channel as long as it related to financial products, but they were resistant to any other outside advertising. Personalized advertising was widely rejected because of privacy issues.

"Consumers are viewing ATMs as more than cash dispensers. ATMs in the broader sense are here to stay. Consumers are very open to kiosks. I think in the next five to 10 years, it's going to explode," McCracken said.

For more information on this topic, visit our trends/statistics research center.