Article

Reports offer conflicting forecasts on installed ATM growth

One report attributes growth to next-generation machines, while the other points to cash demand.

November 29, 2011 by Kim Williams — Reporter, NetWorld Alliance

According to a report released last week by market research firm Global Industry Analysts Inc., the global installed base of ATMs is forecasted to reach 3.9 million units by 2017. Some industry experts say this figure is a bit too optimistic.

The report attributes growth in the market over the next few years to the introduction of advanced, next-generation ATMs with superior capabilities, and a number of promotional schemes aimed at increasing ATM usage. It also says robust demand for new installations in developing markets, particularly Asia-Pacific, will bode well for the market.

However, the annual report released by London-based strategic research and consulting firm Retail Banking Research puts the number at 3.2 million by 2016, a 42-percent increase from today's installed base, and at no more than 3.4 million by 2017. RBR says the growth will come from increased cash demand in developing countries.

"There is a tendency to over-extrapolate recent trends, such as the rapid growth in China. We would agree that there will be an increase in more advanced ATMs, offering automated deposit and other features, but these will mainly be replacement machines in more developed regions such as Europe and North America. The growth in the installed base will be in developing countries, particularly in Asia, Middle East and Africa," said Dominic Hirsch, managing director for RBR.

Growing demand for cash withdrawals is promising

The ATM markets of Asia-Pacific, Central and Eastern Europe and the Middle East and Africa will expand significantly faster than other regions, according to Hirsch. The three regions are also expected to show higher growth in ATM cash withdrawals, the number of which will double between 2010 and 2016. Only in Asia-Pacific and Central and Eastern Europe, however, will ATM usage significantly outpace ATM numbers creating a positive environment for deployers.

RBR predicts that the strong demand for ATM cash withdrawals will remain one of the major drivers of ATM growth in the next few years. The total number of ATM cash withdrawals worldwide is expected to increase at an average of 8 percent per year between 2010 and 2016, compared to average growth of 6 percent per year in the number of installations.

On this point, both research firms agreed. Factors that kept the global ATM market afloat and rising through the 2007-2009 economic meltdown included growing customer adoption of ATM services and rising preference for self-service banking. The recession interestingly resulted in bank customers resorting to increased ATM transactions, which is direct fallout of rising overdraft fees on debit cards, high service charges for credit cards and reduced preference for plastic money against a backdrop of weak personal finances and tight liquidity.

Banks place high priority on deposit automation

Deposit automation remains a major component of global growth as ATMs with such functionality accounted for a quarter of all ATMs shipped to banks. In addition, deployers doubled the number of stand-alone terminals with automated deposit functionality in 2010, so the total number of automated deposit terminals in the world surpassed 570,000, according to RBR.

China, the U.S., Turkey, Russia and South Korea, combined, installed nine new automated deposit ATMs for every 10 in 2010.

ATM Industry Association CEO Mike Lee also thinks deposit automation with cash recycling or recirculation capabilities will pave the way for installment growth.

"I believe the new killer application is ATM cash recirculation. The cash deposited is checked for fitness and authentication by the recycling component. If the notes do not pass the test then are they put in a special cassette and will not be re-issued. If they are all good notes, they will be used for cash dispensing purposes," Lee said.

Self-service: Need for speed

The GIA report places a strong emphasis on the ever growing need for speed, convenience and customers' habit-driven use of self-services as factors forcing financial institutions to expand ATM installations to ensure customer retention and satisfaction.

The use of the ATM is moving beyond simple cash dispensing to advanced self-service functions such as e-ticketing, bill payment and third party product marketing, among other functions. As a result, companies are integrating their software and services more holistically with ATM cards for greater innovation, efficiency, productivity and, ultimately, financial performance.

What do you think will be the primary driver for global ATM installed base growth? Discuss your answers in the comments section below.