The IAD: Forging the way forward for the ATM
by Tom Pierce, Chief Marketing Officer, Cardtronics
A long time ago, 50 years to be exact, a bank installed the first-ever ATM. For the better part of the next quarter century, when a person used an ATM, it was operated by a financial institution.
Eventually, times changed and independent deployers joined banks in having the ability to own and operate ATMs. The so-called "nonbank" ATM was born, convenient cash access expanded exponentially, and the ATM Industry Association was established to represent what quickly evolved into a global industry — the deployment of ATMs.
With a membership representative of the entire ATM industry, it is most appropriate for ATMIA to lead the global celebration of the 50th anniversary of the ATM. But it wasn't always a foregone conclusion that there would be a 50th anniversary for the ATM industry to celebrate.
The ATM's demise was predicted 10 years after its creation, when its "path to mainstream acceptance … was not a smooth one," as a February ATMIA newsletter article said.
In fact, in the United States, executives of one of the first major banks to install an ATM were said to be reluctant to fund placement throughout their branches — skeptical of whether consumers would trust unattended machines to properly dispense money. With market forces of supply and demand in question, the ATM's future seemed very much unsettled in those early days.
ATMs in the U.S.: A series of fortunate events
Without the occurrence of a series of events in the U.S., the early concerns about the ATM's viability would have led to the end of the device instead of to the valued position it holds today as a complement to other channels of financial services delivery.
This series of events occurred mostly from the late 1980s through the late 1990s, and included:
- a U.S. Supreme Court ruling that resulted in development of interstate electronic funds transfer networks, as well as shared ATM networks;
- successful legal challenges that led major ATM networks to lift bans against surcharge fees, allowing for more price and service differentiation within the industry; and
- consumer dissatisfaction and criticism from elected officials that spurred the development of independent surcharge-free networks.
Unshackling the ATM
Despite being viewed by some in the U.S. banking world as modern-day carpetbaggers, ATM manufacturers, independent ATM deployers and maintenance providers took advantage of events to establish a new business model.
While simultaneously serving the ATM equipment and maintenance needs of banks and credit unions, manufacturers and resellers started working directly with retailers who had already begun to see the value of in-store ATMs. Soon consumers were gaining more convenient access to cash, thanks to independent ATM deployers.
Hardly a U.S.-specific phenomenon, the ATM has been welcomed by consumers in many parts of the world. In the U.K., Europe, and elsewhere, these machines have become a part of everyday life.
Regulatory issues have been different depending on the country; consumer adoption and use have varied from one nation to the next; technological advances have resulted in cash machines with differing capabilities in different places. But because the popularity of cash continues, the IAD is emerging around the world as a strategic partner to FIs and other card issuers.
These partnerships also differ by market. For example, in Africa, IADs are helping FIs, card issuers and finance ministries bring the unbanked and underbanked into the fold of citizens who will benefit from the region's rapidly growing economy.
In the U.K., the ATM is helping to ensure access to basic banking services in communities left without a bank branch. In February, Cardtronics U.K. worked with a local retailer and county MP to provide an outdoor, 24/7 ATM to the Welsh town of Blaenau Ffestiniog — restoring basic banking services six months after the town's last bank branch closed.
This followed a similar solution in the town of Glastonbury, which was left without a bank branch or accessible ATM. Both towns are tourism-dependent, making convenient ATMs important.
The way forward
Simplifying access to funds, whether in a bank account or on a prepaid card, still drives the IAD today. But the way we pursue this mission looks a little different than it did decades ago.
The experience gained ensuring access to basic banking services has given IADs expertise unrivaled by most financial institutions. And now that FIs are shifting their strategic focus back to their core business, the IAD is becoming a partner in that shift — advising FIs on ways to reduce capital costs, retain customers through broader ATM networks, and deliver a better ATM user experience.
The IAD's role in these partnerships ranges from maintaining a surcharge-free network that allows a regional FI to retain customers dispersed throughout the country to providing outsourcing for all of an institution's ATM operations, both on- and offsite.
The picture of vitality
To paraphrase the previously mentioned ATMIA article, "After starting out as a one-trick pony, the ATM (and the IAD) continue to evolve into the Swiss Army knife of financial services devices."
But given the predictions from some quarters that cash — and subsequently, the ATM — are facing their ultimate demise, can this evolution occur?
Cardtronics believes the predictions to be wrong for a number of reasons: Firstly, ATM deployments are increasing worldwide, with 3 million machines in operation today. Secondly, technologies such as mobile payment apps that some said would make the ATM obsolete are now being embraced by the industry as a means for consumers to withdraw cash from an ATM. Thirdly — and most importantly from an underlying strength perspective — cash continues to be one of the top three payment methods around the world.
Consumers are still going to expect access to cash around the clock and around the globe. Banks know it. Independent ATM deployers know it. Increasingly, our industries will collaborate to ensure that consumers have continued access to cash where and when they want it.