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In it for the long haul
In the long run, it's going to be a question of how creative we can be when thinking of what needs to be dispensed to authorized ATM users.
December 29, 2015 by Richard Buckle — Founder and CEO, Pyalla Technologies, LLC
Although much attention is given to businesses' quarterly performance, good companies operate toward longer-term goals with a well-defined vision and strategy. This is not to ignore the constant fine-tuning that goes on behind the scenes as markets evolve and course corrections are applied — anyone who has sailed knows that changing tides and swift-flowing currents will take you off course.
But when it comes to financial institutions and payments processing, who would have guessed only a short time ago that the world of cash, personal payments and even the humble ATM would face such game-changing circumstances as they do today?
There's, of course, a generational aspect that's been addressed in numerous posts to this blog: The baby boomer generation has different expectations than Gen X, which also is quite different from Gen Y, aka millennials.
Baby boomers still like the social aspect of banking and for the most part are at home inside branch offices, whereas the more tech-savvy Gen X and Gen Y will happily interact with devices. Some millennials are taking this one step further, completely spurning traditional banking models and transacting payments from their smart phones and tablets.
Yes, to be an FI you need to think long term and ignore the quick sprints that are commonplace.
The Sydney Morning Herald newspaper recently ran the headline, "Bain & Co. tips one in three bank branches to close." The story underneath made two observations: "While most customers now prefer the convenience of doing routine transactions online or via mobile, branch visits still play a key role in banks' ability to sell new financial products — especially major products like home loans"; and "Banks now need to negotiate canny partnerships with social media companies to improve their mobile reach without ceding too much control to the new intermediaries."
These statements reflect a couple of key comments in the Bain report by Gerard du Toit, the Boston-based head of global banking at Bain & Co.:
Around the world, banks that have taken a 'build it and they will come' attitude have not been as successful at migrating customers from branch to digital self-service. ... If you get the technology right, that actually works quite well for Gen Y and millennials, but the problem is it tends to alienate the valuable baby boomer customer base. ... Once people are comfortable with using the technology it is more convenient for them and they just stop coming into branches.
Du Toit identified Facebook as "the most likely disrupter in the local market," according to the Morning Herald article.
Facebook a likely disrupter? According to the CIO Review article, "Facebook disrupts payments market with free friend-to-friend payment option on its social networking site," Facebook will be very much a player in the payments processing space:
The user will soon have payment option in the form of a '$' icon placed in the list of options in the Messenger message composer. The user needs to tap the $ icon to add the Visa or MasterCard debit card information — issued by a U.S. bank — to send money.
Nothing too avant garde here; it's just the potential number of users that strikes me as being significant. If all I want to do is to pay someone or, better still, receive a payment, it's all on my Facebook page. Cool!
But wait, there's more!
It's not just Facebook; what about Uber? According to recent press reports, Uber is now attempting to lure new drivers by offering them bank accounts. Sort of.
Turns out, Uber "would allow drivers to easily register for a bank account or prepaid card when signing up to work for Uber," according to the article. Furthermore, "Uber has reached out to potential partners to handle the banking itself, people familiar with the matter say. These people requested anonymity due to the sensitive nature of the project and ties to Uber."
And this is only the beginning, the article said.
Seems that most Uber drivers are coming across from the taxi business, a predominantly cash trade whose drivers had few touch points with traditional FIs.
"Uber is exploring a few 'value-added' services in addition to same-day payments: cash-back discounts, merchant offers, and the ability to send money internationally are all possibilities," the article said.
In other words, it's not just the millennials on Facebook who will find it easy to move cash, but also the local Uber driver.
Point is, different age demographics will have their preferences and, for the most part, the growth in new transaction volumes will come from unexpected sources.
What then of our humble ATM?
During the 24 hours of Le Mans, teams of four elite racecar drivers maintain unbelievable speeds over extended sessions. The days of two-driver teams are long gone — the intensity simply cannot be maintained with just two racers.
Strategy is influenced by the weather and the competition, but all teams know that they are in the race for the long haul. Race strategies are mapped out in detail and the good teams drive to a plan.
FIs should be putting together their plans for ATMs, and these should be cognizant of the long haul: Baby boomers, for instance, still need cash even if it's just to pay for valet parking or tip the caddy; younger generations are more likely to see value in combination ATM-kiosks; and the youngest of all generations most likely will be looking for the ATM to come to them — figuratively and quite possibly literally.
For me, no matter how you look at any future strategy for ATMs, the value is still very much in the infrastructure. And over the long haul, it's going to be a question of how creative we become when thinking of what needs to be dispensed to authorized users.
Having just come in out of the cold after shoveling snow from our footpath, and with earlier references to sailing fresh in my mind, my thoughts to flights of fancy — sailing in the Great Barrier Reef off Hayman Island.
But reality is not so kind. I need to make a trip for salt to sprinkle on the path and, while I am at the convenience store, I will hit the ATM. With roads as they are, I will likely need to have cash on hand to pay more energetic folks to mount snow chains on my car!
photo istock
About Richard Buckle
Richard Buckle is the founder and CEO of Pyalla Technologies, LLC. He has enjoyed a long association with the Information Technology (IT) industry as a user, vendor, and more recently, as an industry commentator, thought leader, columnist and blogger. Richard participates in the HPE VIP Community where he is part of their influencer team.
