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Mixed messages from western European ATM market

August 22, 2010 by Dominic Hirsch — manager, Retail Banking Research

One in three ATM markets in western Europe contracted last year. A fall in the number of ATMs in any country is relatively rare, and it is unprecedented for so many markets to shrink at the same time. Is this simply a financial crisis induced anomaly, or a more significant turning point for the industry?

Despite the falls in six countries, led by the United Kingdom and Spain – western Europe’s two largest markets – the region managed a modest increase of 2.3% in its ATM installed base. Turkey, for some years the star performer in the region, and Italy both increased their number of ATMs by 7%, showing what can be achieved even during difficult times.

Where markets have declined, the falls are mainly a by-product of branch closures and the accompanying withdrawal of ATMs, rather than due to any strategic decisions about ATMs specifically. The exception is the UK, where falling transactions at surcharging machines have led to removal of some units deployed by independent ATM deployers (IADs).

Looking ahead, there will be competing pressures affecting the shrinkage or growth of ATM numbers. Branch density remains high in several countries, most notably Spain, and further branch closures are likely. This, combined with a general desire to reduce costs, will lead to some fleet rationalisation. Once banks’ confidence,and more importantly IT budgets, are restored, these downward forces will almost certainly be outweighed by more traditional pressures. Off-site penetration in western Europe remains low compared to other regions, and this opportunity, enhanced by the removal of some branch ATMs, and increased migration of transactions to self-service at remaining branches, will lead to increased deployment. Furthermore, despite their success (until recently) in the UK, IADs have struggled to make significant inroads in other markets. This is starting to change, and the gap that IADs have historically filled – namely convenience locations – will ultimately need to be served, either by banks or independents.

While many of the downward pressures from 2009 have continued into 2010, the outlook for the region for 2011 appears rather brighter.

Reprinted from Banking Automation Bulletin (see www.rbrlondon.com/bulletin for more information)