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The ATM business isn’t an ATM

The notion among certain groups that ATMs are obsolete has been pervasive for many years. However, data suggests that the ATM and its industry are far from their demise.

September 19, 2014 by Rebecca Hellmann — Marketing and Sales Coordinator, Welch ATM

A recent Wall Street Journal article, while targeting a certain major ATM industry player, indirectly attacked the ATM industry in general. The article, by John Carney, likens cash to printed maps and ATM businesses to film camera companies and video rental stores — a dead industry walking.

The main supposition for Carney is that mobile payments, once combined with already powerful credit and debit cards, will make cash use scarce enough to render ATMs obsolete. Or rather, more obsolete, since the ATM business is “already stagnating,” as evidenced by a 1 percent decrease in ATM withdrawals per year from 2009 to 2012.

This trend is further supported, said Carney, by the decline in cash use — just 30.8 percent of point-of-sale payments in 2012, according to a study from McKinsey & Co.

The notion among certain groups that ATMs are obsolete has been pervasive for many years. However, despite decreases in cash use, data suggests that the ATM and its industry are far from reaching their demise:

Preference for the ATM channel has increased from 11 percent to 14 percent in the past year. A recent American Bankers Association study found that the use of desktop banking since 2013 has dropped while the use of branch, ATM and mobile banking channels has risen;
17 percent of all checking account shoppers indicate that a free ATM is a “must have” according to FindaBetterBank.com;
The average value of ATM cash withdrawals has risen. While consumers made 100,000 fewer ATM withdrawals in 2012 than they did in 2003 (as noted in Carney’s article), the average dollar amount climbed from $85 to $116;
The cash payment share by volume in 2012 was 46 percent.A cross-country comparison study performed by the Federal Reserve Bank of Boston found that, excluding recurring payments such as utilities, payment shares in the U.S. were 46 percent cash, 26 percent debit and 19 percent credit, with the remainder attributed to other payment methods such as mobile;
41 percent of those surveyed for the Fed's mobile use study reported locating an in-network ATM;
According to a Q1 report from FindaBetterBank.com, two out of five consumers who demand mobile banking insist on free ATMs as well;
According to a study by CreditCards.com, two in three U.S. credit cardholders say they typically use cash for purchases of less than five dollars; and
according to the Fed study, "Diary of Consumer Payment Choice," contrary to popular perception, 40 percent of 18–24-year-olds prefer cash to other payment methods.

But perhaps Carney’s intent was not to insinuate the redundancy of the ATM industry. Rather, he might have meant to warn against the dangers of being overconfident in current automated teller machine technology and payment standards.

This is a valid warning for any company that wishes to remain relevant to consumers. So, while the ATM industry is by no means deceased, it might be time to take a serious look at innovation to ensure that Carney’s comparisons and predictions never acquire the ring of truth.

photo courtesy of bill selak | flickr