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Analyst: ATM networks should expand to meet growing cash demand
July 19, 2010
Banks in the United States and the United Kingdom should expand their ATM networks because the use of cash in retail transactions is growing, not contracting, according to Ovum, a research company owned by Datamonitor Group in London.
"The amount of cash in circulation is constantly on the rise," said Jaroslaw Knapik, senior analyst with Ovum's financial services and technology team. "According to the European Central Bank, the number of banknotes from the Eurozone is rising around 9 percent per year. There are also over 40 percent more U.S. dollar bills available compared with the beginning of the millennium. Given the fact that most cash is being distributed by ATMs, this channel is expected to grow."
Consumer demand for cash is the impetus behind banknote expansion. In 1993, for example, there were less than 20 billion British banknotes in circulation. Last year, there more than 45 billion, said Knapik, who analyzed Bank of England and Federal Reserve statistics. "The vision of a cashless society will not become reality in the foreseeable future," he said.
Knapik added, however, ATM expansion in the U.S. and the U.K. is "sluggish," but banks located in emerging markets are expanding their ATM networks. Although it is difficult to quantify because of geographic variations, banks and nonbank financial institutions spend $15,000 to $35,000 annually managing one ATM.
Financial institutions can reduce their ATM costs through technology, including deploying cash-recycling ATMs, installing anti-fraud systems and using ATM remote monitoring, he said.
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