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Cash back at the POS versus the ATM

ATM deployers have been keeping watchful eyes on cash-back transactions at the POS, but a recent study shows that cash back at the POS might not be as popular as once thought.

July 26, 2005

Cash back at the POS. It's a big concern for many ATM operators, but a recent study conducted by Greenwood Village, Colo.-based First Data Corp., which operates the STAR Network, found that ATM operators should exhale a sigh of relief … at least for the moment.

The annual study, which First Data has been conducting since 1992, tracks consumer ATM/debit card use at the ATM and POS. About 13,000 consumers were surveyed from October 2004 to December 2004 for the study, whose findings were compiled in April and released to the public June 30.

What's Important The number of POS transactions has steadily increased since 2000, but cash-back transactions account for only 15 percent of all POS transactions. Consumer ATM use has remained steady overall, with FI-owned ATMs showing the greatest usage decline. Consumers are interested in more options at the ATM, such as balance inquiry and the transfer of funds from one account to another.

Not surprisingly, monthly POS transactions have steadily climbed from about eight in 2000 to 10 in 2004. Conversely, consumers visited ATMs (to withdraw cash, print account statements, check account balances, etc.) only about seven times a month.

But Betsy Storm, vice president of marketing for enterprise payments at First Data, said those figures are misleading, especially when they're not looked at individually.

ATM use fluctuates but remains steady overall

ATM use from 2000 to 2004 has fluctuated, but it hasn't plummeted. In fact, ATM use overall increased from 2003 to 2004, with more consumers using foreign ATMs. Most consumers reported visiting their issuing FIs' ATMs five times a month in '03 and 4.6 times a month in '04. Their use of foreign ATMs, however, slightly increased - from 2.7 times a month in '03 to 2.8 times a month in '04.

So what does all of that mean for ATM deployers? That they need to be promoting their networks and using their ATMs for more than cash dispensing, Storm said.

"What we can learn from this study is that the ATM is incredibly viable," she explained. "I think it's important for financial institutions to think about some of the different things they could offer at the ATM, like balance inquiries and transfers between accounts. We want to point out the areas that they could improve and grow. That can all be beneficial to helping their interchange and to bringing people out of the branch, which will help the branch run more efficiently."

FIs in particular, she added, need to use their ATMs to offer more complementary services. "Consumers are still looking for and are interested in the ATM," she said. "And so deployers can look at these kinds of study results and find out how they can improve their networks. … Consumers are definitely still relying on the ATM and it's important for financial institutions and ATM deployers to understand how they can continue that trend and offer the service that people need."

So what are some of the services that consumers found important to offer at the ATM? Balance inquiries on accounts and the ability to transfer money between accounts were two services that consumers said were "most appealing." Two other options that came in a close second were the ability to make deposits at ATMs throughout the consumer's home state and the ability to print and/or view statements at the ATM.

Cash back at the POS is not the ATM's biggest competition, according to the study. Only 15 percent of POS transactions in 2004 included cash back, and the number of times consumers got cash back dropped from 2003 to 2004 in most parts of the country. But consumers' use of debit cards at the POS increased 6 percent from '03 to '04, with a majority of those consumers using their cards for purchases.

The growing demand for debit

Although cash is still king, consumers might have less need for cash, since using a debit-card for payment is becoming more popular and available. That's the way one operator at an independent sales organization in the western United States, who asked to remain unnamed, sees it.

Over the course of the last five months, his overall transaction volume has remained flat. The typical increase in ATM use, which begins in March and runs through August, hasn't been reflected in his transaction volume.

He said the transaction lull is affected by many things, namely an increased number of ATMs in densely populated areas. But the use of debit cards at the POS also is having an impact, he said. "Overall economic conditions could have an effect. … But because the purchases are increasing with debit, and there is or could be less of a need for cash, then your need for cash to go buy something lessens to some extent."

The checks also has lessened, to some extent, according to the study. The number of consumers who use checks has gradually declined since 2001. In 2001, 48 percent of survey respondents said they made monthly purchases with checks; in 2004, that dropped to 45 percent.

But Storm said those trends should not impact overall ATM usage.