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Commentary: From the Roman Empire to the ATM Empire

In his latest installment of On the High Road, a trip to Rome shows ATMIA International Director Mike Lee that the ATM is neither virtual nor personal -- but perfectly positioned between the two for today's consumer.

January 10, 2002

Mike Lee is international director of the ATM Industry Association, and is based in London.

I was drinking a cup of black Italian espresso in a bank situated within walking distance of the Colosseum in Rome. I always drink coffee white, but it was a question of "when in Rome, do as the Romans." It was then that my host made a general statement about Italian banking which, in one sentence, put into perspective for me where the ATM finds itself at the beginning of a New Year in 2002.

"The virtual has to be combined with the personal," said Angelo Pucci, Rome's Director of the Cassa di Rispamio di Ferrara Bank, a bank which deploys ATMs at all of its national branches.

Pucci was rightly stressing that in Italy it would be unthinkable for Internet and telephone banking to diminish altogether a personal relationship between the bank and its customers.

Pucci's words struck home. Si, the virtual has to be combined with the personal. Grazie, Angelo – you have given me a compass to guide me as the world-changing year of 2001 draws to an end, a simple yardstick for understanding where our industry should go in the complex, difficult world that lies ahead in 2002.

The ATM is positioned precisely midway between remote banking and traditional branch banking. For reasons that are both technological and psychological, an ATM Empire of more than one million ATMs has evolved in just over three decades. This is an empire that is not about to crumble into ruins. In fact, the peak of the industry will certainly be more than double the current number of worldwide installations.

To use a Roman metaphor, I predict that the ATM is one gladiator that will remain standing after a battle among the multiple delivery channels to see which ones are champions. And, once again, Pucci's observation about Italian banking can serve as a point of departure for the argument that the ATM is a strong gladiator in today's self-service world.

Withdrawing cash from an ATM is far from a virtual form of banking. The ATM is typically located in busy, well-lit, public places, creating a social experience for customers as they conduct their transactions. The ATM is installed within communities – the high street, the town center, the shopping mall, the airport, the supermarket - in a way in which the telephone and the PC are not.

In addition, taking cash from the ATM and putting the notes into your wallet or pocket is a tangible experience, compared to a transaction initiated over the Internet or by telephone or even via a credit card.

Yet the ATM cash withdrawal is not as "personal" an experience as receiving money from a teller inside the bank branch. Or is it?

These days a human, or "non-automated," teller, sits behind a protective glass shield which in most cases muffles the voice transmission, causing both teller and customer to become a little frustrated at the poor quality of communication afforded by this unnatural act of trying to talk through a thick screen.

It is a situation that promises human interaction but seldom delivers. It is really only when a customer talks one-to-one with a financial advisor that old-fashioned personal human communication takes place.

An automated teller does not promise human communication and so does not induce the stress of a failed or unsatisfactory human interaction. An automated teller provides stress-free, 24/7 access to cash, saving on time and emotional energy. An automated teller is never in a bad mood. An automated teller speaks multiple languages. An automated teller is lightning fast. An automated teller is not lazy. An automated teller costs less than a human teller to operate. An automated teller does not take lunch breaks or holidays.

In short, the ATM is quite simply the best person for the job of teller.

An ATM is neither virtual nor personal. It has none of the disadvantages of virtual banking – a feeling of remoteness, of intangibility, of uncertainty. It has none of the disadvantages of traditional face-to-face banking – standing in queues, being restricted to office hours, trying to talk through a glass screen. But it combines the balance Angelo Pucci was hinting at as essential to Italian banking.

The ATM is at just the right position for today's modern consumer. The majority of human beings are not ready to become cyber-creatures living in a virtual world of remote transactions. The ATM may not, strictly speaking, offer the personal touch, but it does offer the right touch for today's customers: reliable, convenient, communal, tangible.

Which is why it has been voted the second most important piece of convenience technology in the U.S., well ahead of the PC, the mobile phone and cable television. In a recent consumer survey conducted by PULSE, one of America's largest electronic funds transfer systems, and polling 2,200 bank account-holders in 16 states, respondents ranked their ATM cards second only to the home telephone as the most valued consumer convenience.

Bearing in mind that Alexander Graham Bell invented and patented the forerunner of the telephone in 1876, whereas the ATM was invented almost a hundred years later, in 1967, this degree of trust displayed by 21st century Americans in the ATM is testimony to a remarkable rise to popularity over a relatively short time span.

That is one reason why I can predict that the ATM is a gladiator that will still stand after the battle for supremacy of delivery channels. It has become a champion channel.

It is not just a high degree of customer acceptance that fuels my faith in the future of the ATM. Society itself has become dependent on the ATM for the functioning of the payments system in many countries.

Richard Ambrose, technical and ATMs manager for APACS, Britain's Association for Payment Clearing Services, states boldly it is an indisputable fact that the UK could not operate without ATMs now. "Stats vary," he told me,"but, in general, it is said that approximately 75-80 percent of the UK note requirements are dispensed by ATMs."

This is why the European Central Bank chose to utilize the continent's network of ATMs as a key distribution channel for the euro, the new common European currency. By March 1, the euro will be the sole legal tender throughout the 12-country euro zone. Although retailers will play a big part in distributing the new coins and notes, the bulk will be delivered via ATMs. As Ambrose explains: "The critical mass of euro note distribution can only be achieved by mass distribution via ATMs."

This is a vivid illustration of the rising power of the ATM Empire.

While in Italy, one of the 12 countries converting to the euro, I became aware for the first time that the ATM is driving forward the self-service society. I was visiting the Italian ATM manufacturer, Sigma, across the Apennine mountains, which form the spine of the country, on the east Adriatic coast. Sigma's head office is set in what locals call the "sweet hills" around Altidona where the ground is so fertile that prosperous farmers live in hillside villas.

In a country that is a world leader in industrial and product design – which other country would have produced the Ferrari? - it is not surprising to find innovative ATM designs. Pucci's Cassa di Risparmio di Ferrra bank in Rome's Piazza Venezia sports a multifunctional Sigma ATM that is a cash dispenser, currency converter and cash deposit self-service terminal.

Ubaldo Marconi, Sigma's affable and ebullient international sales manager, got me thinking about the extent to which modern economies are becoming self-service societies, and not simply because he kept offering me coffee from a vending machine! It was after he mentioned that Sigma produce a self-service terminal for the Greek market that enables automated flexible mortgage payments.

It is surely true that the ATM has taken the concept of a self-service society a step further than vending machines and self-service ticketing machines on their own could ever have done. "The benefits of automation are privacy, reduced operational costs, ease of access and reduction of stress for the customer," Ubaldo explained.

Sigma began life in 1983 as a software house but has diversified considerably to become an automation specialist. The firm started hardware manufacture after winning a contract to develop the software and hardware for a self-service machine to pay telephone bills for Telecom Italy. The customer inserted the bill into the machine and its bill-reader read the barcode and displayed the amount due on the screen, indicating options for payment, including credit card, debit card or cash.

"From this multifunctional self-service machine, it was a short step to producing ATMs," Ubaldo continued. A major contract with the Italian Post Office followed for self-service dispensing and scanning machines.

Displaying the seemingly natural innovativeness of the Italians, Sigma pioneered the Cash Deposit Machine (CDM) in 1992, accepting a vast array of 168 denominations. Sigma's core business was becoming the production of a self-service banking machine that saved banks space by combining such functionalities as cash deposit, currency exchange, night deposit and envelope deposit.

Sigma's mission is to deliver innovative products integrated with best-of-class service, that fit the customer's unique needs. Again, we are back to Pucci's call not to neglect the dimension of personal service (the customer's unique needs), a traditional part of Italian banking.

If mortgage payments, payment of utility bills, ticketing, currency exchange and most banking transactions have all been automated, as well as simple retail transactions like buying a can of Pepsi or a bar of chocolate, have we not arrived at a high degree of automation in our lifestyles?

The multifunctional self-service terminal in Italy illustrated to me the extent to which this has enriched and liberated our busy lifestyles.The challenge remains to keep it all personal so that the high level of customer acceptance -- the greatest strength of any product – is not lost. That is the message of Rome to the ATM Empire.

One Italian voice that the ATM industry in Italy could well pay attention to is that of the political philosopher, Antonio Negri, whom Timemagazine has just named as one of the outstanding innovative thinkers of 2001. Living under house arrest in Rome, Negri has collaborated with Michael Hardt, a professor at Duke University in North Carolina, to write "Empire," a work of social theory that looks at the negative and positive impacts of globalization. The authors see the main benefit of globalization as unprecedented mobility: "the power to get up and go."

In the U.S. and now in the UK, independent deployment of entry-level ATMs in the retail and leisure sectors has given increased access to account-holders to their banked money near to where they want to spend it. In Italy and across Europe this revolution in retail or convenient ATMs has not yet happened.

So there is not the ubiquity of ATMs in Europe that one would expect to find in such populous cities and towns. Ubiquitous ATMs facilitate "on the spot" spending of cash in society, increasing mobility of the consumer by allowing cash withdrawals and other transactions to take place closer to the point of sale and not necessarily in the high street or near a bank branch.

If Negri is right and mobility is now a key feature of life in the global village – and Oscar Wilde once said that all great ideas are dangerous – then ATM deployers in Europe need to find ways to meet the current and future consumer demand for ubiquity of self-service terminals.

Since Italy is one of the "big five" in Europe in terms of numbers of ATM installations, along with Germany, Spain, France and the UK, one would expect a huge increase in convenient ATMs over the next few years. An installation base of just over 30,000 ATMs for a population of more than 56 million is very low compared to the U.S.

I saw the future of the ATM Empire more clearly after my visit to Rome, home of the most famous empire of all – how the ATM is at the heart of the development of the self-service society and how it must never lose the high level of customer trust it currently enjoys if it is to stay in its strong position between remote banking and traditional face-to-face banking.

And so, as I say, "Ciao, Roma, grazie, Roma," and as we begin a New Year, I would like to leave you with seven megatrends in the ATM industry I have experienced during my travels On the High Road looking for the human stories behind our industry. I leave them without any commentary, and in no particular order, simply as signposts for further thought. I welcome any comments from readers at mikelee@atmiaeurope.com

• Multifunctional ATMs have driven forward the creation of the self-service society

Prognosis: More and more services will be automated, but remote banking will not displace communal self-service machines; automation cannot afford to lose customer trust and acceptance.

• Increased mobility is the consumer demand of today and tomorrow

Prognosis: The convergence of the future will not so much be between ATMs and kiosks but rather the marriage of mobile telephony and ATMs through Bluetooth technology. Mobility and ubiquity are the future. What can stop the revolution in retail or entry-level ATMs, which took place in the U.S. and is now happening in the UK, from happening in Europe if the consumer demand for 24/7 access to cash cannot be met any other way?

• Increased compliance to EMV and to disability provisions for ATMs

Prognosis: The ATM industry will increasingly comply with both international EMV standards and with regulations for access to ATMs for the disabled.

• Globalization and diversification

Prognosis: Due to the pressures of increased competition and globalization, many ATM manufacturers and businesses will continue to diversify.

• Consolidation

Prognosis: There may be both consolidation within the independent deployment sector, particularly in the U.S., as well as increased pressure on banks to outsource aspects of the ATM business, including ATM estates themselves.

• ATM security is under threat from organized crime

Prognosis: Chip and PIN technology will reverse the steep increase in card fraud while smart security technology, coupled with increased collaboration within the industry and between the industry and the police, will cause major ATM criminals to migrate out of the industry in the medium term.

• ATM advertising has not yet found its operational business model

Prognosis: The winning formula is short of one or two factors, but the solution is not very far away; the industry needs to collaborate more extensively in order to find the critical mass and to present a strong case to the advertising sector.

Why seven megatrends, you may ask? Well, Rome wasn't built in one day -- but it was built on, and between, seven hills. And seven is reported to be the perfect number. Besides, I couldn't think of any more!

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