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If the past predicts, we're in for a heck of a ride
All too often, people describe the ATM market in the U.S. as mature or saturated, with little growth opportunity and minimal room for innovation. History would suggest that this description is far from being true, and that the best is yet to come.
November 5, 2003
Mr. Hayes is the managing director, Financial Services Practice, for Dove Consulting Inc. He is a frequent speaker on ATM-related topics and an ATM & Debit Forum chair, is author of three definitive guides to the ATM industry. He has consulted for several large bank deployers, the largest ATM ISO, leading EFT networks a major ATM manufacturer.
All too often, people describe the ATM market in the U.S. as mature or saturated, with little growth opportunity and minimal room for innovation. History would suggest that this description is far from being true, and that the best is yet to come.
Approximately 30 years ago, the first ATM was deployed in the U.S. With few ATM cardholders and no consumer awareness, use of this first machine was low.
Yet this automated teller was meeting a real need in the market - offering more convenience to consumers (customers could now access their cash outside of bank hours) at a lower cost to the bank (fully utilized, an ATM could perform many more transactions than a bank employee, freeing up staff to focus on selling activities).
As a result, the last 30 years have been a virtuous circle. More consumers used ATMs for their everyday banking needs, so more banks deployed ATMs, which increased convenience, which in turn supported further consumer adoption.
Back in the early 1970s, who could have imagined that by today:
·
U.S. consumers would perform 14 billion transactions at ATMs·
ATMs would be placed on almost every street corner (and in almost every convenience store, airport, hotel, etc.)·
370,000 ATMs would be deployed across the U.S. by banks, credit unions and ISOs, covering every state and conceivable location·
ATMs would become an important part of consumers' everyday lives·
78 percent of consumers would say that ATMs are an important part of their lives, vs. 56 percent for email (Source: Recent eFunds survey)·
ATMs would become the primary service channel for many banks, with ATMs handling more transactions than branches·
Consumers would travel abroad without foreign currency or Travelers Checks, with only a simple ATM card, confident they can access local funds upon their arrival, day or night·
Companies could focus on ATM manufacturing as their primary capability.·
A leading ATM manufacturer-Diebold-would employ 10,000 people with revenues of approximately $2 billion·
The convenience value would drive consumers to pay $4.5 billion annually in surcharges to fund ATM networksFuture Outlook
If history is any guide, two things should be clear about the outlook for the ATM industry:
1. No one can predict how this market will evolve in the next 30 years.
2. All of the trends to date suggest that the future will be very bright.
We can already see the evolution of some of the longer-term developments, events that will begin within the next five years and dramatically alter the ATM landscape over the next 10.
·
ATMs will talk. To comply with the Americans with Disabilities Act, banks and ISOs need to upgrade their ATM networks by adding voice guidance technology. Today and in the near future, the majority of ATMs will offer users the option of being talked through a transaction.·
ATMs will be more personal. The ATM will "know" its customers, just as the local branch teller once knew his or her customers. Screens, transactions, language and messages will be tailored to the individual. ATMs will image checks and provide consumers with a copy of their deposited check on their ATM receipt (or email it to their registered address or make it accessible via the bank's Web site)·
ATMs will be cheaper. The "dumb" terminal of old with a green monochrome screen will be replaced with an advanced PC sporting a large sunlight-viewable color screen. Using common technology, the PC-based ATM will offer much greater power and flexibility at a fraction of the legacy model's cost.The bank ATM market will bifurcate into two broad categories:
·
High-end: ATMs as a strategic channel. Many large banks view (and will continue to view) their ATM network as a strategic distribution channel. These banks will invest in their ATMs, in their processing functionality and in their customization capabilities. For the customers of these banks, an ATM will no longer simply be an ATM but a differentiated touch-point for interacting with their financial institution.·
Low-end: ATMs as a utility.For the vast majority of financial institutions, ATMs have come to represent a "cost of doing business," as their customers now expect this kind of access. For these banks and credit unions, the primary focus will be on cost minimization. These institutions are likely to outsource the placement, processing, servicing and maintenance of their ATMs to specialist third parties, companies able to perform these functions with at higher quality with a lower cost.Conclusion
The early signs of these developments can be seen today, but their full effect will not be realized for several years. If the ATM industry changes as much over the next 30 years as it has over the last 30, we're in for quite a journey.
Let's enjoy the ride.
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