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STUDY: Cash withdrawals level off at ATMs in western Europe

April 29, 2009

LONDON — Retail Banking Research Ltd.'s latest edition of its annual western Europe ATM survey, "ATMs and Cash Dispensers Western Europe," reveals a leveling off of cash-withdrawal volumes in western Europe, despite a continued increase in the number of ATMs deployed.

According to RBR, the total number of cash withdrawals in western Europe remained virtually unchanged from 2007 to 2008 at 12.3 billion withdrawals. Average ATM usage in the region fell to 2,780 withdrawals per terminal per month as the increase in ATM installations continues to have a diluting effect on transactions.

Italyhad the lowest withdrawal levels, at just 1,486 withdrawals per month per terminal. But the average withdrawal value inItalyis much higher than that of other countries in the region, RBR found.

The study, which covers 18 countries, also shows that the growth of ATMs in the region has slowed to 3 percent annually, with the greatest slowdown being felt in theUnited Kingdom, where the number of independently operated ATMs fell for the first time last year. Despite the slowdown in growth, theU.K.retained its position as the largest ATM market in the region. Over the past decade, independent ATM deployers have been the main contributors to ATM growth in theU.K.But in 2008, the number of non-bank installations fell as the three largest IADs, Hanco, NoteMachine and Payzone, removed more than 1,800 machines from the kingdom.

There are various reasons for this decline. Most notably, the introduction of a higher interchange fee for ATMs in deprived areas has led more banks to deploy ATMs in locations that previously were deemed unprofitable. This has had the knock‑on effect of reducing transaction volumes at nearby IAD ATMs. In addition, Bank of Ireland is increasingly deploying free ATMs in post office locations that were formerly home to IAD units.

Outside theU.K., other markets beat expectations. InFinland, where the installed ATM base has been falling for 16 years, 2008 reflected growth. For the first time since 1992, the change in the number of ATMs has been positive.

This growth came as the result of the entry of an IAD called Eurocash, a subsidiary of the Swedish IAD Kontanten. Following the sustained annual falls in the number of bank ATMs in the country, several key indicators suggest potential for future growth. The country's ATM density, at 324 ATMs per million inhabitants, is the second lowest in western Europe, and the average usage, at 9,143 cash withdrawals per ATM per month, is one of the highest in the world.

Turkey: The fastest growing market for four years

The number of ATMs inTurkeygrew by 20 percent in 2008, by far the largest growth in western Europe. The country has been the fastest growing market for four consecutive years, and with 3,768 new ATMs deployed,Turkeyexperienced its highest ever absolute growth in 2008.Turkey's strong performance follows an improved flow of foreign capital into the banking market, which has resulted in increased competition. The entry of a non‑bank deployer, Talon, which installed 600 ATMs in its first year, also has intensified competition.

Recycling technology at ATMs increases

The number of ATMs with automated deposit functionality deployed by western European deployers increased by almost 50 percent in 2008 to 36,700 units. The three largest markets for automated deposits areTurkey,SpainandGermany.

RBR's study shows that deployers in western Europe are increasingly being convinced of the benefits of recycling technology as well. Some 21 percent of all automated deposit‑accepting ATMs in western Europe now contain recycling units. InBelgiumandNorway, all automated deposit ATMs are recyclers, while more than 80 percent of automated deposit ATMs inAustria,Germany, andSwitzerlandcan recycle deposited notes.

EMV and Triple DES‑compliance increase

Security features on western European ATMs have continued. The proportion of terminals that are EMV‑compliant rose to 86 percent in 2008, while that of Triple DES‑compliant units increased to 87 percent. Both measures are expected to continue to increase as more anti‑fraud measures are taken by the payment card community. ATMs in six countries —Denmark,France,Luxembourg,Norway,Swedenand theU.K.— now comply fully with both EMV and Triple DES standards.

Outsourcing of first-line maintenance falls

Cash replenishment is outsourced for 45 percent of all ATM installations, but the proportions differ for branch and off-site ATMs, at 26 percent and 90 percent respectively. Cash replenishment for off-site ATMs is much higher, since banks do not have staff, equipment or security procedures for replenishment at remote locations.

First-line maintenance is more often carried out by branch staff, but 26 percent of branch ATMs still rely on outsourced first-line services. Less surprisingly, 81 percent of off-site ATMs continue to outsource first-line maintenance and service. The share of ATMs for which first line maintenance is outsourced in western Europe fell to 42 percent, as deployers increasingly conduct this function in-house. Almost all deployers in the region outsource second-line maintenance for their branch ATMs.

Second-line maintenance also is outsourced for the majority of off-site ATMs, although some U.K. IADs employ their own in-house teams.