Change has come to retail banking on a significant scale as the range of customer-owned channels grows in popularity. Increasing numbers of clients now access their accounts through PCs, tablets, smart phones and mobile phones. How will the ATM fit into this evolving payments field? In particular, how will ATMs, mobile phones and online banking interface in years to come?
Until now, the biggest recent development in ATM technology has been deposit automation. But we’ll see later in the article that a new era of innovation in payments and ATM technology is only just starting. First, let’s assess the impact of adding automated deposits to the ATM’s growing armoury of functions.
When it comes to cash, which is not going anywhere for several decades given the robust demand for cash across the world, even small financial institutions and credit unions with a handful of ATMs are installing advanced function units with automated deposit capabilities.
Cash depositing has been a leap forward for ATMs and for cash. It enables a system of continuous cash recirculation to take place which decreases costs for transporting and replenishing cash, helping to keep cash – still the main product of ATMs – competitive.
“Technology improvements in recycling technology, coupled with increasing demand for recycling as it relates to lower cash management costs and simultaneous cash deposit capability,” said Diebold’s director of advanced technology development, Jim Block, “are creating new value propositions for ATMs in the near-term future.”
Adoption of automated deposit-taking ATMs has increased sharply. By 2009, 464,000 such machines had been installed in 46 countries. There has been a recent compound annual growth rate of 20 percent. The recycling ATMs have been around for years but have only recently started to find this kind of market penetration. The accelerated adoption rate has caused churn in the existing stock as large numbers of banks have moved to replace old machines with new deposit-taking terminals. Retail Banking Research predicts that the number of deposit-taking ATMs, which are being placed in branches as well as retail locations, is likely to rise to 1.3
million out of a total ATM base of 3 million by 2015. One new deposit-taking ATM model has an expansive 22 inch screen which can adjust to the height of the customer.
There is a strong business case for the enhanced ATM. Jim Block explains: “Deposit automation technologies have greatly improved the ATM’s contribution to banking efficiencies…receiving cash deposits directly into the ATM without an envelope [cuts] administrative costs of deposit handling.”
Anja Lindner, head of industry marketing banking at Wincor Nixdorf, places these cost savings within the larger context of improving cash handling processes, technology and shortening the cash cycle. “Cash recycling is a step towards shortening the cash cycle," she said. “New sensor technologies for cash authentication, improved read rates and harmonization with the TCO (total cost of ownership) items of an ATM will be particularly important in this context.”
The good news is that this popular deposit-taking, cash-recirculation ATM represents only the beginning of innovation in our industry. The background for future evolution of the ATM is the new world of Customer Owned Devices being used for payments and how they will interface with ATMs.
A real game-changer in this space is the arrival of mobile Internet and its scope for
expanding the use of mobile payments. Juniper Research suggests that there might be 550 million transactional users of mobile money by 2015. And it’s thought there’ll be more people accessing internet via mobile devices than PCs by then. At the end of 2011, there were already 6 billion mobile subscriptions, estimates the International Telecommunication Union (2011), equivalent to 87 percent of the world population. It must be remembered, though, that about 90 percent of mobile internet use is to socialize, not to buy online.
Recently, there has been a surge of online payments through mobile devices, mostly using a PIN or password for authentication. PayPal has noted a month-on-month increase of 25 percent in mobile payments. Traditionally, its transactions have been from PCs. Now PayPal is piloting innovations like mobile ticket purchase. Aite Group consultancy forecasts global mobile bill payments will rise from US$16 billion in 2010 to US$214 billion in 2015.
Some thought leaders in the ATM industry have already raised the question of the need for a new delivery channel strategy and best practices for channel convergence in this new mobile-digital era. Given the global footprint of 2.3 million ATMs, as well as the rising worldwide demand for cash, there is no reason why the ATM cannot remain the leading self-service channel. It can certainly play a pivotal role within the growing family of complementary customer-owned devices. There are now many companies promoting alternative transaction at ATMs, up from a handful only two years ago.
The ATM – and cash – are proving competitive in the new mobile-digital payments
environment. For example, cash in circulation in Kenya has continued to increase steadily despite the exponential growth of M-Pesa mobile banking (M is for mobile, pesa is Swahili for money), a celebrated world leader in mobile payments. This Kenyan mobile-phone based money transfer service was introduced in April 2007. By 2012, 17 million M-Pesa accounts had been registered in Kenya. M-Pesa allows users to deposit, withdraw, and transfer money easily with a mobile device, move money to a bank account, pay bills and purchase airtime. They can also
send balances using SMS technology to other users (including sellers of goods and services), and redeem deposits for cash. M-Pesa customers can deposit and withdraw money from a nationwide network of agents that includes airtime resellers and retail outlets acting as banking agents.
While M-Pesa has facilitated e-cash transfers, it is not replacing cash. The high growth of mobile payments in Kenya from 2007-2012 was matched by a strong and steady increase of currency in circulation as shown by Central Bank of Kenya data.
The increase in cash demand, in the period in which the revolutionary payments technology was taking off in Kenya, speaks to the probability, in my view, of a long-term co-existence of cash, m-cash and e-cash in our future mobile-digital world. I am convinced we’re going to see accelerated channel convergence in the months and years ahead.
ATMs and CODs, such as mobile phones, are already regarded as part of the same family of devices by banks and vendors. And that message needs to get out to the cardholders and mobile phone account-holders, millions of whom regularly use ATMs. At ATMIA, which has over 3,700 members in 60 countries, we are working on a plan to evolve the ATM into an electronic payments hub.
ATMs and mobile phones are starting to converge in a positive way. Today, money can be taken from ATMs using mobile phones in cardless transactions in countries from Japan to Greece, from Turkey to Spain. A synergy is certainly developing between mobile phones and ATMs. In the future, consumers will use their mobile banking apps to pre-stage an ATM withdrawal or transaction. And mobile phone accountholders generally use cash to top up their mobile air time. It’s thought by industry leaders that cardless ATM transactions have a big future. Thinking
further ahead, this kind of contactless technology at both ATMs and Point of Sale terminals may mean the end of plastic cards in a decade or two.
We should not forget that a strong software platform for ATMs has enabled this
technology evolution to advance to the point that ATMs should become a payments hub. Block traces the growth of this platform as follows: “There has been a progressive improvement of computing power, memory capacities and hard drive technologies, display interface standards (VGA through HDMI), UI standards (such as touch screens), peripheral busses (serial/parallel ports through the current USB versions, bluetooth, etc.) and network connectivity technologies (from low-speed modems through Ethernet, Wi-Fi and cellular).” Block believes ATMs now have
formidable computing platforms to drive innovation while, at the same time, reduce costs. Looking further ahead, he sees this ATM software power increasing with a shift toward cloud platforms and network-based software.
As a general principle, there is an ongoing need to connect the digital world to the real bricks and mortar world, as in the example of mobile banking linking to ATM banking on the high street. It’s a two-way process because ATMs are evolving to become more customer-friendly and intuitive in a mobile-digital world.
The way to optimise this growing connection is to link cash and cashless methods of payment in one complementary and seamless system ensuring maximum consumer choice and convenience. PayPal, for example, as the world leader in online payments, with more than 100 million active users in 190 markets, has moved into mobile payments with its PayPal Mobile service and now is looking at PayPal ATMs which would enable PayPal customers to redeem in cash the
value stored in their digital wallets if they so choose.
Banks need to ensure their customers can readily make online payments, m-payments and use the ATM for a variety of services in a coordinated set of integrated, branded customer experiences, linking self-service, branch and CODs as inter-related delivery channels. The mobile phone, like Internet banking, is becoming another keyboard connecting us to our bank in the way that ATMs have connected us to our accounts for over four decades.
But how do we ensure the customer is experiencing all these different bank keypads seamlessly and consistently?
One workable model, which lets new CODs rest on the shoulders of established banking technologies, is to make the ATM the hub linking the bank and the branch to the customer and his/her set of CODs. Ultimately, the following terminals could link into the ATM hub:
This model enables the bank to view today’s customer in a holistic light and his/her
devices in an integrated way. “There is no such thing as ‘the Internet customer’ or ‘the branch customer’,” observes Wincor’s Lindner. Intuitive customer experience, she says, has become a key driver of innovation. “In many countries, multi-functionality is a common strategy at the ATM to provide consumers with added value….Examples include offers like end-to-end check processing and services such as invoice payments at the ATM, but there are also many other
possibilities. This trend could continue all the way to customized banking at the ATM.”
To achieve this kind of integration, self-service is a crucial node linking CODs, especially mobile ones, to the bank infrastructure with its delivery channels, including branches. Any and all types of devices can be connected to the ATM. Andrew Martin, of Retail Banking Consulting Group, and experienced ATM deployer in Europe and the UK, is excited about two projects underway which connect the ATM with the online world.
“One is the Foreign Currency provider – here the ATM becomes a new delivery channel for their FX online system,” said Andrew. “A customer orders Euros online and collects them at the airport through the ATM at departure or arrival.” The second project is providing loans at ATMs. “In the loans areas we see customers applying for a short term loan online with a non-FI, they then collect that loan at the ATM for immediate cash.”
Andrew’s “click & collect” concept is a promising development that allows customers to order online and then to collect at an ATM, linking “bricks & clicks.” “We see numerous retailers on the high street closing down retail locations and converting them into collection points where shoppers buy online and collect at their leisure,” Andrew forecasts.
Another new and innovative connection between the ATM and a banking channel that illustrates the power of the ATM hub model is the potential for interactive tellers at the ATM using video banking. Video interaction at the ATM or branch brings the bank closer to the customer while keeping the convenience – and cost saving - of the remote delivery channel intact. The benefits of 24-hour, self-service availability can now combine with the human interaction possible at the branch. The migration of the ATM industry to Windows, and, in future to Windows 7, can only increase and extend this kind of interface innovation.
“The branch experience is critical to a bank’s brand and its business performance, and technology can help improve that experience,” said Michael O’Laughlin, senior vice president, NCR Financial Services. “We are seeing many innovative financial institutions recognize how APTRA Interactive Teller can help them efficiently bring more services and a better experience to their customers – without losing that human touch.”
All of these new connections in this period of increased channel convergence need to be managed. In the future, it has been suggested in an ATMIA white paper that there could be a central unit responsible for coordinating the development of the overall customer experience. Centralization would ensure that each terminal and interface carries a common set of images, corporate messages and navigation tools. Common content may be aligned across all terminals, or the coordinator may choose to vary the functionality according to the device and its location. The screen and keyboard, making up the lion’s share of the customer experience, would be managed to ensure commonality of image, corporate messages including brand building and navigation style. In addition, many adjacent technologies will begin to impact the available functionality and performance of these terminals, such as CRM, digital advertising, and video.
Taking all these developments into account, it is easy to draw the conclusion that the branch of the future will be a customer-centric multi-channel, multi-function, multi-device environment. CODs and self-service channels will be experienced as part of the same family. ATMs will work with desk tops, tablets, pads, mobiles of all types, and other technologies and channels. Branches could use technologies such as video and advanced digital advertising across all customer interfaces in synchronized campaigns.
The use of evolving recognition and authentication techniques, such as palm-based biometrics or contactless ATMs, could play into the convergence space by activating sophisticated CRM campaigns. The ATM can perform all of the tasks needed in an effective channel convergence strategy from brand communication to personalized CRM based sales.
In my view, the global physical infrastructure of the ATM, as well as its expanded
computing power and functionality, not to mention its 10-year history of CRM programs, makes it an ideal candidate for the centralizing role of payments hub.
The advantage of the convergence model is that the ATM has pioneered self-service banking and has becomes the high-service level device everyone trusts. It’s a unique machine that combines electronic transactions and physical cash transactions. ATMs are now capable of automating all of the principal teller transactions and many others carried out in a retail bank branch. The ATM is where the high tech and high touch, described by futurist and physicist Dr. Michio Kaku (http://mkaku.org/), can meet.
Kaku reckons our wants, dreams, personalities and desires have not changed much in 100,000 years and that when modern technology clashes with this primitive human self we carry around inside us, the primitive desires win every time. There is a constant competition, he argues, between high tech (e.g. watching a sporting event on television) and high touch (e.g., attending the live event in person). All other factors being equal, Kaku believes we will always choose high touch. Cash is high touch, digital, electronic transactions are high tech.
At ATMs, as I have suggested, high tech meets high touch. ATMs are also where
high tech and low tech meet. For a world of advanced and emerging nations, where the majority of humans are comparatively poor (and unbanked), this dual capacity of the ATM to reach people from all walks of life is unmatched in banking. A prime example is how ATM remittances allow migrant workers to send cash back to their home countries electronically. The combination of high tech and high touch makes the ATM a powerful technological force for convergence. That is why I see it becoming the payments hub of choice for this generation.
We can forecast that future ATM hardware and software developments will take place within this framework of channel convergence. The overarching objective will be to reinforce the patterns of interface between customer and bank/ATM deployer with the ATM as the hub. In short, I foresee the rise of the ATM hub, a far-cry indeed from the original 1967 design of the cash vending machine outside the branch.
Michael Lee, CEO of the ATM Industry Association since 2005. Michael Lee, CEO of the ATM Industry Association since 2005.
Copyright (c) January 2013 by BankNews Media