The ATM industry outlook for 2015: ‘Bigger, better, faster, more’
I was surprised (well, flabbergasted, actually) to discover recently that my father has never used an ATM. Ever. I find this incomprehensible.
It’s not as though my parents scrape by in a tarpaper shack down in the holler. They live in a comfortable suburb of Kansas City with paved streets and Starbucks and everything. Including ATMs.
Nevertheless, when they need cash, my parents drive to the bank to cash a check at the drive-through or inside at the teller window where an associate sits waiting for something to do — because it’s banking hours and everyone else in this bedroom community is at work.
I explained to my dad that this ghost-branch scenario is prompting FIs to adopt a new, self-service model where there is no teller behind a window because there is no teller window. Instead, there is a free-roaming “universal banker” ready to help him complete his transaction — at an ATM.
“Not in my lifetime,” my he said. He could be right. Or not; the community bank my parents have done business with for decades has shuttered three of its four branches in recent years. My parents are lucky enough to be only a mile or so from the one that remains.
The longer view
I’ve been thinking about the above conversation in light of ATM industry developments of 2014 — and those likely in 2015.
Three years ago, branch reinvention was not much more than an interesting experiment. Today, it’s a full-blown trend, as conferences and trade shows around the globe confirmed in 2014. Agendas were liberally peppered with titles such as, “Next Generation of Self Service,” a session at BAI Retail Delivery.
They also teemed with presentations on mobile technology, another trend that slowly gained momentum in 2014 — slowly, that is, until September, when it went into overdrive with the announcement of Apple Pay. In real terms, Apple’s vote for NFC changed nothing about payments in 2014. In psychological terms, it changed everything. To employ a paraphrase, “It’s the iPhone, stupid.”
As discussed at the ATM & Mobile Innovation Summit in September 2014, FIs interested in preserving market share will have to jump on the mobile wallet bandwagon — and soon — or become accustomed to the taste of dust.
IADs and ISOs have just as much reason as FIs to incorporate mobile technologies into their business models — and not just for ATM-finding. In 2015, they’ll be looking for ways to make mobile a part — or a bigger part — of their growth strategies, as Cardtronics did last year.
We’re also likely to see a growing number of acquisitions and alignments in the independent ATM world, as deployers strive for economy of scale and a broader footprint. Along with this, we’ll see growing numbers of FIs outsourcing ATM operations to those independents who are able to position themselves as capable and reliable providers of hardware and services. Just like smaller IADs, smaller FIs are finding it hard to keep up with regulatory imperatives and system upgrades.
Which invites the obvious segue to card fraud and the limits of EMV in stopping it. In 2014, hackers carried out some very sophisticated and very scary exploits involving ATMs. Meanwhile, law enforcement carried out some impressive take-downs of hacking and skimming networks, but these agencies simply cannot keep up with the creativity and determination of criminals with mad computer skills.
And while sophisticated risk management technologies might block fraudulent transactions linked to stolen cardholder data, they can’t do much about the cost of replacing compromised cards and reassuring concerned account-holders. Chase has now replaced my EMV chip card twice in three weeks due to data thefts, and those metal Sapphire chip cards cannot be cheap to produce and deliver overnight via UPS. Clearly, the solution to fraud will have to be much bigger than the chip in a smart card.
We can also look for greater cooperative effort in 2015 among payment industry stakeholders (starting with the launch of the new ATM Security Association for Advanced Technology) as they wrestle with problems of fraud — at the POS, the ATM and online. EMV will be only one facet of a solution that must cover all kinds of angles and blind corners.
These are the high-visibility issues, but they’re by no means the only ones: There’s the on-going effect of 2014 court rulings that punctured the puffed-up legal claims of patent trolls; the continuing saga of bitcoin and the impact of regulation, price fluctuation and criminal exploitation on the future of the bitcoin ATM; the Monty Python-esque back-and-forth in the cash debate; the ongoing discussion about the feasibility of real-time payments; the possibility or futility of modifications to the Dodd-Frank Act by a Republican-dominated Congress; and the list continues … concluding with the question of how to get a 78-year-old man to finally use an ATM.