A vanishing breed? EMV and the retail ATM
by Daryl Cornell
More than 100,000 retail ATMs gone, shuttered, inoperable.
Customers forced to return to bank ATMs, some of which might soon allow access only to their own customers.
At bank counters, long lines of impatient customers wanting access to their own cash.
What is it that could force a contraction of up to 25 percent of all U.S. ATMs as early as six months from now?
The stars are aligned and the tectonic plates are shifting beneath the cash access landscape. We know that change is coming, but what is unclear is the timing and severity of the combined effects, driven by:
1) The October 2017 liability shift
This will be the first domino to fall. While the October 2016 MasterCard ATM liability shift turned out to be a big “nothing burger,” the VISA (and all others) EMV liability shift this October could unleash a tsunami of unexpected chargebacks that could prove painful to many merchants and ISOs.
The industry response could be a rapid shutoff of most non-EMV ATMs — estimates of which range from 100,000 terminals to as many as 200,000.
In Canada, a market with regulatory EMV upgrade requirements, we saw a 10 percent fallout rate in active merchant ATMs following the 2012 deadline.
Given that an estimated 95 percent of all U.S. merchant ATMs are not yet EMV ready, a major disruption in cash access could arrive just in time for the holiday shopping season.
2) Government overreach
Government intervention could accelerate and magnify the cash access contraction in certain markets.
Currently, battles against anti-ATM regulations are being fought in New Jersey, Illinois and other locales.
Whether it’s surcharge caps, ATM license fees or anticrime ATM monitoring, legislators are actively working on bills that, if passed, would render most white label ATMs uneconomical to operate.
Once again, the result would be a sharp contraction in cash access options, putting additional pressure on bank branches and bank ATMs.
Unfortunately, many of these legislative efforts are taking place in highly populated states and cities, which will magnify the pain of those affected.
3) Bank retrenching
This will exacerbate the problem by further limiting consumer access to cash.
The proliferation of white label ATMs over the past 20 years has benefitted banks in a number of ways. Chiefly, merchant-replenished ATMs have driven a sharp decrease in the demand for both cash withdrawals and deposits at bank branches.
In response, banks have culled facilities over the past 20 years — by as much as 25 percent by some estimates.
Banks have also responded to an explosion in the number of white label ATMs by granting access to their own bank ATMs to noncustomers — for a fee, of course.
Should a serious contraction in white label ATMs occur, one possible response by banks would be to limit ATM access to customers only, further exacerbating the problem of cash access.
The solution to much of this potential mayhem is, of course, for merchants to upgrade their ATMs to EMV, and for legislators to leave well enough alone.
However, given that only 50 percent of all merchant POS terminals are estimated to be EMV ready nearly two years after that 2015 deadline, it appears that serious chargeback pain or shutoff will be the only impetus for merchant ATM upgrade.
Unfortunately, legislators, always eager to protect constituents from themselves, are likely to persist in their anti-ATM regulatory efforts.
Look for a sharp U.S. ATM contraction as early as late 2017, spreading cash access pain rapidly through the economy.