Allpoint Blog

Bank Transformation: Bearish on Branches, Bullish on ATM (Operators)

[Editor’s Note:  This post originally appeared in the 2017 ATM Future Trends report published by ATM Marketplace earlier this month.] 

At first glance, the secular trends driving change in the banking industry might seem cause for concern for independent ATM operators. Digital, on-demand, mobile – consumers now demand all of the above from their bank. So where does that leave the now 50-year old ATM, a fixed physical asset largely associated with paper currency? Leaning forward and ready to lead because bank transformation is a tailwind (not headwind) for independent ATM operators, that’s where.

Make no mistake, a banking industry transformation is underway and focused on digital and mobile engagement; shrinking the number of bank branches; and effectively managing customers’ increasing demand for convenience. And therein lies the opportunity for ATMs.

The Shrinking Physical Presence, The Embrace of Cash

According to FDIC research, from June ’15 to June ’16 in the United States, more than 1,400 branches closed. To put that into perspective, that is the size of a top 15 bank. But what about the customers? All of those closed branches, yes, they eliminated real estate and cost, but the account holders, they’re still here.

Bank customers have enthusiastically embraced the digital transformation of banking. And they continue to use cash. Recently published research by the Federal Reserve Bank of San Francisco agreed with our Cardtronics 2016 Health of Cash Study: cash is the most commonly used form of payment. Importantly, there’s good reason to believe this condition will endure, that cash will survive and thrive in the digital age.

A clear trend emerged in our Health of Cash research: As consumers encounter a growing array of ways to pay – from cash and cards to mobile wallets and person-to-person (P2P) apps – a ‘new norm’ is emerging as consumers embrace a blended mix of payment options in today’s fragmented payments landscape.

The Independent ATM: Critical Infrastructure

The footprint, form and function of banking is evolving, with customers demanding always-on access to banking services, including ATM cash access. A by-product of the banking transformation is that ATMs have emerged as the physical component of the digital banking model. As banks reduce branches and staff, ATMs become more valuable. And yet, cost rationalization isn’t limited to branches and people. Banks are doing the same with ATMs, along with evaluating their footprints and reducing branch locations.

An ATM specialist, an ATM infrastructure partner. Surcharge-free cash, envelope-free deposits. This is what a well-positioned independent ATM operator can be for a cost-rationalizing bank. A “Cardtronics” can be the capital- and cost-efficient physical distribution network for banks and credit unions that find it increasingly difficult to justify a dedicated branch infrastructure, much less their own retail ATM presence.

Inflection Point: Independent ATMs Move Up-market

Looking back on recent months through the lens of two noteworthy moments for Cardtronics, this moment in time may well be an inflection point for the independent ATM industry. Historically the means by which small- and mid-market financial institutions competed with America’s largest banks, our Allpoint surcharge-free ATM network now finds itself of great interest to those up-market institutions.

Allpoint is expanding its audience, and it’s directly correlated to the trend of digital transformation and banks looking to manage their costs more effectively. Within the last six months, Allpoint ATMs have been embraced as a vital complement to the digital strategies of both a top five and top 15 bank.

Beyond being newsworthy for Cardtronics, these are significant milestones for the independent ATM industry. Why? In many instances, America’s largest banks are leading the way in investing in digital channels. And yet, their customers clearly want what all consumers want: convenient fee-free access to cash, despite going digital in other areas of their banking relationship.

Independent ATM operators have good reason to be bullish about the future when even at the scale of a top five bank, they see independent ATMs in top-tier retail locations as critical infrastructure for transforming customer service. That is a powerful statement on how intertwined digital banking and ATMs have become in fulfilling the self-service demands of consumers, especially at a time when ATMs are increasingly becoming America’s source for cash.

What it all means

Even as the ATM advances beyond middle-age, the banking industry transformation has created an unprecedented opportunity for independent ATM operators. We can be – we are being – looked at as the perfect complement to a bank’s or credit union’s digital strategy. The independent ATM industry can be the low-cost, high-value physical infrastructure that empowers banks to focus on their digital channel.

With the ATM turning 50 in 2017, our industry has achieved a seat of importance and honor at the banking industry table. Banking may be entering the digital age, and the ATM might be approaching its golden years, but it would also appear the independent ATM industry is entering a golden age.

Brad Nolan
Managing Director, Global Product and Marketing

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