How the ATM Industry Needs to Reinvent Itself

Amit-GoelAuthor


 

Amit Goel

Co-Founder at LetsTalkPayments.com

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From their first noted use in the mid-1960s, automated teller machines (ATMs) have seen multiple innovation phases in the banking technology space. ATM machines were formed with the primary goal to dispense cash beyond banking hours and over the years, they have excelled at this. They have done so well that the perception of ATMs has become analogous to a cash dispensing machine. It is within this laudable and well-executed function that manufacturers and banks need to rethink. It acts as both a boon and a bane. Multiple surveys and research point that ATMs are the second-most used touchpoints by bank customers only behind branch visits. However, with the growing prominence of mobile, IoT and related technologies, ATM manufacturers and banks need to embrace this technology and the greatest difficulty they could face is in changing the decades-long perception of cash-dispensing machines.

ATM manufacturers have already understood the requirement for enhanced services in their offerings. The largest manufacturers like Diebold (with their recent acquisition of Wincor Nixdorf), NCR Corp, Cardtronics and others have actively invested in developing technology-rich service offerings. Below we shall discuss some of the major innovations coupled with consumer preferences that are being trialed by various players globally.

1. Mobile as a substitute for cards:

With a wave of solutions aiming to provide seamless wallet experience, consumer adoption of mobile for payments is now going mainstream, thereby replacing cards. Wallets are replacing cards, at merchant outlets, e-commerce stores and other consumer touchpoints. This provides consumers with an ease of transaction as they get to use a mobile phone and leave all their cards behind at home. Here are the different solutions that are being explored:

a. QR code and/or NFC sign-ins via third-party wallets
b. QR code and/or NFC sign-ins via bank mobile apps
c. OTPs generated to customers’ mobile phones

2. Authentication using Biometrics and other techniques:

Even with a lot of consumer awareness campaigns and technology enhancement, one of the major causes of fraud in the cards and payment industry is skimming. Leading banks and technology vendors are now looking at biometrics as the solution to fightING fraud. After several years of debate on its usage, biometrics has taken off in an exponential way in the past two years, thanks in part to the mobile fingerprint solutions that are being developed.

Globally, there has been a huge demand and interest in these services. Biometrics along with mobile is seen as a foolproof way going forward. Biometrics, though initially was only focused on fingerprints, a large number of experiments are being run in order to provide comprehensive solutions. Here are some of the aspects that are gaining momentum:

a. Multiple fingerprint sensors
b. Voice biometrics
c. Facial recognition
d. Iris recognition

Here are some of the initiatives in the industry:

● BofA and Wells Fargo have announced that they are going to utilize Apple Pay in their ATMs that would leverage NFC on the phone for authentication. This will also let them leverage the wallet technology which aims to replace physical cards.

● FIS started testing its mobile wallet-based cardless cash withdrawal at ATMs in 2013. The technology utilizes QR codes as a method of authentication. In 2015, they added biometric access to ATMs, making it multifactor authentication combining mobile QR code along with biometrics.

● Biometric solutions as authentication methods are gaining widespread momentum. In 2015, Halifax, a UK bank had explored the concept of using wearables (Nymi band) as a method to authenticate by using customers’ heartbeat.

● In January 2016, Diebold and EyeLock (iris-based authentication service provider) had announced their new concept of screen-free ATMs. These ATMs would not have a pin pad, a screen or card reader but would work by the using a mobile app that utilizes NFC and QR code technology verified by EyeLock’s iris scanning feature.

3. ATMs and the related Branch Transformation & Self-Service Concepts:

Deploying ATMs was originally done as a means to reduce the long queues and substitute for human teller transactions. However, the installation of ATMs at multiple locations has been a drag on the costs. At a time when banks are looking at closing down branches in order to curtail costs, ATMs can be viewed as substitutes that provide all banking features at substantially lower costs when compared to running a bank branch. For long, ATMs have provided basic features of cash withdrawals, checking balance and viewing recent transactions. They are now looking at expanding these services with new and innovative features that not only attract retail customers but also help banks in meeting their goal of branch transformation.

Some of the features that are being tested in this area are:

a. Video/virtual teller machines: 2015 has seen banks embrace this technology which allows customers to interact with bank employees/bank customer care units. It allows for two-way communication providing the human element that was missing with previous machines. Bank of America and BMO Harris are two of the banks which have deployed this concept in the US.
b. Instant loans
c. Bill payments
d. Tablet screens/style for ATMs

While some of these features have been in existence for quite a while, the usage of these via ATMs has been low. Also seen as add-on features, some of the prominent existing features provided by ATMs are: the ability to recharge mobile accounts in the UK and get stamps from ATMs in the US. One of the reasons for this was low consumer awareness of such services.

4. Personalization:

Personalization can be viewed as a logical next step for ATMs. It can also be coupled with the trends of branch transformation and replacing cards with mobile wallets and digital cards. A major driver for mobile adoption in multiple segments is its power to provide enhanced personalized offerings to individual customers. With ATMs developing solutions that are largely aimed at replacing cards with mobile, ATMs would be looked at as platforms to increase loyalty, cross-sell, or upsell to customers.

Some of the concepts that are being explored or could be explored:

● In 2015, BMO Harris bank announced the roll-out of mobile cash ATMs. Customers utilizing this service would have the option to preset the cash that they would like to draw from an ATM. The app then provides a QR code which would be scanned at the ATM and desired cash would be dispensed.

● The ability to differentiate offerings based on consumers preferences and transactions – provide commerce facilities at ATMs, run customized marketing campaigns (provide service offerings like discounts, merchant-specific rewards, etc.).

● Cardtronics with its ALLTM Network launch has plans to mix cash with digital rewards allowing customers to save money with coupons and rewards at retail locations that host their ATMs.

With multiple concepts being tested by manufacturers and financial service providers, ATMs are reinventing themselves to retain part of their image the go-to destination for customers. However, a major factor that would be differentiating them is their ability to promote customer awareness of the innovative service offerings. Players would also keep in mind the demographic divide that they cater to. By means of their existing reach, ATMs are a unique concept that would be utilized by customer across target groups – baby boomers, Generation X/Y/Z, etc. Hence, while they do look at innovating with latest features, they would also need to run a study on the pockets of areas where they would like to deploy these services in order to meet the unique needs of the varied customers they serve. For example: As devised by Diebold, ATMs with new-age technology that do not have a screen, PIN pad, or card reader would be more easily adopted by millennials while the baby boomers could look forward to the traditional ATMs with interactive features such as video teller machines.

In any case, ATMs are in for a huge recycle, and players who would be able to rightly predict their consumer pulse, develop and deploy the right services at the right place would emerge as winners.

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