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Why ATMs Will Continue to Play a Prevalent Role in Banking 

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Automated Teller Machines (ATMs) have been around for 50 years, with the first one opening at a Barclays branch in Enfield in June 1967.

Fast forward 50 years, more than 70,000 have been installed across the UK since, dispensing £129bn last year alone, according to The Guardian.

Since the introduction of ATMS, they have widely been accepted as a small-scale banking platform that deposits and withdraws money, checks accounts, and processes bank transfers.

While ATMs have progressed significantly in the past few years, many argue that the banking industry has outpaced the need for ATMs, and that there is no longer a sufficient market for them. On the other hand, some argue that ATM banking is a crucial part of making banking and cash available 24/7, especially in cash-dominant geographies. So where does ATM banking stand in the global economy?

Still a touchpoint for many

ATM’s were created to prevent over-congestion at bank branches and to provide banking that is available 24/7.  While some geographies do not rely heavily on cash, there are still over 2.5bn people unbanked in the world. ATMs are a way of accessing funds, sending money back to loved ones and accessing basic banking needs.

And ATM banking is still a touchpoint for many consumers, allowing ease of use and immediate access to funds.

People at Lloyds bank atm, cash dispenser
Over £194 billion were withdrawn from UK cash dispenser in 2015 and the number of total (mainly private) cash machines only grow (according to paymentsuk.org.uk report 2016).

Recent statistics by ATMIA estimate that the number of ATMs currently in use are at 3 million units, approximately 1 ATM per 3000 people in the world. The four regions that have the highest number of ATMs per million are the US, Canada, Europe and Japan. Regions with the most demand for ATMs are Latin America and Asia.

Contrasting geographies, contrasting routes

The number of ATMs worldwide reached a record 3.3 million in 2016, according to RBR’s latest report, Global ATM Market and Forecasts to 2022. The reports outlines that the rate of expansion slowed to 3%, down from 5% in 2015, largely as a result of rationalisation across western Europe and in other major markets such as Brazil.

China still propels ATM expansion – adding by far the most ATMs in 2016. Local banks have used this approach to gain new customers and provide a better service for current ones by introducing ATMs to rural and previously underserved urban areas.

Financial inclusion is also a great initiative to bolster growth in many Asian countries. RBR’s study also showed that several other large Asian markets, including India, the Philippines, and Pakistan witnessed strong growth in 2016. Financial inclusion initiatives by governments and banks have proven successful in bolstering the number of banked individuals. This in turn has heightened the need for additional ATMs.

Integration with advanced technology

According to the Financial Times, several banks in the US and Europe are already rolling out ATM machines with near field communication technology (NFC), a big push in the digital direction.

NFC technology is traditionally used in contactless payments and is becoming widely adopted in a variety of economies.  This would allow digitally savvy ATMs to let a customer set up a transaction on their phone before they reach an ATM, and the machine would dispense the cash when their phone is in contact with it.

The FT also states that an estimated that 2.2bn smartphones will be equipped with NFC by 2020.

And it’s no surprise. We live in a digitally-focused world, where consumers want the ease and availability of banking available at their fingertips.  Several analysts argue that financial institutions are becoming increasingly willing to invest in a new approach, as the ATM will remain to be a big part of the banking experience, and could potentially win the attention and possibly the loyalty of modern consumers.

Some experts also debate that ATM banking is actually set to become even more popular due to a spike in increase in the number of ATM withdrawals.

A recent article on ATM banking agrees: “The ATM is in many cases the most common self-service channel consumers have with their bank. Projecting a positive brand image and good consumer experience is important.”

Supporting financial inclusion

While western countries are ready to let go of cash payments, eastern geographies aren’t quite there yet.

According to consultancy Retail Banking Research’s (RBR) study Global Payment Cards Data and Forecasts to 2020, a total of 417 billion cashless payments were made in 60 countries worldwide in 2014, and these are increasing at only a slightly faster rate than the number of ATM cash withdrawals.

ATMs have two verticals of which consumers mainly use them. Basic use of ATMs allow customers to withdraw cash, show account balances and allow internal account transfers. The more complex machines, usually found within bank branches themselves, facilitate credit payments and pay direct debits.

With a McKinsey study finding that 2.5bn adults worldwide are still unbanked (with Africa, Asia, Latin America and the Middle East accounting for 2.2bn), it further reinstates the need for ATMs to support those without access to basic financial needs.

While the fintech sector is  embracing innovative payment options, cash still remains the main method of payment for many – even 1.5 million adults in the UK.

In a world that is overflowing with innovation and technology, banking has certainly taken a big leap forward, and ATMs are predicted to mirror the advances.

Experts believe it is fairer to suggest that contactless technology will decreases the uses of cash, but not eradicate it completely. And therefore, in a society fostering with innovation, ATMs are set to be a part of the journey, and continue to be of use to millions of people.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.