Cash is on the decline, as card and digital payments become the dominant form of payment. The arrival of contactless payment, as well as one-click payment on e-commerce sites like Amazon, have meant greater convenience and speed for consumers both young and old.
Figures from the financial services association UK Finance show that cash payments, while remaining common, fell by 16 per cent between 2017 and 2018. They also predict that just nine per cent of transactions will be completed using notes or coins in 10 years’ time, compares to 60 per cent 10 years ago.
Cashless payments have been so successful that UK Finance found that two million more people used cash no more than once per month in 2018 than in 2017. However, 1.9 million people still mainly used cash.
In Sweden, where notes and coins represent just one per cent of transactions, the situation is more extreme. A fifth of people claim not to use ATMs any more.
Globally, the number of ATMs around the world fell for the first time in 2018, according to research consulting firm RBR, seeing declines in four of the world’s five largest markets: China, the US, Japan and Brazil, with growth in India slowing.
Unsurprisingly the continued need for cash machines is being debated in many markets.
With fewer cash withdrawals, ATM operators are generating less revenue. This isn’t helped by the fact that the fee UK operators receive from banks when ATMs are used was reduced in 2018.
Link, the ATM industry body in the UK, said the fee drop could result in up to 30,000 ATMs disappearing. However, fees will not be cut for free ATMs located 1km or more from the next nearest cash machine. Link said the move is to encourage operators to place machines in more remote areas.
One result of these changes is that ATM operators will start to charge consumers to use machines. Indeed, consumer lobby group Which? has found that free-to-use cash machines have been rapidly disappearing across the UK, with nearly 1,700 machines starting to charge for withdrawals in the first three months of 2019.
There is also the question of upgrading ATM operating systems to Windows 10 before Microsoft ends support for the widely-used Windows 7 in January 2020, with the cost of upgrading older machines potentially making less sense than closing them.
There are arguments that the UK network of 55,000 ATMs support financial inclusion as a proportion of people don’t have access to digital and contactless payment technology.
According to UK Finance chief executive Stephen Jones, “technology is not for everyone and cash remains a payment method that is valued and preferred by many, so maintaining access to cash will be vital to ensure no customer is left behind".
Bearing these factors in mind, the humble ‘hole in the wall’ needs to evolve if it is to survive the reduction in cash withdrawals while continuing to serve an important social function.
RBS is already piloting contactless ATMs, with customers able to withdraw up to £100 without putting their card in the machine. Chase Bank in the US, meanwhile, has introduced card-free ATMs where customer access services through their phone app.
The ATM Future Trends report suggests ATMs could even adopt biometric technology, such as fingerprint and facial recognition as an authentication method. Indeed, Barclays has already trialled finger vein scanning.
Another view is that the challenges facing ATMs will lead to modernisation such as the introduction of touchscreens, brighter displays, video banking and faster transactions times. Greater personalisation is another idea to help ATMs remain relevant, with the potential for users to request the mix of notes they receive via their mobile app or to receive new cards directly from the ATM. Some banks are also offering customers the ability to make automated deposits and even recycle cash.
The services offered by ATMs could also evolve to include loan applications, buying lottery tickets and dispensing foreign currency. In the UK, people can already top up their mobile phone balance. ATMs in Latin America typically have 50-75 features, including the ability to pay bills or for pay-to-view sport coverage.
As digital payments continue to put the pressure on physical cash, ATM providers will be forced to innovate and move away from simply dispensing money.
Ultimately, it seems the ATM will be with us for some time yet. The argument that they support financial inclusion is valid, while their usage has expanded beyond merely dispensing cash, to include other important or useful services. It’s not yet time to brick up ‘the hole in the wall’.