Could the U.S. see an ATM squeeze like the U.K.?
Cash access has grown tighter in the U.K. as more consumers adopt digital payments and banks shrink their fleets of branches and ATMs. Could the U.S. could see a similar phenomenon?
The U.S. lags several years behind the U.K. in adopting contactless payments, which have displaced cash in most low-ticket transactions. Britain's banks gradually relaxed support for cash access, giving rise to “cash deserts” in certain rural areas where bank branches and ATMs are scarcer.
The U.S. already copes with such scenarios in its most extreme regions, such as rural Alaska, and the risk is that cash will become just as hard to come by in parts of the country that are not accustomed to dealing with such scarcity.
In the U.K., the Post Office filled the void. It now supports free cash withdrawals across the country with big banks footing the bill. Barclays recently tried to pull out of the banks’ Post Office deal because its cost rose, but the bank reversed its decision under consumer pressure.
The U.S. — with the highest number of ATMs per capita in the world — is still a long way from seeing ATM access dry up. But banks are changing the way they support ATMs as cashless transactions increase and digital banks expand.
First Citizens Bank, which has 600 branches in 19 states, recently removed ATMs from about 30 of its branches, a trend experts say could catch on with more small and midsize U.S. banks.
Raleigh, N.C.-based First Citizens Bank pulled the ATMs out of branches in Arizona, New Mexico, Colorado, Kansas, Missouri and certain other regions where consumer usage was low. In areas where the bank has no ATMs, First Citizens offers customers free ATM withdrawals at any bank.
“We looked at how best to serve customers in the markets where we removed ATMs,” said Barbara Thompson, director of marketing and communications at First Citizens. ATMs remain a core part of the bank’s strategy, she said, noting that allowing customers free access to any ATM expands their access to cash.
The move targeted branches with a heavy concentration of business customers and low ATM traffic, where it made economic sense to remove the hardware, Thompson said. Each branch retains a vault for after-hours deposits.
First Citizens is not the only bank weighing its decision to continue supporting ATMs at all branches, as low-performing ATMs become a drain on earnings.
Over the past five years, ATMs have shifted from a profit center to a cost center, as out-of-network cash withdrawal fee income has declined, according to Casey Merolla, Accenture’s managing director of payments strategy for North America.
“Banks previously saw ATMs as driving profits from usage fees and foreign transactions, but they can’t count on fees to offset the escalating cost of keeping up with ATM technology changes,” she said.
ATMs, introduced 50 years ago, run the gamut from basic cash dispensers to sophisticated customer service devices. Some banks are keeping older ATMs going by hunting down replacement parts. Others are investing in new models with interactive video screens, biometrics and contactless access.
“ATM technology is getting more complicated, and as banks grapple with the market's changing dynamics, we’re seeing a lot more consulting inquiries,” Merolla said.
In short, ATM access remains important to banks for dispensing cash and performing other services, but efficiency demands that ATMs must serve more consumers and — in many cases — more banks, she said.
“Depending on the size of the bank and their branch footprint, banks are looking to minimize ATM support where they can, but I don’t see a lot of them getting rid of ATMs completely,” she said.
ATM users’ needs have changed, too.
“The rise of mobile check deposit technology has changed the mix of deposits, so most banks are seeing a higher proportion of ATM cash deposits than ever before,” Merolla said.
Diebold Nixdorf, the largest manufacturer in the global ATM market, has seen slower sales worldwide in recent years, forcing the company to redesign its hardware for changing scenarios.
“Cash use is diminishing, but cash has a very long tail and we believe ATMs will continue to play an important role at banks for years to come,” said Octavio Marquez, senior vice president and managing director for Diebold Nixdorf’s Americas banking division.
ATMs have evolved to perform a variety of functions that will only continue to expand, Marquez said. Dave & Buster's last month announced new self-service game card dispensers made by Diebold Nixdorf will be installed in its 134 restaurants.
"As ATMs gain more functionality by dispensing cash through different technologies, recycling cash and sorting other types of deposits, there may be fewer overall but each one is performing more work than before,” he said.
One group benefitting from the industry shift to make ATMs more efficient is third-party ATM network operators like Cardtronics’ Allpoint, Fiserv’s MoneyPass and FIS’ SUM networks, which offer surcharge-free withdrawals to participating organizations’ customers.
More small and midsize banks are outsourcing ATM management to independent operators, while several emerging digital banks in the U.S. are leaning on independent ATM networks for customer cash access.
Chime has a deal with MoneyPass to provide surcharge-free ATM access for its digital banking customers, and Varo’s customers use ATMs at no cost from the Allpoint ATM network.
When announcing third-quarter earnings last week, Cardtronics said it’s expanded or signed new agreements with fintech partners for ATM access including Varo, N26 and Oxygen.
On another front, brick-and-mortar banks are expanding to new markets without adding new branches by white-labeling ATMs owned by third parties.
PNC Bank in June teamed up with Cardtronics to introduce PNC-branded ATMs in more than 200 Timewise Food Stores in the Houston area.
Most of Cardtronics' 40,000 Allpoint ATMs are located inside stores like Walmart and CVS, which corresponds with existing consumer shopping patterns in urban and rural areas, said Brad Nolan, executive vice president with Cardtronics’ Allpoint network.
Last year Cardtronics began upgrading its Allpoint ATMs from solely dispensing cash to full service mode, accepting deposits.
“What we’re seeing is a lot of different requirements from different banks," Nolan said. "Between cash-dispensing, taking deposits and mobile banking, a financial institution can provide full-service banking without a branch."
By next year, about 15% of the 40,000 Allpoint ATMs in the U.S. will be full-service, he said.