As we move from cash to cashless, turbo-charged by the pandemic, there is a fundamental challenge to ATM providers like NCR and Diebold Nixdorf. I had this view back in the 1990s. It’s just taken a quarter of a century to become a reality.
In the UK Link, the largest cash machine network, said there was a 38% decline in ATM transactions in 2020, caused in large part by the coronavirus crisis; in the USA, attempts to steal from ATMs jumped near 150% from 2019 to 2020, partly because ATMs that normally held $50,000 were now holding almost $100,000 to deal with the pandemic lockdown and avoid refilling.
On the other hand, we saw cryptocurrencies, particularly bitcoin, rise to a valuation more than ten times higher than the previous year and all of the world’s central banks rushing to implement and issue digital fiat currencies.
What are the implications of the flight from cash and the rise of all digital? What will be the impact on banks and bank networks? If cash management disappears, what will we manage? And all those holes-in-the-wall literally become holes in the wall? What will we do with all that empty space?
Some say that ATMs could become digital branches, allowing check and cash deposits and linking to video agents when service is needed. If that were the case, would any branches be needed at all?
I asked these questions twenty five years ago, but that was before the invention of the smartphone. The fact that you can do everything on a smartphone today, even deposit a check as an image, means that you don’t need an ATM to do that.
But, on the opposite view, what about all the people who don’t like digital banking, don’t like online and mobile payments, and don’t want to deal with machines? After all, cybercrime is rising – it’s estimated that damage relating to cybercrime will hit $6 trillion annually, according to Cybersecurity Ventures – and many customers feel more vulnerable doing things digitally versus physically.
The result is that banks try to run a hybrid strategy of both digital and physical service. Banks get lambasted for closing branches and retailers get flack for refusing to accept cash. Nevertheless, these trends are inevitable and ongoing. We will see branches disappear; we will see cash disappear. During the lockdown, one in three UK consumers were refused checkout services because they offered cash. During lockdown, UK banks closed more than 6,000 ATMs, a 10% reduction, from 60,600 to 54,300.
The world has changed and pivoted rapidly in 2020 from physical to digital. Banks are changing and pivoting rapidly to keep up: shuttering more branches, reducing ATM and cash management operations, moving to cloud, and focusing on work and service from home. But the customers have not changed and pivoted. We think they have – they don’t like cash anymore – yet I guarantee that when this shutdown ends, everyone will be asking what happened to their ATM, their branch, their branch manager and their favourite teller.
It is the issue that has plagued our industry for all time: we want to distribute and operate at lower cost, whilst continuing to serve the most legacy of customers.
This has to change as 21st century banks cannot compete with banks built in the 21st century if they continue to service and operate for 20th century customers. Shut down those ATMs, close cash management operations, get rid of checks and paper, eradicate bills of lading and letters of credit, decimate anything involving a wet signature; switch it all to an app and an API, or you won’t keep up.