Caught in the spin cycle of competitive contract pricing, savvy merchants, increasing costs and growing regulations, IADs, ISOs and banks are increasingly asking, "What's next for the ATM?"
This is a critical question to answer before deciding to upgrade ATMs or even to consider exiting the business. While the U.S. leads the world in many areas, the ATM product cycle is clearly not one of them. As a result, there are lessons we can learn from countries and markets ahead of the U.S. in ATM development, including:
Hardware pricing will continue to fall
This is particularly true of "through-the-wall" financial institution ATMs, whose price reductions largely trail those of retail ATMs by nearly a decade.
The combination of "Windows upgrade fatigue," liability shift, PCI, fraud and growing Asian competition will cause banks to increasingly reevaluate their ATM strategies. Some will outsource, others will move to a lower-cost CE platform, the remainder will sharpen their pencils and gut the old "high-margin hardware with expensive hardware-software maintenance" model.
As we've seen in the retail ATM industry, the big box ATM manufacturers have only begun their painful business reinventions.
Regulatory requirements (helpful suggestions) will continue to increase
PCI and EMV upgrades might be child's play compared to what we've seen in other markets. The European Union's Single Euro Payments Area regulations mandate either CIT-fill or validating dispensers for ATMs, effectively stymying the growth of any retail ATM model.
Outside Europe, the adoption of similar regulations would be a death warrant for merchant-fill ATMs, which have facilitated the widespread closure of U.S. bank branches over the past 20 years and a "retail ATM in every urinal" level of deployment.
Other less-than-exciting ATM developments include polymer currency conversion in many countries and the threatened implementation of Braille notes in the U.S.
This will be an industry-wide challenge, as legacy ATM dispensers have struggled in many cases to keep up with these widespread changes in physical currency.
ATM functionality will increase but it won't much matter
There are natural extensions of the ATM, including charity, lottery and direct currency conversion. These product enhancements might help to stem the flow of contract losses and merchant pricing pressure, but none is a magic bullet.
Other proposed functional extensions are merely distractions from the ATM as an efficient cash dispenser.
In a mature market, it's all about operational efficiency and customer relations. IADs shouldn't hold their collective breath waiting for game-changing functionality at the ATM.
Cash is going nowhere — unless governments decide otherwise
As we've seen in Cyprus and now in Greece, when the poop hits the fan, cash is king.
Banks are efficient in the absence of political, economic or technological disruption. For any regular connoisseur of the news, though, none of these have been in short supply of late.
Governments, however, would love to kiss cash goodbye. Whether to drive greater tax collection, reduced currency issuance costs or higher transaction scrutiny, governments are increasingly recognizing the benefits of a cashless society. Keep an eye out here.
The U.S. retail ATM market will probably continue on its current trajectory for a while. But beware the growing number of mines in the harbor. Forewarned is forearmed.