Cash is resilient. Through decades of plastic-based and digital payment innovations, this tried-and-true tender has proven its staying power. However, it’s safe to say that the way consumers view cash and want to use it is very much evolving.
Today’s consumers want access, freedom, and choice. They want control. The financial institutions and service providers who give it to them will be the ones to own the market.
According to Brad Nolan, EVP for Allpoint Solutions at Cardtronics, that’s why financial services providers are increasingly looking to retail ATMs to support cash-out and cash-in activity. Some are even looking to the point of sale as an avenue for providing these services – but let’s not get ahead of ourselves. Nolan says that’s still a long way away.
Much nearer at hand is the demand for ATMs to do more. Here’s why Nolan says it’s time for financial institutions and service providers to hop on the train – and there’s still time to do so before it pulls out of the station.
Market Dynamics
During his 20 years with JP Morgan Chase, Nolan gained long-term and bird’s-eye views of marketplace trends that have pointed him toward the conclusion that it’s time for a new generation of ATMs. But he’s not just leaning on his own anecdotal evidence.
The Federal Reserve’s 2016 Diary of Consumer Payments showed that cash was still the most-used payment instrument, representing 31 percent of all payments – and 60 percent of small-dollar purchases (under $10) as well as 45 percent of payments from low-income households. All told, the world paid more than $18 trillion in cash that year.
Sorry, what was that about cash being dead?
Far from it, cash is alive and kicking – and the demand for convenient cash is substantial. The number of consumers retrieving cash from an ATM other than their banks’ ATM doubled from 2012 to 2017. Rather, Nolan observes, it’s teller transactions that are falling as a result of a growing reliance on ATMs.
“Many think of digital and ATM cash as being in direct competition,” Nolan said. “The reality here is ATMs were the first digital channel and still play an important role in helping consumers convert digital funds to physical cash in hand.”
Even as cash payments share the spotlight with newer digital options, Nolan said ATM transaction volumes are still projected to grow over the next four to five years. It is no less important today than in years past for financial institutions to provide the cash consumers demand. There is still time for financial institutions to join the on-demand cash movement – or as he calls it, “on-ATM” – utilizing a modern ATM strategy to compete for cash-hungry customers.
Benefits of a Retail Deposit Channel
Why do consumers bank where they bank? Most would say, “Convenience” – they have an account with the financial institution around the corner from their home or work.
However, this notion that convenience is defined by branch location falls apart when you ask the consumer if they ever actually go into the branch. Today’s consumer has redefined convenience, says Nolan. They’re looking for two things: a killer mobile app, and free and convenient access to cash via ATMs. Digital defines the way consumers interact with their finances, and the ATM is the connection point with those digital finances to a physical world. As consumers reprioritize their needs, Nolan says banks should realize that cash access is imperative to customer acquisition and retention and is, in fact, a critical underpinning of a digital banking strategy.
Giving the customer what they want can drive overall business efficiencies, says Nolan. Imagine that
The specific numbers, of course, will vary bank by bank, but for this example, that plays out to a reduction of 657 tellers and $25 million in teller expense savings. It also produces customer growth rates of around 70,000 incremental customers, with a $40 million marketing value increase. In total, Bank X would realize $65 million in overall value purely by creating free and convenient access to cash.
Case Study: Growing Consumer Trust in the ATM
Nolan shared the following real-life example.
A financial institution recently enabled deposit capabilities at its ATMs with a mass merchant retailer in four different markets. In each market, the number of deposits increased steadily each month after the change was made. Perhaps more significantly, the dollar amounts of the deposits also increased.
Furthermore, the number of cash deposits exceeded the number of check deposits, and the total number of deposits outnumbered cash withdrawals. That is, customers were putting more money into the ATM than they were taking out. If that’s not a sign of demand, what is?
“Consumers are gaining trust in the ATM and making deposits,” Nolan concluded – and “when it comes to deposits, customers have to trust that it’s going to get into their account, and get there on time.”
Whereas those same consumers used to get in their car and roll up to the drive-through ATM – or even get out of their car and wait in line in the branch lobby – to ensure that their deposit made it into their account, and did so on time, they are now entrusting the same task to a machine located in the store where they are already shopping, no special bank trip required.
Winning the Trust Game
There is, however, a limit to human trust, which is why Nolan says you won’t see point-of-sale clerks processing cash deposits anytime soon. On top of that, he doesn’t anticipate that financial institutions will ever get behind point of sale as part of their deposit retention strategies because there’s no potential for branding.
An ATM, conversely, can convey the brand experience of a given financial institution by leveraging familiar colors and logos – even at multi-bank utility ATMs. Nolan says that will be a key component of creating consumer trust in a utility ATM – and trust will be required to move into the “on-ATM” future.
In conclusion, Nolan says, the top financial organizations in the “on-ATM” game will enable consumers to take cash out, put cash in, and convert physical cash-in-hand back to digital, either in the form of a traditional deposit or as a bill payment, a P2P transfer, or an account top-up – and they will do all this not just from their own branded ATMs, but from multi-bank utility ATMs that better serve their customers by making cash access easy, convenient, and free.