Are ATMs in danger of becoming obsolete in the digital age, or do they still have a place as digital banking takes the financial services industry by storm?
John Sheppard-Baron created the first automated teller machine (ATM) in 1967 at a Barclays bank branch in North London. The device revolutionized financial services by providing account holders with round-the-clock access to cash, and it was inspired by chocolate vending machines. A booming US financial market quickly became interested in the ATM after it saw success in Europe, and Donald Wetzel introduced it to New York in 1969.
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ATMs are now a ubiquitous sight on high streets and main streets, at gas stations, and in shopping centers all over the world, serving as an architectural symbol of legacy banking. But as we move into the 2020s, you’ll discover that contactless payments and digital banking are rendering cash—an antiquated yet reliable method of paying for goods and services—obsolete.
In fact, modern ATMs provide more services than just disbursing cash; these include cash deposits, mini statements, and balance inquiries. But when it comes to providing a quick and easy customer experience, digital banking can do all of the above (apart from cash disbursements), leaving physical bank branches and their ATMs behind. What then is the future of ATMs and are they still relevant in the current digital era?
ATMs are now a ubiquitous sight on high streets and main streets, at gas stations, and in shopping centers all over the world, serving as an architectural symbol of legacy banking. But as we move into the 2020s, you’ll discover that contactless payments and digital banking are rendering cash—an antiquated yet reliable method of paying for goods and services—obsolete.
In fact, modern ATMs provide more services than just disbursing cash; these include cash deposits, mini statements, and balance inquiries. But when it comes to providing a quick and easy customer experience, digital banking can do all of the above (apart from cash disbursements), leaving physical bank branches and their ATMs behind. What then is the future of ATMs and are they still relevant in the current digital era?
The bank branch collapse
According to Paymentology’s Regional Director for Europe, Martin Heraghty, the survival of ATMs and their associate branches depends on consumer preference. He claims that “the demand for brick-and-mortar bank branches and ATMs is decreasing as more people adopt digital banking.”
According to Paymentology’s data, since 2016, the number of ATMs in Europe has decreased by more than 10%. Meanwhile, as customers’ digital banking habits grew more ingrained, research from the international consulting firm Kearney projected that 25% of European bank branches would close between 2020 and 2023.
As a result, established banks are sacrificing ATM innovation in favor of the expansion of customer-backed digital banking. According to Heraghty, “banks are adjusting their strategies, investing in digital banking, and improving their customer’s experience while reducing their physical presence and partnering with innovative fintechs.”
The decrease in legacy banking infrastructures is not limited to Europe either, as Euromonitor International reports that there will be fewer ATMs in the US overall in 2021—an estimated 456,000—down from a peak of 470,000 in 2019. This is made worse by the fact that ATM servicing costs have increased due to a decrease in the worldwide demand for cash, which has forced banks to reevaluate the locations of their ATMs.
Where ATMs continue to
Though digital banking and contactless payments are becoming more popular due to the growing number of fintech companies, Martin Hartley, CCO of emagine Consulting Group and decision-maker for the Bank of England, thinks that many people “for whom ATMs still have their place.” He acknowledges that “since technology in the banking industry has surged over recent years, the demand for ATMs has certainly reduced,” but he believes that “cash is still important” and doesn’t “see that changing anytime soon.”
This is particularly true in low-income and developing markets, where ATMs continue to be a vital tool for reaching the underbanked and offering an easily accessible route from cash to checking accounts. According to Michalis Michaelides, Director of Business Development at BPC Banking Technologies, “cash remains an important tool for consumers” in these underprivileged areas.
According to a 2022 Merchant Machine report, 78% of Romanians still carry cash, and Peru has the greatest ATM density per 100,000 adults—127—among the countries. The question of where cash and ATMs thrive and fail is not just a geographic one but also a demographic one. Which? reports that since 2015, 48% (4,735) of the scheduled bank closures in the UK have resulted in a risk to the access of funds for vulnerable customers and those who have not embraced digital banking, such as the elderly. This suggests that some people in developed markets still find ATMs to be very important.
In technologically advanced nations, digital wallets are widely used, but in less developed nations, cash is still essentially the only method of payment. Hartley continues. Given how many people lack access to modern technology in many parts of the world, a cashless society currently seems unfeasible.
ATMs in banking in the future
As legacy banks seek to acquire and collaborate with fintechs that are revolutionizing the digital banking space, and regulators support digital payments with an eye toward increased fraud prevention, it is evident that ATM innovations are not currently being commissioned to market in large quantities.
Therefore, it’s possible that, like payphones, ATMs will eventually become obsolete and may even vanish completely if advancements in financial infrastructure services aren’t able to keep up with the rapidly expanding digital banking sector.
Even though the number of ATMs is declining and legacy banks are neglecting them in their efforts to keep up with digital financial services, ATMs are still an essential component of the banking infrastructure today.