Cash is king? ATM makers fight to stay relevant in digital world

By Lisa Fu
  • TECH
  • Monday, 02 Apr 2018

A woman uses an ATM machine at the Kenya Commercial Bank (KCB) in Nairobi on January 24, 2018. / AFP PHOTO / SIMON MAINA

The ATM is in the midst of a mid-life crisis. 

Not only are there plenty of ATMs to choose from – at banks, bodegas and bars – they are also losing relevance as digital payment methods abound. 

“The total number of ATMs in the US is approaching around half a million,” said Daryl Cornell, chief executive officer of ATM manufacturer Triton Systems. “And that seems to be, at least in our view, full maturity.” 

That saturation has manufacturers like Triton scrambling to reinvent themselves. Coupled with the boom in mobile banking and payment services like Venmo, the ATM guys are turning to software and self-checkout in the hopes of surviving. 

Over the last couple years, the number of operating ATMs in the US has remained mostly flat, a fact that’s reflected in concerns about orders voiced over and over in the earnings calls of companies like NCR Corp and Diebold Nixdorf Inc. From 2010 to 2016, the number of operating ATMS grew by just 1.4%, according to data from RBR, a research and consulting company. 

A 2015 survey by Business Insider Intelligence found that 40% of millennials said that they would quit using cash if their credit or debit card could replace such transactions. The group said data hasn’t been updated, but they estimate the percentage has likely increased over the past three years. 

“The only time I ever use an ATM is if a place takes cash only or if I’m going out to the bars,” said Nick Burch, a 23-year-old accountant from Atlanta. He notes few places in the city are cash-only these days and he uses cash at bars because its easier to lose a card if he puts it on a tab. 

ATM makers have kept themselves going via the grace of upgrade cycles required by regulation changes. But such periods provide only a temporary revenue fix, and full-market saturation may cause annual ATM sales to plummet as much as 90%, according to ATM Marketplace, an ATM news site. That’s what happened in the UK and Canada, Triton’s Cornell said. 

“As we’ve seen in Canada in 2012, as soon as they went through their EMV upgrade program new ATM sales fell,” Cornell said in a telephone interview. “We think we’re going to see something similar to that in the US.” 

There’s a light at the end of the tunnel, if for just a brief moment. A Microsoft Corp update in two years is hoped to prompt sales as banks will need new hardware to match the software change. 

In the meantime, manufacturers are pushing new features like cardless ATMS and linking the machines to mobile phones, said Michael Lee, chief executive officer of the ATM Industry Association, also known as ATMIA. 

“ATMs are adapting to the global move toward digital banking and online retail,” Lee said. 

Sam Ditzion of Tremont Capital Group, an ATM consulting company, insists the machines aren’t going away and neither is cash. Still, becoming a software company that just happens to also make good hardware would be a better business model, he said. 

“Many of these companies have been trying to diversify into more solutions and software services,” said Ditzion. “Hardware, in general, has been an increasingly difficult product to maintain any kind of good margin on.” 

Of course, that might mean Diebold and NCR would have to compete with the likes of Microsoft. 

Diebold Nixdorf has already moved to decrease exposure to the US market by acquiring Wincor Nixdorf in 2015 and now just over 20% of total revenue comes from the US, according to Mike Jacobsen, Diebold Nixdorf’s corporate communications senior director. 

“We’re in a position of strength from a services and software perspective to capture the opportunities we think will increasingly represent where the growth is coming from,” Jacobsen said in an e-mail. NCR declined to comment. 

The Reserve Bank of Australia has said it expects financial institutions to start removing under-used ATMs with “tap and go” payments overtaking cash, according to a story in The Sydney Morning Herald. While Triton’s Cornell emphasises that US cash use is flat and not declining, about 29% of US respondents in a Transaction Network Services survey said they never use ATMs, an 8% increase from 2015. — Bloomberg

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