Banks rush to bring old-fashioned ATMs into digital age

Fifty years after Barclays installed the world’s first ATM in a north London suburb, the British bank and several of its big US competitors are racing to digitise the old-fashioned cash machine.

The first ATM was unveiled in Enfield on June 27 1967. Now forecasts of the death of cash are making the industry rethink its proposition to meet changing consumer needs, with plastic cards increasingly being replaced by mobile payments.

“Our industry will innovate more in the next five years than we’ve done in the past 50,” says Andy Mattes, chief executive of Diebold Nixdorf, which makes a third of the world’s more than 3m ATMs. “The speed is exhilarating.”

With increased smartphone use, and Silicon Valley companies wading into the payments industry, banks and ATM makers have put interaction with mobile devices at the centre of their new machines. They hope that rather than being subsumed by mobile payments, ATMs will be able to absorb them.

Several banks in the US — including Wells Fargo and Bank of America — and in Europe are rolling out machines with near field communication technology, a type of electronic communication used in contactless payments. This enables customers to set up a transaction on their phone before they reach an ATM, with the machine dispensing cash when their phone comes into contact with it. It is estimated that 2.2bn smartphones will be equipped with NFC by 2020.

For Mike Lee, chief executive of the ATM Industry Association, the attraction of “cardless” ATMs is added security and the ability to speed up transactions. “Cardless transactions take just 10 seconds for customers to get their cash, compared to around 30 seconds for traditional card withdrawals,” he says. “Speed is a very important part of consumer experience.”

More than 40 per cent of Wells Fargo’s 13,000 ATMs have NFC technology, while the bank enables customers to use all its ATMs for cardless transactions with a mobile passcode system. BofA has rolled out cardless technology to 5,000 of its ATMs across the US, including the majority of machines in San Francisco and Silicon Valley.

I don’t see ATMs completely replacing branches; they will complement them

In the UK, Barclays has been piloting cardless ATMs in 160 of its branches since October and will add new machines to 40 per cent of its 1,300 UK branches this year.

Diebold Nixdorf has developed a so-called “headless” ATM, which features no screen, touchpad or card reader. Transactions are carried out on mobile devices and the ATM merely dispenses cash. It has been trialled by Citigroup, but is yet to be rolled out.

Diebold has also produced a miniature machine that is about 1.5 times the width of a US dollar note and designed to take prime position in retail outlets. Mr Mattes says several US banks are considering introducing it, but the design has yet to receive regulatory approval.

Optimising ATMs is one way to offset the decline of bank branches in developed markets. There are 1.1m bank branches globally, compared with 3.5m ATMs. Mr Lee expects this ratio to be four ATMs to every branch by 2020. “The ATM is becoming a more important bank channel as bank branches are no longer cost efficient,” he says.

As many as 200 different functions can be carried out by ATMs, including paying bills, making charity donations and paying taxes, as well as buying lottery tickets, sports tickets, transport tickets, stamps and vouchers.

The latest series of ATMs from NCR, another manufacturer, has a strong focus on incorporating video and mobile technology, including using Bluetooth transmitters to alert bank customers when they are close to a cash machine. Several UK lenders are planning to introduce the new designs and NCR expects them to be on British high streets soon.

However, bankers do not expect the new ATMs to fully replace bank branches.

“We will have fewer branches, but branches will be around for a long time to come,” says Carl Hynes, head of branch transformation and self-service at Barclays. “I don’t see ATMs completely replacing branches; they will complement them. There are still lots of things that customers want a human connection with.”