The coming age of smart ABMs
Banks are fighting the decline of cash by bringing new features to automated banking machines
After more than 40 years of withdrawing their cash from ABMs, are Canadians now poised to withdraw from cash altogether?
In the age of online bill payments, PayPal, and credit and debit cards, there are fewer reasons to go to the bank machine to get hard currency.
Media reports that Apple Inc. has plans to launch its mobile payments service in Canada this fall, bringing with it the ability to pay for purchases using an iPhone and the much-anticipated Apple Watch, will only add to the pressure.
To fight the decline of cash, banks are adding touch screens, no-envelope deposits and other features to their ABMs.
“People are using much less cash than they did 40 years ago. The machines’ role as a cash dispenser is still important, though diminishing significantly,” said banking industry analyst David McVay.
“The banks are left with a conundrum. They have an expensive network of machines that are producing less revenue and less cost reduction each year. How do they get more value out of them?”
Today, there are more than 60,000 ABMs in Canada, including approximately 18,600 bank-owned machines.
When it comes to cash, “this is the most-used channel in the bank,” said Fraser Mackay, vice-president of digital strategic initiatives at the Canadian Imperial Bank of Commerce (CIBC).
“We’re constantly thinking of ways to improve the network to make it a better experience for customers and clients.”
CIBC rolled out Canada’s first bank machine, dubbed “the 24-hour cash dispenser” on Dec. 1, 1969. It was activated by a key, a plastic card and a personal identification number. Customers could not withdraw more than $30 at a time from the machine.
“People went through the first few years always counting the cash that came out of the machine,” McVay said. “They found that it always came to exactly what they expected it to be and then, after a while, they stopped doing that.”
Toronto-Dominion Bank (TD) made a splash with its Johnny Cash Machine in 1983. The television ad featured the Man in Black himself, who intoned, “Friends, life’s too short to walk the line.”
Today, 55 per cent of Canadians bank via the Internet, according to the Canadian Bankers Association. Nearly one-third of Canadians used mobile banking the past year.
But 85 per cent of Canadians use ABMs when making cash withdrawals — far outpacing use of the branch and cashback services from retailers.
Today, about 40 per cent of consumer transactions in Canada are made in cash, according to figures from Moneris, the country’s largest debit and credit card payment processor.
That amounts to just 15 per cent of the value of all transactions.
The cost of an ABM ranges from $5,000 to $40,000, not including added costs to pick up deposits, refill the cash and maintain the machines.
In January, TD announced plans to test new so-called Smart ABMs in four locations in the Greater Toronto Area.
The machines have touch screens and offer envelope-less deposits and the ability for customers to take cash withdrawals in $5 and $10 bills, in addition to the usual $20 and $50 bills, said Jim Grimmer, vice-president, North American ATM channel.
“I don’t know if anyone has landed on this as the next thing,” Grimmer said.
“It’s about testing it and making it customer-centric, making it fit into the customer’s lives, not the bank’s life.”
Canadians have been at the forefront of bank-machine innovation, including the first Bitcoin ATM, unveiled in Vancouver in late 2013, said Jean-Philippe Vergne, assistant professor at the Richard Ivey School of Business at the University of Western Ontario.
McVay believes that ABMs are in an inevitable downward slide. “I think you will see ABMs diminishing in prominence and importance. It may take 20 years, but they’re on the downswing in terms of utility,” he said.
Vergne disagrees. “If you combine these two trends, these innovations and the decreased need for cash, what is likely to happen is we will have fewer ATMs, but they will be better ATMs,” he said.
It’s unlikely that cash will disappear entirely, Vergne added.
“There will always be a use for cash. It’s tangible. It’s instantaneous. It’s convenient.”