An ATM must do more than dispense cash

When retail bank branch hubs went dark in 2020 as a result of the coronavirus, the focus shifted to an institution’s array of spokes – from call centers to online banking tools and delivery services. Many institutions found their ATM channel was the only physical access point for consumers anxious to access cash or make deposits.

At the same time, the longer-term trend of net branch reduction picked up significantly, with more than 2,000 locations being shuttered during 2020 and into 2021, according to S&P Global Market Intelligence. That’s the equivalent of a top-seven bank (by number of branches) ending lobby service in communities across the country.

A key takeaway from institutions’ pandemic response is that, while the ATM can serve as a backup to or replacement for the branch, it must do more than simply dispense cash. It must be managed as a mission-critical device. In some cases, this could mean transitioning to a full interactive teller machine (ITM) with elongated service hours, which can soften the blow of branch closures. In other cases, expanding the availability of ATMs that can take cash deposits has taken on new importance.

Sign up for the free BAI Banking Strategies newsletter and get industry insights delivered to your inbox.

For many institutions, the ATM is not just a service delivery vehicle, but rather an important part of the sales funnel that helps to efficiently acquire and retain customers. As a branch substitute, the ATM provides robust marketing opportunities, whether placed in local stores or drive-up locations. The ATM can be seen as a force multiplier of the branch network, maintaining brand presence and service delivery in many more locations.

Financial institutions need to shift resources to more efficient channels, such as the ATM, as they seek to expand their market presence, compete with upstart challengers and deliver engaging digital-banking experiences. For some institutions, branches will be reconfigured to become sales centers, advice centers or even neighborhood destinations and co-working spaces, while the ATM takes on core physical banking needs, such as cash delivery and deposit-taking, while also keeping the financial institution’s brand top of mind.

The incredible shrinking branch

The past year has shown financial institutions that customers can be well-served outside the traditional, large branch footprint. For example, bankers are asking themselves about delivery options beyond building a new branch. Could a digital-first strategy that combines a killer mobile app with a robust ATM network serve their customers effectively and allow them to compete in new ways?

For those institutions with branch rationalization strategies, option include membership in a surcharge-free network and/or branding non-bank ATMs in retail locations to provide surcharge-free access to customers where they already shop. We can already see that larger institutions are moving forward with lighter branch footprints and then backfilling with other service channels, including free-standing ATMs and branded off-premise devices.

As we emerge from the pandemic, we will see investments continue to grow in the digital services space—not just for efficiency’s sake, but also because banks and credit unions will have to think of better ways to retain existing customers as those customers are offered digital financial services from nascent market entrants.

In addition, as staffing levels change and are more directed to revenue-producing activities, institutions will be looking to repurpose staff away from expense centers, like ATMs. This sets up branch operations to become less involved in running ATMs and more focused on maximizing revenue-producing products and services.

We can already see these changes taking place, as the larger banks and fintechs set consumer expectations for the future of banking. We know, based on consumer preferences, that this expectation includes access to large fleets of widely distributed ATMs that are convenient, have advanced features and are fee-free.

More than a year into the pandemic, customers have adopted new behaviors and raised the bar for what self-service should look like going forward. The competition introduced by fintechs is accelerating these trends, as is the increase in mergers and acquisitions. The need for cost efficiencies is more critical than ever, and is motivating institutions to look for ways to implement changes without increasing capital costs.

The hub-and-spoke model, with services centralized in a physical branch, is giving way to a new model, where services are delivered through alternative channels, which means the ATM fleet is more important than perhaps it has ever been.

Michael Hafer is executive vice president of product and market solutions, North America, at Cardtronics.

Get more insights on the future of branches in the BAI Executive Report “What’s in store for bank branches?”