Since ATMs first emerged almost 50 years ago, they’ve evolved almost beyond recognition. Originally introduced to reduce congestion in branches and avoid longer opening hours, they’ve stepped up impressively in sophistication and become central for access to cash and banking experiences.

In some markets they’re now a complementary channel to branch, mobile and internet banking – offering capabilities in different territories like topping-up prepaid mobile phones, making charitable donations, buying stamps, and handling credit card applications, express loans and currency exchange.

Innovation is continuing, with next-generation ATM networks evolving into ever richer and more personalised communication channels. Recent research underlines their enduring appeal, finding that 37% of customers in the US and 34% in the UK feel there are not enough ATMs, and too few ATMs that do more than just dispense cash.

However, ATM networks also face challenges in many markets, including squeezed profitability, falling demand, changing customer behaviours and expectations, and the progression in some countries towards a “cashless society”.

What ATM network strategy?

So, what factors should banks consider when mapping out the next steps for their ATM networks? While there’s no one-size-fits-all strategy, there are two dimensions that banks need to contemplate in every market.

1. Ownership

Should you own your network or outsource it? And second, location: where should you position your ATMs? Each dimension has three sub-themes that should be considered in detail.

On ownership, the overarching decision is whether to retain the ATMs, or outsource them because they’re no longer economically viable. There are three sub-themes to consider.

  • Brand value and presence. How do your branding and culture align with your customers’ ATM experience, and what kind of “halo effect” do you gain from external ATMs? If your brand image and related customer service and experience are priorities, you might want to own your estate so you have complete control – despite the lower costs that outsourcing might offer.
  • Cash management and ATM fees. What’s your strategy around cash management, value generated from ATM charges, and cost of cash operations? In countries that are going increasingly cashless, like Sweden, there’s an expectation to run down the ATM estate in the medium term. In emerging economies, by contrast, cash – and ATMs – remain business-critical. The level and importance of ATM fees also vary widely between markets, as do the fixed and variable costs of operating the network. While outsourcing may reduce these costs, this again needs to be weighed against the benefits of owning the estate and better lease contracts.
  • Supplier landscape, partnerships and collaboration. If you opt for outsourcing, the size and sophistication of the supplier landscape will determine which model you select. Options include bank-owned and supplier-operated; third party-owned and supplier-operated; and supplier-owned and supplier-operated. If there’s a competitive landscape of suppliers, banks will be able to negotiate good contract terms. But be aware that as the providers grow and service more banks, this can create dependency for banks that might lead to price rises.

2. Location

On the second dimension, location, there are four options: branch ATM – inside; branch ATM – outside; external ATM – away from branch; and external ATM – within partner premises, such as a supermarket. Again, there are three sub-themes.

  • Purpose of the branch offering. What customer behaviours you are looking to encourage? For example, if a bank is looking to reduce footfall in-branch and increase digital self-service, more external ATMs would make sense. But if it’s looking to optimise cash handling within branch, it might be prudent to locate ATMs and CDMs in the outside lobby of branches.
  • Security. Security and fraud considerations differ by geography. In countries with high safety and security concerns, you might want the ATMs mainly inside in secure locations. In others, ATMs can be placed in external or remote locations with less risk.
  • Brand location strategy. You need to have the optimal number of ATMs in the best locations for both competitive advantage and customer experience. This means not only evaluating profitability and operation of the estate, but also possible future locations in the light of constant evolution in the market, customer behaviour and ATM capabilities.

Overall, the message is clear. The starting-point towards making your ATM networks fit for the future is to understand their role and relevance for your bank and customers in each market. By focusing on the dimensions and sub-themes I’ve highlighted, you can be sure to make the right decisions in every case.

My thanks to Adrija Biswas for sharing her expertise on this topic. Please contact me if you have any questions.

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