The vision of a cashless society will not be fulfilled in the foreseeable future. Cash is expected to remain the primary method of payment by volume, and so competitive banks need to maintain or expand their ATM channels. However, this needs to be carried out with a strong focus on efficiency, as economic uncertainty is still a strong inhibitor of further growth.
While there are continuing predictions about the declining use of cash, and the forms of payment that could take over, the majority of transactions are still being settled with cash. The amount of cash in circulation is constantly on the rise. According to the European Central Bank, the number of banknotes originating in the eurozone is rising by approximately 9% per year. There are also over 40% more US dollar bills available than there were at the beginning of the millennium. Given the fact that most cash is distributed by ATMs, this channel is expected to grow in the foreseeable future.
At the same time, however, the cost of managing the ATM channel is growing as well. This situation is driving further technology investments, with the major focus being on lowering the cost base. The key issues facing the ATM channel, and how they can be addressed through technological advancements, were presented during the ATM Industry Association's (ATMIA's) Europe conference in London in June 2010.
A typical mid-size or larger bricks-and-mortar bank has at least two business models for the ATM channel. One is in-branch and bank-branded, self-expanded, off-premise ATMs based on legacy infrastructure and processes and an aging banking network, and with many services associated with branch management. In this model, multi-vendor monitoring is required (including in-branch management), with multiple support structures for software and services. The other model is typically based on a newer off-premise ATM fleet that has recently been expanded, most probably through a partner such as a retailer, a food chain, a gas station chain or a post office. The newer network is normally managed as a separate channel, with more streamlined processes and more optimized vendor management.
While the existing overall models are functioning reasonably well, there is still a huge opportunity to increase efficiency through, for example, the integration of the support model (sub-contract field engineers, cash in transit, telecommunications), more accurate resource management of network peak times, and the optimization of hardware replacement strategy (basically, creating a center of excellence for the entire ATM channel management under one umbrella). Ovum expects this to accelerate. Additionally, given the fact that vendors able to provide integrated services are emerging, such a reengineering of processes and the underlying infrastructure is becoming much more feasible to manage. Diebold, First Data and Sociedade Interbancaria de Servicos all presented ATM management services during the ATMIA event.
Cash is king, but this does not change the fact that the costs associated with cash management are relatively high when compared to more efficient electronic payment methods. The main reasons for the expense of cash are related to staff, transport, insurance, security and clearing. However, it is also important to mention unrealized revenues when cash in circulation is poorly optimized. The key issue is that cash management processes are labor-intensive. While the introduction of ATMs has significantly lowered the cost of dispensing cash, the cost of manual dispensing at the bank counter remains relatively high. The situation with deposit-taking is quite similar, as the level of automation is rather low, despite recent technological innovations.
The focus is now on minimizing cash handling costs through the elimination of manual processes and a reduction in the volume of cash banks have in circulation. Technology can be leveraged for intelligent cash recycling and also for the optimization, management and monitoring of cash logistics among bank branches, cash in transit companies and central banks. Wincor Nixdorf and Nautilus Hyosung highlighted their cash recycling technologies during the ATMIA event, with Wincor also focusing on the management of the entire cash cycle.