The ATM is Dead. Long Live the ATM!

Usage is on the decline – so why are banks looking to the machines to save them?

Bradesco Bank ATM, Rio de Janeiro. (© Jon Hicks/Corbis)
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In the U.S., customer ATM adoption went slowly: “Money is so primal in our psychology, you can’t make changes to our payments without it causing an immense amount of psychological angst,” says David Stearns, senior lecturer at University of Washington’s Information School on monetary informatics and payment systems. Some banks tried to smooth over that angst by personifying their machines, often in slightly weird ways – a Florida bank introduced its customers to Miss X, the truly creepy clown make-upped “Sleepless Teller”, while First National promoted “Buttons, the Personal Touch Teller”, an anthropomorphized cartoon cash machine. Others, according to a New York Times article from 1977, gave away coupons for ice cream and hamburgers with ATM cards, hired Star Trek actor Leonard Nimoy to lend a space-age cred to the new machines, or gave their employees 25 to 75 cents for each customer they were able to convince to use the machines as an incentive.

It didn’t always work; a flock of articles about the burgeoning bank technology reflects the difficulty banks had in getting customers on board. One Detroit artist told The New York Times in 1977 that she preferred face-to-face banking and that a number of her friends had machines eat their cards: “I’m suspicious,” she said. “At least the girl behind the window doesn’t die in the middle of a transaction.” A dubious banking exec in New York City told the paper that it was great that customer could bank at 3 a.m., but “Where are you going to spend it at 3 a.m.?” (in New York in the 1970s, one suspects lots of places, actually).

But enough people used them that ATMs became more common and their widespread adoption, however frustrated by card-eating and breakdowns, drove innovation. IBM pioneered the online interconnective software that ATMs came to run on, which allowed the terminals to be connected to the banks larger computerized network through dedicated phone lines. Banking de-regulation also pushed ATMs forward, especially after a 1984 US Supreme Court decision ruled that ATMs did not count as branches of banks and therefore were not subject to laws regarding geographic concentration of banks. By the 1980s, ATMs were big business and most banks had adopted them, forcing tech companies to make the devices safer, stronger and capable of doing more; it also forced the machines to standardize, as banking networks became more open. In the 1990s, another ATM market had opened up: Independent automated teller deployers (IADs, to use the lingo) were installing ATMs unaffiliated with specific banks in ever more convenient locations, from corner shops to cruise ships.

Now, ATMs are pretty much everywhere (Wells Fargo Bank even operates two at McMurdo Station in Antarctica). And though they’re capable of doing a lot of useful things such as deposits, payment transfers and balance checking, they’re still basically doing the same thing that they did when they first appeared nearly 50 years ago. Which might be a problem.

There are now more than 420,000 ATMs in America, totaling upwards of 3.2 billion transactions a year, according to the US Government Accountability Office; the vast majority of those transactions, to the tune of nearly 2 billion a year, are cash withdrawals. But if the ATM is primarily a cash-dispensing machine, then its days may be numbered: Cash, if some financial commentators are to be believed, is on its way out.

Basically, people are using cash less and less. Boston-based research firm Aite Group said in 2011 that US use of cash was expected to decline by $200 billion by 2015. The Federal Reserve’s 2013 study of payment methods in America found that on the whole, payments are increasingly card-based, especially debit card. The study also found that the average payment made using a card, whether debit, credit or prepaid, is decreasing, meaning that people are using cards for the kinds of small purchases they once would have used cash to make. MasterCard estimates that 80 percent of consumer spending in the US is cashless, a figure that came in a press release heralding their claim that a number of nations are moving to a cashless society (and should be taken with a grain of salt, given its source).

Then there’s the much-talked-about, almost-cresting mobile payments wave, which allows consumers to use their smartphones to pay for purchases. Venmo, a mobile wallet-cum-social network app that serves up peer-to-peer payments with emoji and millennial élan, is growing dot.com fast: According to Bloomberg Businessweek, it processed $700 million payments in the third quarter of 2014, up $141 million from last year. Apple’s new iPhone 6 comes with Apple Pay, which allows users to use tap existing contactless payment terminals to tap and pay (although, for the moment at least, it seems to be confusing cashiers the world over). The funds come either from the credit card the user’s iTunes account is connected to or another that the user wishes, but, crucially, credit card information is not stored on the phone.

And tech startup Square makes it possible for small merchants to take credits cards using their smartphones without having to pay huge fees to credit card agencies. Places where cash traditionally ruled, for example, the farmers’ market, now take card. Even money exchanges you’d rather not have evidence of can be done electronically – as the big fears around Bitcoin, person-to-person currency that operates without oversight from a central banking authority, have shown.

However, the “cashless society” is an idea that people have been batting around since before the ATM even and, as yet, it hasn’t happened; a number of industry analysts and academics don’t think it will (no matter how much safer it may make America, according to a March 2014 article in The Atlantic correlating decreased cash use with decreased crime). Stearns, who studies the sociological implications of payment in society, noted that cash-based interactions still have power in America, such as dropping a coin in homeless person’s cup, adding your tithe to the collection plate at church, or tipping the valet who parks your car.

Then there’s the fact that people really do still use cash. During the recession, the number of cash transactions actually increased, according to the Federal Reserve – and haven’t yet subsided, even after the recession’s official end. In a report published in April 2014, the Boston, San Francisco and Richmond Federal Reserve Banks found that while the value of cash transactions may be low, at around only $21 on average, the frequency is not – at 40 percent, cash takes the largest single share of financial transaction activity. And that other report claiming that the cash use in the US will decrease by $200 billion by 2015? It also noted that at that rate of decline, roughly 4 percent a year, the use of cash in the US wouldn’t fall below $1 billion before the year 2205. As in about 200 years from now.

But even if America does go cashless at some distant date, that needn’t sound the death knell for ATMs – as long as ATMs provide something we need. And that’s a bit more complicated.

Customers using ATM's at Hong Kong Bank. (© Jacques Langevin/Sygma/Corbis)
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