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08/11/2010 / craigmartinallen

Is the ATM still the banking industry’s single greatest innovation?


Posted by: Daniel Scott Posted on: August 3 2010

At the end of last year Paul Volcker, the former chairman of the Federal Reserve, caused a bit of a stir when he said at The Wall Street Journal’s Future of Finance conference that we have to go back more than 30 years to find the last truly great financial innovation that actually improved society: ie the invention of the ATM. “It really helps people, it’s useful,” he said.

Many might argue that the development of online banking, and more recently mobile banking and payments, are equally worth of recognition as significant innovations. And they probably have a case. But there’s no doubt the introduction of the ATM was the first innovation to have a big impact in reducing queues and overhead costs for bank branches.

But more importantly, the ATM also marked the first time that customers were put in control of their interaction with their bank, and the first time they had direct access to the bank’s core systems. The end result is that the ATM revolutionised the way people everywhere manage their personal cash flow.

This impact is something that the inventor of the ATM, John Shepherd-Barron, who sadly died in May, only realised after the fact. When he and his wife saw a farmer arrive at an ATM in northern Thailand by bullock cart and remove some cash, he realised that his 1967 innovation had changed the world.

And despite the rise in online e-commerce, electronic point of sale systems based on cards and increasingly contactless mechanisms, cash is still king in even the most developed countries.
According to the European Central Bank, the number of banknotes from the Eurozone is rising by approximately 9% per year. There are also over 40% more US dollar bills available compared to the beginning of the millennium.

Technology analyst firm Ovum says that the vision of the cashless society won’t become reality anytime soon. Given the fact that most cash is being distributed by ATMs, this channel is expected to continue to grow in the foreseeable future.

Spanish bank BBVA is one that has invested in its vision for the future of its ATM channel. With help from design consultancy IDEO and hardware manufacturers NCR and Fujitsu, it has made some striking changes to is reimagined ATM of the future.

They’ve certainly taken onboard the design and interface trends of the day – such as the large colour touch screen display and navigation style. I can definitely see these being popular among customers using ATMs within a branch lobby or self service area, which is where BBVA is deploying them. The angled screen, privacy shields and thought given to queue placement are all marked improvements to customer friendliness.

But in-branch ATMs are only part of the disparate estate that banks must manage themselves or outsource – dealing with their own-branded machines in exterior locations, and co-branded machines with partners such as petrol stations or retailers.

So the ongoing evolution of the ATM is going to see a greater variation in shape, size and functionality. ATMs deployed in external walls in entertainment precincts, for example, need to be simple and robust, with a focus on security and anti-tampering devices.

Small kiosk style bank branches in a shopping centre could contain some ATMs focused on express cash withdrawal, while others performed a richer range of account servicing, bill payments and partner-linked services such as mobile top-ups or store loyalty card management.

In May we posted a top 10 list of recent innovative uses for ATMs – everything from paying taxes to dispensing public transport season tickets. While by no means a comprehensive list, it does go to show that the ATM is at the heart of self service innovation.

But while the future looks bright for ATMs, there are challenges that banks, manufacturers and operator networks face in managing them effectively. Foremost of these is security.

A powerful example of potential vulnerabilities was displayed recently at the Black Hat hacker conference in Las Vegas by New Zealander Barnaby Jack, who forced Triton and Tranax ATMs to “jackpot”, spitting out cash.


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