Why is modernization at the ATM important in retail banking?

It is sometimes perceived that investing in modernization and innovation is a risk. In industries like retail banking, where financial technology is at the heart of change, not modernizing is potentially one of the biggest risks a financial institution could take, such is the anticipated pace of change expected in the next few years.

The theme of change and modernization is currently growing in areas like the ATM channel also. The ATM is such an established, familiar self-service device that's been with us for 50 years that some financial institutions might not even consider how much potential it has for innovation. So why is modernization at the ATM important?  Here are a few reasons why changes to the ATM is something that banks might look at alongside mobile, online and wider digital banking changes in future years.

Customer expectations
We live in an increasingly digital world, where consumers expect innovative technology to be at the heart of almost everything they do. Constant reinvention and change are crucial in sectors like consumer electronics. This has created a culture in which many customers, even if they are happy with the product or service they already receive, are constantly demanding to see what's coming next.

It's inevitable that this anticipation and expectation of the next exciting technology by consumers will feed through into financial services. When it comes to the ATM it is sometimes wrongly perceived as familiar and inflexible. We see some ATMs installed that are 15-20 years old such is their reliability.  However, subtle changes in design, core technology and new concepts into ATM architectures and operating systems are occurring. Financial institutions willing to invest in a new approach at the ATM could potentially win the attention and possibly the loyalty of modern consumers. This is particularly important, as the ATM is in many cases the most common self-service channel consumers have with their bank. Projecting a positive brand image and good consumer experience is important.

Wanting to be better
To a certain extent, the ATM has been a victim of its own success, as it's approaches its 50th year since the first installation in June 1967.   Today's machines are so consistent, durable and reliable that sometimes banks are happy to stick with what they've got. 'If it ain't broke, don't fix it', so the saying goes, but this approach could be a risk in future as other banks may be embracing the wider changes in financial technology as they look to innovate and grow. Think about the rise of social media also, where a poor ATM experience often sees consumers taking to social media to complain to banks.

In many industries, businesses want to continue evolving and delivering the best possible service to their customers must be willing to change, even if the established way of doing things has served them well in the past. We may be at a pivotal point in financial services in coming years as this industry looks to align to what changes we've seen in other industries such as retail, travel and hospitality for example.

Staying ahead of others
The growth of fintechs and challenger banks means established banks are facing more competition than ever. It is likely that investing in modernization is one of the most effective ways for a bank to show that it is driving and embracing change in its industry, rather than resisting or racing to catch up with it. Offering an ATM experience that is similar to a tablet or smartphone is a great example of how financial institutions can look to deliver omnichannel banking to consumers be it online, mobile or at the ATM.

The future?
With so much change forecast in the retail banking sector globally over the next five years, it will be interesting to see how retail banks adapt to deliver the experience that consumers demand.

Three Million ATMs are installed currently today. More than four million ATMs are expected to be installed globally by the year 2021. Cash Withdrawals each year still total $14 Trillion. To put that in context it's the equivalent of around $440,000 every second. (Source: Retail Banking Research, Global ATM Market and Forecasts to 2021).  Whilst ePayments and digital banking will clearly continue to grow, it's going to be fascinating to chart how the ATM as a self-service channel and cash as a payment method evolve also over the next five to ten years.