Innovation 2.0: ATMs in the 21st Century

Innovation is reshaping global financial services. From how they are consumed, to who offers them and how they’re structured, we live at a time when new ideas and new approaches to payments and digital banking arise almost weekly.

Yet, arguably the biggest innovation in the sector to date isn’t a Monzo account, a mobile contactless payment, or a QR payment code. It is the now 50-year old ATM. Stay with me.

Having fallen from the limelight in recent years, the now somewhat humbled ATM launched back in 1967. It transformed banking like nothing before it and nothing since. The ATM fundamentally changed our relationship with money, payments, and banks; its impact affected consumer attitudes and behaviour, and it changed our relationship with people and with machines.

Today, despite everything we hear and read about, the ATM is still considered by some to be the most remarkable statement of innovation in financial service ever.

Yet that always-on, quiet and reliable face of the high street with its modest display, PIN-pad, and cash dispenser has been dragging its heels behind other financial services for a long time now. Very little, if anything, has changed in what it offers consumers.

There are four principal reasons for this inertia:

1. Restrictions created by proprietary software;
2. Outdated infrastructure which creates legacy dragons;
3. Lack of interoperability across vendor components;
4. Deployers can’t easily extend ATM services themselves.

Meeting 21st-century expectations

ATMs have vast potential when it comes to the services they could offer and so this chronic lack of innovation has been hugely frustrating to watch. Consumers are becoming savvier about what they want. An ATM which offers cash and a balance check could not be further away from what these expectations are in 2019.

Despite this, a real opportunity is now emerging for FIs to re-invent the ATM.

The banking sector is under pressure to reduce costs. Over the last couple of years, the sheer scale of bank branch closures in the UK (for instance) has been described as ‘staggering’. The impact has been felt far and wide. Closures have significantly reduced access to financial services for businesses and communities throughout the country.

Enter the new world order of 21st-century ATMs. With the right technology behind them, ATMs offer an opportunity to plug this gap, maintaining and indeed even extending services to more people in more places at a far lower operating cost than a bank branch.

But – and the but is crucial here – they have to offer more than they do right now in terms of utility. To achieve that, the legacy technology underpinning the way ATMs operate will have to be replaced with modern architecture suited to the complexities of the 21st-century.

Self-service banking revolution

It is time for FIs to reverse the perception that ATMs are just here to dispense cash. Decisions need to be taken enabling ATM to transform into modern financial services terminals that match both the requirements and expectations of today’s financial eco-system.

The more-of-the-same “it will have to do” mindset can’t be allowed to continue. Old-hat vendors that offer upgrade after upgrade to legacy systems are quite literally banking on that attitude, locking deployers into a cyclical game of patch-up and catch-up. Adding new pipes on top of an already crumbling plumbing system isn’t a sustainable solution. A leak is a leak, it doesn’t matter where.

Modern technology aligned to modern demands built from the bottom up can fundamentally recalibrate ATMs raison d'être. Operated by the National Bank of Pakistan, the world’s highest ATM sits on the Pakistan Chinese border at 16,007 feet above sea level. I very much doubt there is a National Bank of Pakistan loan advisor nearby, but there could be.

FIs need to invest in modern technology which new services can be added to with ease, without risk, and without the overwhelming costs associated with legacy technology upgrades.