Why the ATM Industry should embrace Apple Pay

There is no doubt that the digital revolution has already hit the banking sector. According to an American Bankers Association survey released in August, 31% of those questioned stated that online banking was their preferred banking channel. It’s easy to understand why Internet banking would be the favored option in today’s modern, digital world: the ability to access your account and make transactions from your home and on-the-go. The obvious next step is mobile banking, and the ability to bank from the palm of your hand, via smartphone, which has already become central to people’s lives. Alongside this comes a new opportunity for payments and other financial functions to take advantage of integrating themselves within this ecosystem – and this is something the ATM industry should be aiming for.

Many organisations will see yesterday’s release of the iPhone 6 and Apple Watch – complete with NFC and digital wallet – as an attack on cash and ATMs. For the ATM industry it should come as a strong guide for the innovation that could occur within the industry.

So what guidance should the ATM industry take from the iPhone 6, and in particular Apple Pay?

Yesterday, Apple announced that the iPhone 6 (and we can safely presume all future iPhone iterations) will include near field communication (NFC) technology. This allows the device to communicate with other devices around it, be it other smartphones or different devices completely – such as POS systems. Apple’s primary feature built around this is a digital wallet and payments system, Apple Pay, which allows users to store their debit and credit cards on their iPhone and pay for items in stores using just their phone.

This technology builds upon the pre-existing technology used in contactless debit/credit cards, of which there are now over 250 million in circulation across the world. While the vast majority of these are in the Far East, China and Western Europe, it is expected that circulation and usage growth in the US will dramatically increase following the complete rollout of EMV (chip and pin).

While NFC has been included in Android devices for the past few years, it has yet to catch on (via mobile usage) and there had been speculation that it would take Apple’s adoption for it to become mainstream. Many see NFC as potentially overcomplicating a simple process and due to this its acceptance may start slowly and as a novelty initially. For the ATM industry it shows that contactless will be a key part of the future of transactional banking and will be a feature that ATM users could gain great value from. If the direction that Apple is taking is to try and transform the smartphone into also being users’ wallets, then users will expect to be able to interact with ATMs and withdraw cash using these.

Challenges are good for innovation

There are two key usages for plastic cards;

1)       As a means of payment

2)       As a means of withdrawing cash

The first objective of any mobile wallet taking over a debit/credit card as a means of payment competes with cash as a payment method – there’s no getting around it. However, the second objective helps encourage a greater access to cash by giving the user more options to be able to withdraw at the ATM. For example, if an ATM has contactless withdrawals enabled (as a large number of La Caixa ATMs across Spain have since 2012) and a customer forgets their debit card, then by having an NFC-enabled smartphone with debit card information installed, it means cash at the ATM is still accessible.

The ATM industry should embrace this opportunity rather than seeing it only as a threat. The potential to be able to interact with the device that potential consumers see as key to their lifestyle may increase their perceived value of ATMs in their banking routine.  Apple Pay may increase awareness of other payment methods competing with cash, but it won’t change the underlying value of what cash provides, choice.

The ATM industry now needs to innovate and embrace the opportunity (and challenge) that this technology and usage brings, with new features and the potential for a stronger role in the future of banking.