‘ATMs are poised to grow more intelligent in understanding customer needs’

and November 15, 2017

The all-pervasive ATM (automated teller machine) has turned fifty this year.

John Shepherd-Barron came up with the concept of automatic cash dispenser after becoming frustrated at not being able to access his own money outside banking hours. He went on to install the world’s first ATM at Barclays Bank in 1967.

Initially, ATMs took in coded cheques, and exchanged them for cash. The idea of a PIN stored on the card was developed by the British engineer John Rose in 1965. The modern, networked ATM was invented in Dallas, Texas, by Don Wetzel in 1968.

HSBC introduced the first ATM in India in 1987.

In the history of banking, the ATM has been one of the most ‘impactful’ innovations touching the life of the common man. Although it looks normal today, this device changed the way the customer uses cash prior to its availability, and also paved the way for the on-demand economy. In developing markets, these machines serve populations previously excluded from the financial system, often in remote locations.


innovation and impact

The early ATMs addressed the specific customer problems of restrictive banking hours, and ability to get cash anywhere. Further evolution brought in major change in retail banking service—transforming many functions of teller/customer, to machine/customer interface. This is considered a forerunner to today’s online/mobile-based services.

ATMs showed for the first time that a human-centred service can be provided by a machine with enhanced trust, convenience, and faster service. It strengthened the customer’s bond with banks. As a result, banks avoided congestion in their branches and also reduced the number of tellers. Banks installed offsite ATMs and avoided the cost of opening new branches. This in turn, helped customers avoid travelling long to reach their branches or switch banks.

ATMs achieved the human-centered service through a combination of many technical innovations—interactive I/O, image processing to recognize cheques/cash, authorization using PIN, cash dispenser, magnetic cards, steel safe to store cash, and printing of receipts/coupons.

There are over three million ATMs today. World Bank uses ATM density as one of the economic indicators of a country. The lowest density is in Afghanistan—1 ATM/100,000 people, the highest in South Korea—278 ATMs/100,000 people, and in India it is 20 ATMs/100,000 people.

ATMreinventing ATMs

Customers avail bank services through many channels—namely branch, ATM or digital (online or mobile) channels. Worldwide reports indicate that ATM and online remain the largest channels and are at the same levels, branch and mobile follow subsequent ranks.

ATMs, apart from being cash dispensers, are also advanced terminals sitting at the network edge with access to most of the bank resources.  To tap this potential, ATMs are reinventing themselves in the areas of seamless user experiences and extended banking services.

Many innovative user experiences are being piloted by banks, some of them are in the areas of ATM card-less transactions involving convergence of the mobile channel. This involves the use of smartphones to access cash at ATMs with lesser interface. It is achieved through omni channel platform, converging the user experience across mobile/ATM. On the security front, ATMs are poised to provide seamless/improved user security by deploying card-less/biometric authentication methods.

There is also an opportunity in developing markets to enable payment services (utility payments and peer-to-peer transfers) through ATM terminals. This is well suited for semi urban/rural areas where online payments have not picked up due to literacy/ connectivity challenges.

Bank branch automation is an emerging area and has the potential for big disruption. New-generation ATM terminals will be able to serve customers to carry out more complex services like account opening and loans. These ATMs will include live video links to product specialists who can support customers across these intelligent terminals.

To conclude, ATMs have transformed banks in reaching out to their customers and are poised to grow more intelligent in understanding their needs/actions/thoughts.