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There is a lot of time devoted to the discussion on how legacy banks will be able to keep up with their newer, more agile, fintech competitors. This conversation tends to centre around the idea that legacy banks need to think more “digitally”, providing their existing products and services to customers with the same ease that fintechs offer.

However, in order to truly contend with newer contenders, legacy banks must find a way to compete that is more than just playing catch-up. They must become innovators themselves, pioneering new ways of operating. And yet, there is one area in which fintechs are not competing, and which legacy banks are, generally, ignoring: ATMs.

You don’t teach a new dog old tricks

ATMs are usually powered by legacy infrastructure, running on platforms which were built decades ago. This technology often cannot be maintained and managed remotely, a big concern for the current times. And, crucially, every year there are fewer people with the skills and experience to perform this vital work.

In the US alone, 10,000 baby boomers reach retirement age every single day, and it is estimated that this could create 37,500 mainframe positions just this year. No one is learning the skills needed to fill these roles, and so every year this resource becomes rarer – and more expensive. Ultimately, we could reach a time when there are simply not enough people to maintain our current networks of ATMs. So, what will banks do?

More than cash

ATMs are capable of completing a number of tasks, depending on their operator, but their primary role is to dispense cash. Though we are using less of this as a society, the reliance upon cash varies between countries and socio-economic backgrounds. In Britain, cash transactions fell by 51 per cent in the decade between 2008 and 2018, and in Sweden – the world leader in cashless payments – just one per cent of the country’s GDP circulates in cash.

But in Japan, 79 per cent of people use cash every day, and in the US, 70 per cent use it each week. Cash is essential to more than a quarter of American households, who are unbanked or underbanked, and to the 22 per cent who do not own a credit card.

Part of what is driving the trend towards a cashless society in Sweden is the difficulty in making a deposit, as a result of the closure of many banks. More than 280,000 people must now travel more than 20km to visit a cash deposit machine. But this is something that ATMs can assist with, and if they are moved to a cloud-based infrastructure, the ATMs can be managed remotely.

This reduces costs for banks, who can monitor exactly when they will need to visit the ATM to remove and restock cash. Even better if the ATMs can cash recycle, redispensing deposited cash as withdrawals. In fact a recent whitepaper from Perativ demonstrated that using their software bank require 42 per cent less cash in the float and save between 20 and 30 per cent in visits to the ATM and associated costs. Cash recycling machines have gotten cheaper too, costing between $15,000 and $40,000 today, compared to $45,000 to 55,000 five years previously. Banks need to consider what an ATM could do, if it was managed by a better, cloud-based operating system.

Technology as a global currency

Around the world, ATMs offer different services. They can be used to dispense coins as well as notes, pay bills and send wire transfers, and they can be accessed using mobile apps an biometrics. While in Western countries the ATM market is approaching maturity, the number of ATMs in developing countries is increasing. Typically, these markets have a low density of ATMs compared to the population, but are enjoying rapid economic growth thanks in part to state-driven programs to increase financial inclusion.

We recently spoke to Jim Tomaney, COO at Renovite Technologies, a California-based provider of innovative payments solutions. Renovite has been working on a project in South Africa and in the last few weeks has been able to complete an end to end test over a video call, with teams based in Dumferline, Johannesburg and Lesoto.

This simply isn’t possible with older ATMs which run on closed systems. Developed nations need to take a look at the markets in other countries so as not to lose out on competition here, either.

With new tech comes new talent

When banks invest in new technology, they need new talent to maintain and manage the systems. Jim told us that the most valuable experience he looks for is an understanding of the lifecycle of cloud-based products. At the moment, finding people who understand this end to end is a challenge. However, we know that there is an increasing number of cloud engineers, and each day they gain a better understanding of the industry and boost their skills and experience. Supply of this talent will get even better because universities and businesses are investing in it, future-proofing new technologies.

Investing in technology must be balanced with availability of talent. There is nothing wrong with our existing ATM networks, per se, but with each passing moment they become more difficult and more expensive to maintain and update and, around the world, ATMs are getting better and more innovative. If banks truly want to compete with the new finance contenders, they must think not just about the services they offer, but how they offer them. And who will help them along the way.

 

MRL have been sourcing the best talent in the niche financial and payments markets for more than 20 years. Get in touch with us to find out how we can help you. 

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