So King Cash has now been deposed – Where now for ATMS?

So King Cash has now been deposed – Where now for ATMS?

With an amazing synchronicity following  my recent Webinar, where a discussion on ATM migration had also consider if cash was now not the payment method of choice – a press release ‘Is cash dying in Britain?’ was issued.

This press release from Skrill states:

‘One in three Brits now carry less than a fiver in cash, a study has revealed. More than one in five (21%) Brits are convinced physical money will disappear over the next 20 years, according to research released today as part of Skrill’s Future of Money campaign.’

‘Researchers found that cash is being replaced by more contemporary payment methods, such as credit or debit cards, as well as digital wallets and paying with a mobile phone. Instead of paying for purchases using traditional notes and coins, we are now more likely to hand over the plastic or make payments over the internet, with one in 20 claiming they never carry cash on them and 13% saying they would be happy to give up cash today.’

Whilst this survey is UK centric and use of cash is obviously influenced by cultural and geographic factors, there is no doubt that the rapid take on of mobile payments will accelerate the reduction of the transactions that are executed using cash.  I was told some years ago that ‘soon the only users of cash will be criminals and taxi drivers’ however, with the advent of Square and Mpowa putting the capability to cheaply allow card payments to be accepted through a smartphone, even cash for taxi drivers will not be necessary (but they will still not go south of the river after midnight!).

For us who have been in the card payment business and saw the birth of the debit card in the UK through  failed attempts like UKEFTPOS, then success of SWITCH and its final integration into the MasterCard Maestro Scheme, and witnesses the development of international schemes offering debit card brands, it has always seemed inevitable that cash would succumb, but it seems the drivers are now accelerating the trend and this survey shows that, certainly in the UK, the cash is becoming the least favoured method of payment.

For me this also highlights yet another reason that the Banks need to consider the management of their ATM Estates and debit card systems.  It has become less and less cost effective for Banks to run their own ATM estates and their own debit card systems.  In the UK, with the interchange rates set by the LINK ATM sharing scheme where members agree the rate based on the cost of running the ATM estate, the business case for ATM estate growth is more one of reducing marginal losses than of actually making any kind of profit.  For Banks to run Debit card systems and ATM Estates there are significant overheads in maintenance of the underlying technology and staff time in:

  • managing the complex legacy technology operation
  • ensuring compliance with schemes and regulators
  • ensuring all the transaction and card security controls are maintained
  • dealing with physical security of ATMs
  • handling the chargebacks and disputes
  • clearing and reconciling card related transactions.

So because there is now no longer any marketing differential in provision of ATM services, and now with cash no longer being a commodity in demand, looking to control this cost by getting the service outsourced to a provider would seem to be a pressing need for an industry that is focussed on providing banking and financial services to regain the trust of their customers.

For Service providers these conditions should provide the ‘perfect storm’ to allow them to approach the Banks to offer them the service.  The Service providers, by being multi-client, multi geographies, already committed to the technology and operational investment have the economies of scale to maintain a profitable service that individual Banks do not have. However, they do need to ensure they can present a holistic solution, through a clearly defined product, to ensure they can overcome the ‘risk of change’ concerns of the client Banks.  This means that all the aspects of a Debit card and ATM service need to defined and provided as a standard product, there cannot be any appearance that there is any aspect of the service that needs to be developed as part of a programme, the only aspect of any programme must be the actual migration steps.  The service providers need to ensure they have a ‘cradle to grave product’ with ‘menu’ options that covers:

  • Card issuing, ordering and fulfilling
  • Card authentication and payment authorisation
  • Defined online interface for funds authorisation to Bank customer account systems
  • Clearing services for all international and domestic card schemes
  • Secure and compliant data processing sites
  • ATM acquiring services
  • ATM software management and maintenance
  • POS acquiring, and merchant services
  • POS device management
  • ATM Business operations services, for ATM maintenance, ATM cash services, help desk, physical security installation and removal service, and service level monitoring
  • Compliance Services, that can handle both domestic and international compliance requirements
  • Transactions and card security services
  • Chargeback and card disputes operations with an information transfer to the client Banks for services for both domestic and international card schemes
  • Detailed defined business and management information transfers and reporting.

So I believe the decline of cash as a payment method, will not only add to the needs to ensure the robustness of retail payment services  but adds to the growing reasons for Banks and financial institutions to outsource debit cards and ATM estates and provides the opportunity to service providers to grow a business providing a cost controlled service to the clients by ensuring they demonstrate a comprehensive and robust service product.

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