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The Intersection Between ATMs and Mobile Banking - What's Next?

Recently reaching its 50th birthday, ATM technology has revolutionized the banking industry in just over half a century. Additionally, since the June 1967 debut of the first ATM at Barclays Bank in London, ATM technology has changed and greatly improved. Today, ATM technology continues to grow in sophistication, particularly with regard to the integration of ATMs with customers’ mobile phones and mobile banking technology. In this article, we will take a quick look at the history of ATMs and examine how ATM technology is adapting to the widespread usage of smartphones.

The History of ATMs

The first ATMs worked solely to allow a customer to withdraw cash from their account. The customer, armed with a one-use punch-coded voucher and a paired secret pin code could visit an ATM to withdraw up to £10 in cash (worth about €170 or USD $200 today). The ATM allowed customers access to cash without the constraints of limited bank hours, however this benefit was greatly limited as there were only a few ATM locations. Additionally, ATM use was only accessible to a select customer base that held great credit history with their bank.

Standard ATM functions such as the ability to make cash deposits, cash checks, make transfers, check balances, and the ability to use ATMs from banks different to your account-holding bank only came into widespread use over the several decades after the original 1967 ATM. The magnetic-strip debit card, for example, was not invented until the late 1970s. Widespread international adoption of the ATM was later accelerated by the development of high-speed data transfer technology and fiber-optic cables which enabled faster communication between a global network ATMs and the customers’ respective banks.

ATMs and Mobile Phones

ATM providers, banks, and credit unions on the cutting edge of innovation are currently reimagining the ATM to work seamlessly with mobile phones. Current features include the “cardless ATM” where users simply present their mobile phone as a form of authentication to a Near Field Communication (NFC) reader on the ATM. Users can then use the ATM just as if they inserted a physical bank card. Additionally, some banks are experimenting with “pre-stage” cash withdrawals, where users make the cash withdrawal request on the bank’s mobile app, and, upon presenting their phone to the ATM, the customer can then immediately withdraw their cash. Other features include using Bluetooth technology to alert users when an ATM is near.

However, many features of ATMs do not need to be complemented or integrated with customers’ mobile phones at all. Instead, customers’ mobile phones can replace the need for an ATM entirely. ATM features such as checking account balances, making transfers, opening and closing accounts, wiring funds, and even cashing checks (users take a photo of the front and back of the check and upload these images to the bank’s mobile app) can now be done entirely on a customer’s mobile device. Much like the 1967 Londoner became free of the constraints of branch hours for accessing cash, mobile phone users are now free from the constraints of both branch hours and ATM locations for almost all of their banking needs.

The Future of ATMs

It seems that, increasingly, the ATM's only unique remaining function is the ability to dispense cash withdrawals and collect cash deposits. A nod to this seems to have been made by ATM manufacturing firm Diebold Nixdorf, as they have developed a “headless” ATM which is entirely controlled by the user’s mobile phone. This ATM's only function is to dispense cash. What then, is the future for ATMs? Perhaps this future is limited to the ATM's original function of dispensing cash.

Much like mobile phones are putting pressure on the role of ATMs, they are also putting pressure on the role of physical bank branches. Increases in wireless bandwidth capabilities and decreases in wireless data costs have led to an increase in mobile video-banking. Mobile video-banking allows customers to connect face-to-face with a representative of a bank or credit union directly within the financial institution’s mobile app. You can read more on mobile video-banking’s advantages here or check out our work developing a mobile video-banking solution for Belfius Bank of Belgium.

Are the features developed for ATMs over the past five decades only to be replaced entirely by the mobile phone? This may be the case. With an increasing trend away from cash-based payments to mobile-based payments, market demand for ATMs entirely may gradually decrease. Additionally, mobile video-banking capabilities may further cause mobile banking to result in a decrease in market demand for physical branches.