Demand for ATMs Evolving and Growing

However you want to cut it, NCR Atleos (Atleos) is big in all thing’s ATMs. Data as of 23 June 2023, used in its September 2023 investor day, showed that it had over 800,000 installed ATMs.

It has over 80,000 ATM locations that it itself owns and operates. It supports ATMs in over 140 countries and employs over 20,000 people around the world. It says it is number one in the world for retail surcharge-free networks, for providing multi-vendor ATM software applications and middleware and across over 30 countries for installed ATMs.

Atleos earns 22% of revenue from hardware, 9% from software, 40% from services and 29% from network transactions. It operates, therefore, across the whole spectrum of ATM provision and management. While 45% of its revenue is earned in the US, 30% comes from the Europe, Middle East and Africa region, 13% from Asia Pacific and 12% from the Americas other than the US. Atleos has, therefore, a good global perspective.

In that context Stuart Mackinnon, its Chief Operating Officer, spoke to Cash, Payment & CBDC News™ about Atleos’s work and plans.

Changing ATM landscape

Every country is different, some are reducing branch services, some are changing what they do. In both cases, the result is an increase in the density of self-service devices. More capable devices allow banks to solve the branch problem – either to free up branch staff to serve customers or to allow banks to put this equipment into retail shops, with their branding on it, to allow customers to access cash services away from a branch.

It is worth noting that the ‘death of cash’ is overrated in Atleos’s experience. On its ATM network cash transactions are up 12%. While the number of payment transactions may be rising, cash transactions are relatively stable.

ATMs in EMEs

In Emerging Market Economies (EME), such as Egypt and India, the number of people with bank accounts is growing fast. At the moment, cash is still the primary transaction method and so the need for ATMs is high. The ATM services required are not yet complex.

However, the infrastructure required to sustain a modern ATM network can be missing and this can be a constraint on economic growth. Atleos, with the experience of running its own 80,000 network, has a programme to share its operational experience with them.

Interchange fees and surcharges

Atleos works closely with state-owned banks and central banks on interchange and surcharge policies, since these are key to creating a profit-motive for providers balanced with a cost structure that enables and promotes the economy.

Often the authorities are not focused on maintaining a robust ATM system but on costs. The result is an uneconomic network leading to ATM closures. One response is a utility model such is being pursued in the Netherlands and Belgium. Another is the Allpoint system provided by Atleos to institutions so that they can offer their customers ATM services in areas where they have closed branches or there are few financial institutions. Usually these are positioned in retail locations. Allpoint is surcharge free for users. Atleos describes this as a market driven model.

The density of ATMs relative to the population makes a difference when it comes to fees. A national interchange fee may not be appropriate.

Recycling and recirculation

While the recirculation of banknotes once issued by the central bank is an activity that has always happened and been managed, the recycling of banknotes close to the point of use is new. With the increasing adoption of banknote recyclers in bank branches, and now with ‘Interactive Teller Machines’ (ITMs), recycling is increasing fast. Atleos works to advise on note quality, filling cassettes and other cash management activities to spread efficiency best practice.

Role of data

ATMs count notes issued. Recyclers count, authenticate and fitness check notes. ATM management companies use the count to determine refilling schedules and to manage stocks, but only at an aggregate level.

The flow of data in the cash cycle goes two ways. Central banks hold macro level data on cash patterns that is useful for cash management organisations planning operations. Equally, micro level regional data, aggregated rather than granular by machine, is useful for central banks to understand currency flows and cash demand.

As more ATMs and ITMs are used, the opportunity for more granular data exists.

End-to-end ATM solutions

Atleos is seeing an evolving technology and service environment with customers looking for a more end-to-end solution. An important caveat here is that the scale of ATMs a client has makes a difference. Unless the client is running a very significant scale ATM operation, they can struggle to have the resources, skills and knowledge to optimise it and keep up with the changing demands made on ATMs.

Atleos promotes adopting integrated end- to-end model called ATM as a Service (ATMaaS) because it allows quality to be controlled and assured better and for bank resources to focus on strategic business priorities. It also argues that it offers a lower and more predictable total cost base for ATMaaS. Atleos sees its role as a designer, manufacturer, software and service provider and independent operator of ATMs as key in its ability to compete and offer ATMaaS to banks that can benefit from this approach.

Sustainability

Sustainability, closely aligned with efficiency and operational costs, has been on Atleos’s agenda for a long time. However, it has seen a rapid and significant change in the last six to nine months with Requests for Proposals suddenly including questions about sustainability. This customer ‘demand’ is new and just starting.

Ultimately Atleos can engineer into its ATMs almost whatever the customer wants, with the understanding this can impact cost. Up until now, in line with the ATM Industry Associations sustainability work, Atleos has focused on the lifecycle of ATMs, for example increasing the proportion of recycled materials used in new machines, lowering the power requirement of machines (saving $200 per month by reducing the wattage) and including a ‘sleep mode’ on devices.

Final word

Atleos sees increasing demand for more capable ATMs and ITMs driven by changing banking trends, and utility ATM network usage models, growing demand for ATMs ‘as a service’, driven by wanting lower costs and branch optimisation in Advanced Economies and to meet rapidly growing demand in EMEs driven by continued economic reliance on cash and increasing digitization of social services, and a new focus on and interest in sustainability. Underpinning this is a continuing strong demand for cash by consumers and cash services by banks, retailers and consumers.