The announcement last week that the iPhone 6 will include a new service called Apple Pay has caused a lot of buzz – what Apple product launch doesn’t? – and almost as much confusion. In case you missed it, Apple Pay is a new method of mobile payments that uses Near Field Communication (NFC), enabling users to make purchases by tapping or placing their iPhone 6 or Apple Watch (for iPhone 5x owners) near a sensor. Apple Pay supports credit and debit cards from the three major payment networks – American Express, MasterCard and Visa – representing “83 percent of credit card purchase volume in the US,” Apple states in a news release.
What does this have to do with Automated Teller Machines (ATM), those once novel, now ubiquitous cash dispensers that rose to prominence in US in the 1980s?
With the advent of the “digital wallet” and adoption of mobile banking technologies such as photo check deposits, one might conclude that we are now a nearly cashless society. While alternative banking platforms might mean lower volumes at ATMs, new mobile technologies don’t mean the end of ATMs. In 2012, consumers made 5.8 billion ATM withdrawals totaling $687 billion in value. According to the 2013 Federal Reserve Payments Study Detailed Report published by the Financial Services Policy Committee of the Federal Reserve this past summer, “The number of ATM withdrawals decreased 0.9 percent per year from 2009 to 2012. However, during the same period, the total dollar value of ATM withdrawals increased 2.0 percent, and the average withdrawal value increased from $108 to $118.
Cash is still king, even if it has contenders for the throne.
Emerging standards such as Europay/Mastercard/Visa (EMV) will certainly mean risk and expense for ATM network operators and owners. EMV is a global standard for the interoperability of integrated circuit cards, or “smart chip” cards. Popular in Europe, EMV has been shown to offer better protection than magnetic stripe cards. Well-publicized fraud such as skimming and data breaches, and associated financial losses, have payment processors pushing retailers and banks in the US to use EMV compatible hardware. EMV will undoubtedly improve security and convenience for consumers, but it comes at significant cost to merchants and financial institutions. There is also a matter of liability shifting to consumers and intermediaries which we will explore at another time.
A study from Javelin Strategy & Research published in a blog from FIS puts the cost of replacing ATMs in the US with EMV-compatible machines at $500M. And that’s based on an estimate of 360,000 ATMs in 2007 from ATM & Debit News. Industry sources such as the National ATM Council, Inc. (NAC) now place that number at 420,000, adding more than $80M to that estimate.
Progress, it seems, comes with some growing pains. The end result of NCF and EMV payments – safer, faster transactions in form factors accepted globally – is thought to be worth the effort and investment.
In the meantime, consumers will still make trips to an ATM for pocket money or to make a deposit. That’s unlikely to change. Dunbar Armored is here to help maintain, protect and stock those machines for the financial institutions and independent ATM deployers who own them. Dunbar’s ATM service ensures efficient operation and continuous availability of ATMs. From cash replenishment and settlement, deposit sweeps, processing and inventory management, to automated reporting, emergency orders, and first-line maintenance, our service is proven to fit the needs of any ATM network. Learn more here.