Next year will mark the 40th year that Intrust Bank, the largest locally-based bank, has had automated teller machines.
While ATMs are now more than four decades old, bankers and industry officials said the machines remain a key part of how banks and credit unions deliver services.
Advances in technology, changing regulation and customer acceptance have aided ATMs’ longevity and position as a necessary part of banking. In some parts of the country, banks continue to use them to test new markets – a low-cost alternative to building new branches.
“People still need to get cash, and we really haven’t figured out how to get cash out of your phone yet,” said Rod Pitts, Intrust’s division director of consumer banking.
But ATMs have evolved to the point where their transactional functions have been almost fully tapped. Consumers not only can get cash from them, but they also can use them to transfer funds from one account to another and deposit checks and currency – without filling out deposit slips.
Their relevance in coming decades will be determined in large measure by how successful financial institutions are in finding new ways to use the machines outside of transactions, with functions and features banking customers will want, experts said.
History of ATMs
Chemical Bank in New York was the first bank to have an ATM, in 1969. But their widespread deployment wouldn’t come until the 1980s.
“In the very beginning it was helping to get people out of the teller lines who just wanted cash,” said David Kerstein, president of Peak Performance Consulting Group in Austin, a retail banking consultancy. “If you think back to those days when the teller lines tended to snake out the door, one of the reasons why banks implemented these was to help alleviate the service issue.”
Consumer acceptance wasn’t immediate, one local bank executive said.
Monte Cook, executive vice president of retail banking for Commerce Bank in Wichita, said when the bank first introduced ATMs, many customers had a lot of trepidation about using them. They were concerned that the ATM wasn’t secure or they were afraid of being embarrassed because they didn’t know how to use them. In those days, Commerce had employees assigned to help customers use the ATM.
“We spent a lot of time getting people acclimated and comfortable using it,” Cook said. “As they started using it more, so followed the evolution of this technology. Quite frankly, it took a lot of cost out of our model.”
Jim Clark, who is based out of Commerce’s Kansas City headquarters and manages the company’s network of 404 ATMs in five states, said between 68 and 70 percent of households that bank with Commerce use its ATMs.
As Cook noted, ATMs have served to lower banks’ operating costs. And one of the ways they do that is by reducing the need for tellers.
“It has, over time, had an impact on tellers,” Kerstein said. “But I don’t think it’s been the big, driving force.”
With the emergence of debit cards in the 1990s, ATM use began to dip, bankers said.
But implementation of the Check 21 Act in 2004 helped boost their use. The act allowed banks to substitute paper checks with electronic images of them. That act also paved the way for development of ATMs that allow customers to deposit checks and currency without a deposit slip or envelope.
In 2007 Commerce was one of the first banks doing business in the Wichita area to offer those ATMs. That kind of functionality was perhaps the biggest advance in ATM technology in years.
In January, Intrust began installing ATMs with similar technology in 11 of its drive-through ATMs. Intrust calls those ATMs “intelligent ATMs.”
Tom Morrison, Intrust’s senior manager of bank operations, said check imaging has helped his bank spot fraudulent transactions and process paper checks faster.
David Tente, U.S. executive director for the ATM Industry Association, said ATMs such as those Commerce and Intrust use cut the cost of processing a deposit through a teller and other staff by about 60 percent.
The introduction of paperless-deposit ATMs in the Wichita area represents the last milestone in transactional ATM banking, experts said.
What’s ahead for ATM banking is figuring out other functions or features that customers want, and which are technologically feasible.
“The trend that I’ve seen is a little less emphasis on deploying ATMs and … much more emphasis on how can we make them more like a full-service outlet,” Kerstein, the consultant, said.
He said tests are being conducted in Brazil on using biometric identification — scanning retinas or fingerprints — for ATMs. In Europe, he said, there are ATMs where customers can apply and be approved for a loan during their ATM sessions. “So the technology is there to do that,” Kerstein said.
Tente said there are ATMs in Africa where customers can buy lottery tickets. Elsewhere, bank patrons can pay their bills through an ATM. There are also efforts to develop an ATM that would allow customers to interact with bank staff through a video camera.
Tente said the difficulty in doing things such as biometric identification — thus eliminating the need for an ATM card — or loan approval is that there are far fewer banks in other countries, and fewer networks. Doing those in the U.S. would be more complicated because there are thousands of different financial institutions, many of which have different back-office systems and machines.
“There’s a big interest and even demand for doing a lot more than deposits and cash” from an ATM in the U.S., Tente said. “The problem is the ATM industry in the U.S. grew up a lot differently than in other countries.”
Still, Tente is optimistic that there will be growth in more ATM machines in the U.S. in the next few years. But ATM growth in other counties will likely outpace the U.S.
“Worldwide, I think we’ll see more growth than in the U.S. because they are a lot more under-served than a lot of areas in the U.S.,” he said, adding that developing countries in Asia and in India are likely to account for much of the worldwide growth.
While the growth of the number of ATMs may be slowing, bankers don’t think they are close to becoming extinct. At least as long as cash exists. Or they serve as an entry point to doing business with a bank.
“I think it’s that (24/7) access that continues to make that delivery channel popular,” Intrust’s Pitts said.