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Wells Fargo rethinks retail, plans to shutter 450 branches

Wells Fargo has perhaps the largest branch and ATM network of any bank in the U.S., but it’s finally catching up to its peers, who are closing redundant branches, reinvesting in more modern ones and upgrading ATMs as customers embrace digital channels more and more.

While it’s focused on reducing expenses and improving efficiency, it’s still investing in things that make managing finances easier for commercial and consumer customers, Tim Sloan, CEO, said on an earnings call Monday,. In the second quarter Wells introduced Zelle, legacy banks’ peer-to-peer payments answer to Venmo, and began piloting a chatbot for Facebook Messenger. It also upgraded its mobile checking account opening experiences, launched a service for commercial card customers that lets them upload and manage receipts on their mobile device and automated the accounts receivable functions for Treasury Management customers.

“We are focused on improving the operating performance of the company by increasing our emphasis on core banking products and services that we believe are most relevant for our customers and provide the best financial returns for our shareholders,” Sloan said.

It’s also been rethinking its ATM and branch strategies. Wells was the first major bank to bring cardless cash withdrawals at the ATM last year, followed by Bank of America and Chase, and the first to install the feature in all of its ATMs by the end of the first quarter this year, Sloan said, touting that customers had used the feature more than a million times as of last week.

While Wells Fargo has shut down 93 branches this year (54 in the second quarter alone) to eliminate overlap and improve performance of the network, and plans to close about 450 total by the end of 2018, it also plans to increase “infrastructure and platforms available on-demand for self service” — a.k.a, ATMs — from 85 to 845, according to its second quarter earnings supplement.

The bank’s branch total stands at 5,977 as of the end of the second quarter, compared to 6,028 branches in quarter one and 6,111 branches in the second quarter of last year. Wells expects branch closure and “optimization” to save it about $170 million in expenses by the end of 2018.

Wells has been less aggressive than its peers when it comes to branch closures. It closed just 98 branches between 2012 and 2016, according to the FDIC, a 1.6 percent decline compared to Chase (3.4 percent), Bank of America (16 percent) and Citi (28.5 percent).

“The branch interactions are reflective of what’s going on in terms of customer choice moving more to mobile than anything else,” Sloan said. “When you think about our customer interactions… look [not only] at branch interactions, but also look at the number of online and mobile interactions.”

Wells reported 379.9 million customer interactions through ATMs and branches in the second quarter, a three percent decline from 393.3 million in the same period last year. The bank says the change reflects continued customer migration to virtual channels and increasing digital adoption. Interactions through online and mobile channels totaled 1.4 billion in the second quarter of 2017, up five percent from 1.3 billion in the second quarter of 2016.

“It’s important…to make sure that we’re investing in technologies. So a customer can open account on their mobile device set. And if they want to they can come into one of our branches, that’s fine.”

“We’re seeing a slow, but steady return in an improvement in underlying retail business,” Sloan said. “We still have more work to do.”

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The race is on to kill the ATM card

The ATM card could be on its way out, with small banks the unexpected leaders of the charge.

Wells Fargo, Bank of America and JPMorgan Chase are upgrading their ATMs this year to allow customers to withdraw cash from ATMs using their mobile devices instead of their plastic cards. But banks like Wintrust Financial that brought the feature to customers two years ago are already looking to take it further today.

“We’ll continue to build out Cardless Cash so it doesn’t just withdraw, there’ll be other things we can set up,” Tom Ormseth, svp of Wintrust Financial, suggested. “We could go to gifting cash; if I want to send cash to a friend of mine, they can go to a Cardtronics ATM and get that money. It’d be a Zelle-type service, only it’d be cash.”

Wintrust has $25.8 billion in assets and 15 banking subsidiaries, all of which have an integrated digital banking and online payments offering through branded apps on tablets and mobile. It was the first in the U.S. to provide this kind of service at about 175 ATMs in Chicago and southern Wisconsin.

Cardless Cash is a service by nearly 50-year-old financial technology provider FIS that allows customers to withdraw cash from ATMs using their mobile banking app. FIS has some 40 other regional and community bank clients that range from $30 million to $1 billion in assets. A partnership this month with ATM provider Cardtronics, which counts 45,000 ATMs (that’s greater than the combined ATMs of the top four banks) in its U.S. network will expand Cardless Cash even more.

 

 

FIS is also in talks with some of its partners that want to see deposits for small business customers at the ATM, according to Doug Brown, general manager of FIS Mobile. Brown also said “peer-to-peer sending and pick-up of cash” is another potential use case it could offer based on client feedback.

The war on cash hasn’t progressed as much in the U.S. as it has in places like India or Sweden. U.S. cash transactions declined from 40 percent in 2012 to 32 percent in 2015, according to the Cash Product Office at the Federal Reserve Bank, but it continues to be the most frequently used form of consumer payments and dominates small-value transactions.

But while cash is far from obsolete, access to it is becoming more sophisticated. Bank of America customers can activate an ATM transaction by selecting their B of A debit card in their digital wallet and holding it over the ATM’s contactless NFC card reader. Wells Fargo users can log into their banking app and request a single-use, 8-digit access code to enter at the ATM. Turkish bank DenizBank is implementing beacons that push notifications to users suggesting they might want to withdraw cash. Indian bank ICICI allows people to send cash to any mobile phone at any time — the recipient doesn’t even need to have a bank account or smartphone, just the details received through an SMS. FIS Cardless Cash uses QR codes.

The rise of mobile and digital has forced banks to keep up with consumer payments products like Apple Pay and Venmo and modernize ATMs. Hundreds of fintech startups are working on solutions for every part of financial services — payments, wealth management, investing, saving. But the reality is that in the U.S., cash is still king, and that arguably, the last real innovation that took place in banking, the ATM, is the only thing undergoing true innovation today.

For Wintrust, jumping on Cardless Cash wasn’t just about beating the big banks at innovation. Community banks have been customer-centric all along (an approach that today’s banking behemoths are just waking up to); Wintrust knew people would inevitably begin using mobile wallets and that the capability would add real value to customers.

“If we can show businesses in our communities that, hey, we have 20,000 customers using their cards on their phones to go to the ATM — why wouldn’t they with you? We can add some value there,” Ormseth said.

Mobile wallet adoption has progressed more slowly than the bank anticipated, Ormseth said, but added that he’s starting to see more traction with some prominent retailers in the Chicago area, where he’s based.

Security was also an objective in adopting Cardless Cash, Ormseth said. By eliminating the use of plastic cards, customers remove the risk of their card credentials being “skimmed” by fraudsters who plant scanners where customers would insert their card to steal the sensitive information and use it to recreate a card they can use going forward.

“If you don’t have a card presence, [fraudsters] can’t capture anything. So we continue to promote it from a security standpoint,” Ormseth said.

That’s another thing that makes the partnership with Cardtronics so significant, since card skimming is much more rampant at nonbank ATMs at gas stations and drug stores, for example.

But security just isn’t enough to win customers over, he found.

“We’ve been fairly successful in this but still the overall thought of the customer is, ‘So what? How much easier is it really to get cash through the phone?’”

So Wintrust began promoting how fast the transactions are. The experience of standing in front of an ATM for 45-50 seconds, at least, goes down to 10 seconds, Ormseth said. The hardest thing is getting customers to use the function for thefirst time.

“They don’t see the advantage until the first time they actually try it,” he said.

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Why big banks are exploring shared ATMs

Shared ATMs have been the norm among community credit unions for the last few years, but major banks are starting to dip a toe into the water.

“We are exploring shared ATMs, as they could help lower distribution costs and provide ATM access in places that wouldn’t otherwise be economically feasible for us, but choosing the right partner is critical,” said Troy Cullen, evp ATM and Debit Services, U.S. Bank. “We want to ensure the machines are surcharge-free for our customers, we want our customers to easily know that they’re surcharge-free and we want the experience to be consistent for them.”

It’s a common tactic for community credit unions. For the past five years, Co-op Financial Services, a California-based network of community credit unions with reach across the U.S., has worked on eliminating outside ATM fees by creating a network of shareable ATMs among affiliated institutions nationwide. It’s a play to get more customers.

“It allows more account access — there are some credit unions that have deployed these solutions to expand their geographic area through a self-service model where it would have cost them to install a brick-and-mortar branch,” said Terry Pierce, senior product manager at Co-op Financial Services, noting that credit unions that are part of the network often have a small number of branches.

Any customer of 1,800 participating credit unions can access a network of ATMs nationally along with over 5,000 brick-and-mortar branches that serve customers’ needs. Customers can access a network of 350 ATMs nationally by logging into the shared branch network with their account number and a piece of identification. The shared ATMs don’t have specific branding, but the infrastructure lets customers carry out deposits, withdraw funds, transfer money and pay loans.

It’s a way credit unions can differentiate themselves from the bigger players, cut costs and expand their reach at the same time.

“Most credit unions have a small number of ATMs and their footprint is very small,” said Heather Gibbins, senior director of global software product management for Diebold Nixdorf, the ATM manufacturer Co-op Financial Services worked with to develop the shared branch and ATM network. “We partnered with Co-op to allow members of institutions to get the same level of service as they would get from their own institutions.”

While offering additional access points for customers may seem like an option that customers of major banks could benefit from, analysts say bigger players don’t have the same incentive, both due to the cost and the risk of watering down a differentiated experience from a brand.

“It’s like a bait and switch in the view of the brand operators because it’s like saying the brands are interchangeable, and they’re saying, ‘Heck no, we’re not going to do that; we want to be in control of the experience,'” said Bob Meara, senior analyst at Celent. The banks also have to cover the costs of the transactions on the network, which could be significant for big institutions, he added.

Others add that the fees that derive from non-customer transactions at ATMs are a revenue generator for the banks.

“Larger banks don’t have as much of an incentive because they already have well-established ATM networks and can generate fee income when non-customers use their machines,” said Aubrey Hawes, senior director in the Financial Services Global Business Unit at Oracle Financial Services.

Regardless of the convenience of shared ATMs, Pierce said user adoption of them has been slow, which is prompting Co-op Financial Services to relaunch the service next month with a new marketing push.

“It’s really about effective communications, marketing, training and education — a lot of the time technology is deployed with no follow-through,” she said. “There needs to be a lot more collaboration as far as training and educating the staff along with the members.”

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Retailpocalypse: Bank branches are closing in droves

There may be no physical institution as historically revered as a bank. Community centers and trusted destinations, the banks of our imaginations are cool and quiet spaces housed inside classical limestone buildings. Ceilings are high, floors are marble; words echo. Behind bronze-framed windows, tellers take money from trusting customers for safekeeping or direct them to comfortable chairs where they wait for a personal banker.

Nice try. Banks these days are hardly elegant or imposing. Most have shrunk in size thanks to rising costs of real estate, and many have disappeared entirely, according to data from the Federal Deposit Insurance Corporation. Chase reduced its branch presence by 190 locations, a 3.4 percent decline, from 2012 to 2016. Wells Fargo closed 98 branches, a 1.6 percent decline in the same period. Its peers are even more aggressive. Bank of America closed 243 branches (16 percent) in that period and Citi closed 302 (28.5 percent).

Branches are consolidating locations with lower servicing volume, opening in higher growth areas and renovating existing branches and ATMs. More importantly, they’re evolving into more compact, digitally oriented spaces that incorporate new technology and help branch employees focus on improving the customer experience.

Some end up looking more like Apple Genius Bars than banks.

Citibank’s new digital branches, for example, each feature a workbench with computers where customers can look at their finances with a personal banker at their side. Staffers, equipped with iPads, are available on the floor. While the teller behind the window used to be the standard, it is now seen as an inconvenience. This so-called “banking side-by-side,” however, is thought to be a luxury, and banks like Citi want to make it the norm.

“We have personal bankers here, a manager, head tellers – we have everything a traditional branch has but we’re serving [customers] in a more convenient way, and in a better way, really,” says Solymar Difo, head teller at a Citi digital branch in Miami. “Behind the teller line, there wasn’t much we could do. … You might tell them they have to wait for a personal banker, but then the personal banker is caught up opening accounts or doing other things that this client here in front of you doesn’t have time to wait for.”

Traditionally, the role of a branch teller has been a demanding one for such an entry level, frontline job. Many tellers are often straight out of college. They have to learn about the many different financial products they sell, when to identify a sales opportunity that would require a personal banker and how to quickly sell the idea to a customer to get them to that banker.

In digital branches, however, “there’s not a barrier between you and the client,” Difo says. “Instead of directing them to see a personal banker or make a call [or] go online … I have the opportunity to do all three [myself]. I can educate them, help them online, I can even make the phone call with them.”

While those in the banking industry feel there will always be brick-and-mortar branches, in large part because the business of banking is grounded in trust, and in knowing the person with whom you’re working, the move to digital technologies is expected to grow exponentially.

“Today, four out of every five monetary transactions are completed through our self-service channels, but we still see meaningful opportunities for improvement,” Thasunda Duckett, JPMorgan Chase’s consumer banking CEO, said at the company’s Investor Day in February. “Last year, we had over 400 million transactions being completed through our tellers, 70 percent of which could have been done through our self-service channel. So in the year ahead, you’re going to continue to see us focus on migrating more of these transactions to digital.”

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Five charts that show how physical bank branches are here to stay

Despite all the worry (or excitement) about banks getting rid of branches, banks aren’t getting rid of branches.

Sure, they’re reducing the number of branches and using the remaining ones in a way that’s more in line with consumer behavior in a digital world. But branches remain one of the most important parts of their business, particularly outside of major cities and urban areas. And, despite many young people’s inclination to do most of their banking digitally, having a branch and ATM presence is still a big factor in where they decide to bank, even if they never use them.

“It’s becoming increasingly clear that banks that can get the balance right between digital and personal interactions will be those that build the strongest customer relationships,” said Jim Miller, senior director of banking for J.D. Power.

The following five charts show that while non-traditional branchless banks like Ally Bank and Capital One 360 have an edge over brick-and-mortar branches, both are equally important to customer experience and satisfaction.

Banks are improving digital strategy, but digital-first banks have happier customers
J.D. Power’s most recent Canadian retail banking satisfaction report shows that a well-executed online virtual business model leads to higher customer satisfaction. Canada’s largest banks led the customer satisfaction index rankings, each with scores over 750 on a 1,000-point scale. Midsized banks performed only slightly better. Tangerine, the digital lender owned by Bank of Nova Scotia, still outperformed them all, with an index score of 840.

Bank customers are still using tellers, ATMs and the telephone
More people may be using mobile banking apps — and usually, all they’re doing is checking balances — but branches and call centers are still handling high levels on routine transactions: depositing, withdrawing and transferring funds. Last year, for example, 90 percent of customers visited a teller in the third quarter and half called their bank, according to a Bain study on transaction migration.

customers still use ATMs, tellers, phone

And it’s not true that older people are less open than the young to mobile or digital banking, according to Bain. They’re half as likely as the youngest group to bank on mobile or web browser, but ATM and phone use falls off among the older segment and that they’re just as likely to bank online suggests they’ll embrace mobile when the circumstances are right. And older respondents have rated their banking experiences on smartphones or tablets highly, more so than younger customers, who tend to be critical of app quality, appearance and functionalities.

Customer satisfaction is highest in branch visits, but also the least consistent
Among the channels measured for interaction satisfaction, branches had the highest performing with a high score of 927, but they also ranked lowest in satisfaction, with a low score of 813. That means there was a 114-point difference between the two. Mobile however, had the shortest range, with a high of 898 points and a low of 842.

The figures show how much further banks need to go in making customer experiences consistent across all channels. To do that, they’ll have to define the expectations for experience, train frontline staff on key behaviors, track performance and reward employees who meet expectations.

Tellers are often a last resort

bank-branch-call-center-traffic-jam-fig-11_full

Sometimes there are hidden fees, sometimes there are privacy issues. But many people resort to tellers because other channels proved too difficult, Bain found. The line was too long, the ATM was taking too long, there were access issues with their login information or they didn’t have their bank card. More than 70 percent of transactions failed or were abandoned simply because the experience was too complicated.

Mobile banking growth is plateauing 

Mobile banking has plateaued in most countries, but it actually declined in China, which is probably at least in part to do with the fact that Chinese customers have so many financial services available through its mobile payments platforms.

customer-loyalty-in-retail-banking-2016-fig-04_full

The number of consumers that use their bank’s mobile app leapt from 32 percent in 2012 to 52 percent in 2015, according to Bain, then to 55 percent in 2016. That shows that early adopters — ahem, “millennials” — have already adopted. Older customers like digital banking and may soon embrace mobile. Branch users still need to be convinced.

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Hi 5! The top five fintech stories we’re following today

top 5 weekly fintech stories

ATMs as the distributed bank of the future

A recent study showed that for the first time, there were more ATMs located away from bank branches than located onsite. That’s an interesting outtake as banks shrink their physical branch footprints.

The nature of the ATM-as-banking-node is changing, too. In 2001, Gene Pranger was hard at work on uGenius, a pioneer of the Interactive Teller Machine. Now, with BankOn, he’s on to something arguably even bigger: mobile video banking.

Facebank

Anyone interested in seeing Facebook’s intentions when it comes to finance should take a look at the social network’s new European payment license. That’s in addition to the firm’s recent hire of David Marcus, PayPal’s former president, to run Facebook Messenger.

Facilitating global payments is a large opportunity that gets even bigger if you can figure it out for B2B payments. Payoneer recently acquired escrow-as-a-service firm, Armor Payments, and is serious about bridging the trust gap in global B2B payments.

What’s going on with demand for banking apps?

Mobile apps are growing, even if that growth is slowing down. Historical numbers of people are using mobile banking apps. The growth has been led by a younger demographic, which makes sense. Getting the rest of banking customers to use their phones for banking service is the next challenge. There’s still a lot of opportunity for banks to migrate older customers to other channels.

Finance bots

I wish I had an on-demand financial planner running my financial life. Now available on Facebook Messenger, Digit bot has helped people save $250 million.

Facebook has been encouraging financial institutions to use its messaging app as a bot platform. B2B communication platform Slack is also competing to become a financial bot platform and is actively investing in a variety of finance bots, including in startup Sway Finance.

Blockchain hype

Blockchain hype still outstrips real world activity. To see what’s going on in the real world, Tradestreaming spoke to a blockchain expert at SAP.

Can blockchain make life better for the world’s poorest people? On the business side, DTCC, Wall Street’s clearinghouse, thinks it can help and wants to adopt blockchain technology.

For its sake, Bitcoin may never be a currency. It’s something way weirder.

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What war on cash? ATMs are the distributed bank of the future

As a technology, the automated teller machine has been around the block. In the U.S., Chemical Bank debuted the ATM in 1969 in Rockville Center, New York. That first machine, also known as a Docuteller, disbursed cash when customers inserted a specially coded card. Almost 50 years later, as financial institutions work to transition customers to bank outside of expensive branches, the ATM is beginning to look a lot sexier.

In an effort to shift the service burden away from tellers, some of the largest U.S. banks like Chase and Bank America are undergoing significant upgrades to their ATM networks. New ATMs, some of which include cardless access and video chat, are able to provide around 90 percent of the services tellers can provide from within a bank. ATM activity continues to rise — Chase now sees more transactions from ATMs than tellers.

Banks are to growing their ATM networks outside their branches, too. According to a recent study conducted by RBR on the global ATM market, in 2015, there were more ATMs located away from bank branches than located within. 51 percent of automated teller machines in the global market are disconnected from the physical real estate of banks, giving banks a smaller but broader distributed presence within their target markets.

“It’s all about access and convenience in our click-and-mortar world,” Cardtronics’ CMO Tom Pierce told Kiosk Marketplace. “And that bodes well for retail ATM deployers, because we are the convenient access to cash that consumers demand as part of their omnichannel lifestyle.”

Replacing tellers and branches with ATMs can lower costs and if placed in high-traffic areas, see enough surcharge and interchange fees to be run at a profit. In rural areas that are hard for retail banks to service, ATMs serve an important role in financial inclusion for customers who would otherwise go unbanked.

Distributed ATM networks give banks added visibility within their communities, even as some banks shutter local branches. It’s possible that for more communities, in just a few years, the modern teller machine will be the only physical banking presence around. Instead of making customers come to branches, ATMs bring the branches to the customer.

“As independent ATM deployers expand their fleets, more and more retail centers, transport hubs and other non-branch locations will host ATMs,” said RBR’s Rowan Berridge. “Coupled with increasing off-site deployment by banks, in the future it will be even easier for customers to find a convenient ATM away from branches.”

 

 

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Is India’s ATM shortage actually its first step towards a cashless society?

What would happen if ATMs suddenly started disappearing from the streets? This question isn’t the premise for an (admittedly dull) sci-fi thriller, but the basis of an experiment that The Reserve Bank of India (RBI) has inadvertently been conducting over the past few years. India’s central bank recently surveyed the state of 4000 of its ATMs, and discovered that a third of them don’t work.

The fact that so many ATMs are out of commission in a country with over a billion people certainly reflects badly on the RBI. However, this situation could also be an opportunity for mobile payment services to fill the gaping payment space these defunct ATMs have left behind. Mobile internet statistics indicate that India is primed to adopt mobile payment methods: IAMIA and KPMG projections for Indian mobile use are 236 million mobile internet users by 2016, and 314 million by 2017.

Moreover, banks in India have complained about the high cost of maintaining ATMs, and have even raised annual fees for debit or ATM cards to counter this expense. Again, banks could, on their own or with startups, develop mobile payment services that would slowly replace ATMs and which could potentially cut costs for the banks and for consumers.

The numbers tell a different story

Mobile payment services already have a foothold in India – MasterCard’s 2015 Mobile Shopping Survey found that 76.4% of respondents from India have made a purchase via smartphone. However, the mobile user numbers that seem so promising aren’t substantial enough for the Indian market, in which in 2016, there will be still be over 1 billion people who don’t have access to smartphones.

In fact, it would seem that expecting widespread mobile payment services in India would be really premature, since, according to the PRICE Cash Survey 2014, even “card users in the most affluent part of India’s megapolis transact 73% of their expenditure in cash and only 17% by card”. PRICE also found that smaller retailers in India often don’t have card machines, while the ones that do will offer a lower price if you pay in cash without a receipt – in order to avoid sales tax.

For the majority of people in India, then, access to ATMs will remain critical for the foreseeable future.

Fintech in India is stalled

In order to enact a mobile payment revolution, India would need Indian startups and banks to work closely with consumers to develop products that would fit the culture and needs of each of India’s 29 states and 7 union territories. However, while fintech investment in neighboring China was extraordinary in the first quarter of 2016, investment in India startups was much more modest: $73 million.

Archit Gupta, founder and chief executive officer of ClearTax, admitted to Business Insider that the rate of investment in India was slower for fintech than for other sectors. Gupta is optimistic, though, about the future of fintech in India: “I prefer it this way. It is better than sharp exuberance and then a sudden deflation.”

However, what’s clear is that the Indian fintech sector is in no way capable of quickly transforming the country’s payment space at this time.

Backlash against mobile pay

Mobile pay has a lot going for it: it’s fast, it’s convenient, it’s personalized. Nevertheless, not everyone is adopting it: Accenture’s 2015 Mobile Payments Survey found that 52% of adults in the US are ‘extremely aware’ of mobile payments, but only 18% use them on a regular basis. In fact, 67% of respondents reported that they most frequently used cash. In Sweden, the Rilksbank, Sweden’s central bank, has recommended that the government improve access to deposit and withdrawal of cash, even after the country had begun to shift towards a cashless economy.

Maybe Tomorrow

A cashless economy is simply not feasible, let alone recommended, for India at this point in time, no matter what the state of its ATMs. Even so, it’s very possible that as more people in India acquire smartphones, mobile pay services will be able to help banks simplify payment services, become more efficient, and cut costs, all of which will benefit the Indian consumer.

In the meantime, they should really fix those ATMs. However, it’s worth noting that the average bank teller in India makes somewhere between $800 a month (at Citibank) to around half that sum. With ATM upkeep in India priced at $741 a month, it’s possible that the RBI will simply choose to hire more human tellers, rather than spend time and money fixing cash machines.

Photo credit: lylevincent via VisualHunt.com / CC BY-ND

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What Bank of America’s race to cardless ATMs says about the future of banking

bank branch closures

It started on Monday when JPMorgan Chase announced it would be introducing card-free ATMs this year. The first generation of these new ATMs, according to a bank spokesperson, will give customers the ability to access the machine via an access code found on their Chase mobile app.

Not to be outdone, Bank of America countered today that they, too, would be rolling out a series of new ATMs that enable clients of the bank to use their phones to withdraw cash or complete other tasks using their cellphones instead of their bank cards.

The bank, according to CNBC, acknowledged the initiative to introduce cardless ATMs in the US with an initial pilot program in Northern California and a few other big cities with a broader launch expected for later in 2016.

War on cash? ATM growth and usage

Total Global Volume of Cash Withdrawals (billions), 2010-2020
Source: Global ATM Market and Forecasts to 2020

For the most part, this is part of larger upgrade cycle underway at most banks around the world. With the exception of China, which according to the Global ATM Market and Forecasts to 2020, grew its domestic ATM footprint by 18% in 2016, most mature economies are seeing flat growth to contraction in their number of ATMs.

But the growth of ATM machines is just part of the picture — while the number of machines may be stabilizing, they’re being used more frequently. ATM usage is seeing a pickup as global ATM cash withdrawal volumes grew by 7% in 2014 with a total of 92 billion withdrawals made. By most measures, with all the talk of bitcoin, blockchain, and other cryptocurrencies, demand for cash is ostensibly strong and in fact, growing.

That’s a far cry from the commentary coming out of Davos as world and business leaders converged on the city situated in the Swiss Alps to talk about the future. Deutsche Bank CEO, John Cryan forecasted the demise of cash by the end of this decade. “Cash I think in ten years time probably won’t (exist). There is no need for it, it is terribly inefficient and expensive,” he said in a group dedicated to discussing fintech.

Banks of the (near) future

The introduction of new ATM technologies at Bank of America and Chase appears to come at the expense of physical branches. Bank of America is on an ATM upgrade cycle as it pares back its own brick-and-mortar locations. Bank of America grew its ATM network by 1% in 2015 to 16038 while its retail locations were scaled back 2.65% to under 4800 in the same time period. Smarter ATMs with more consumer-focused technology enable banks to deliver high quality service with fewer in-person tellers. Indeed, Chase now does more transactions each month via ATMs than with tellers.

Growth in the ATM business is happening amidst the background of an industry merger of two of the largest players in the ATM industry. Diebold’s revenues are expected to just about double after it closes the transaction to acquire its German competitor, Wincor Nixdorf. The deal is valued at $2 billion and is the largest in Diebold’s 156-year history. But the acquisition is more than just about creating a global war chest, according to Diebold’s CEO, Andy Mattes. He explained to Fortune that the new ATMs his company is developing are no longer “cash and dash” machines. Instead, they’re able to “connect the physical worlds of cash with the digital worlds of cash”. ATMs, like the kinds that Chase and Bank America are rolling out, are able to conduct 90% of the jobs traditionally done by tellers.

That resonates well with banks’ younger clientele who are digital natives and comfortable using their smartphones for most financial transactions. And surprisingly, of all demographic groups in the US, millennials actually have the highest usage of cash. So, while the future may or may not be cashless, the present is definitely cardless.

 

Photo credit: pennuja via Visualhunt.com / CC BY