From ATMs to Apps: The Evolution of Self-Service Banking

Book: Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do Author: Brett King ISBN: 978-1-118-58963-2 Publisher: Wiley (2013)

Chapter 7 of Bank 3.0 is about the ATM. But not really. It’s about what happens when a technology that was supposed to change everything just… stops evolving.

The ATM was born in 1967. Barclays Bank rolled out the first commercially successful one. Before that, Luther George Simjian tried installing a cash dispenser in a New York City bank back in 1939. It lasted six months. Nobody wanted to use it.

But the 1967 version stuck. And by the 1970s, ATMs were everywhere.

The ATM Was About Saving Money, Not Helping You

Here’s something most people don’t think about. Banks didn’t build ATMs because they wanted to make your life easier. They built them because branches were expensive.

King explains it pretty clearly. The biggest fixed cost for any retail bank was the branch. The biggest variable cost was staff. And most of what staff did all day was handle cash deposits and withdrawals. If you could automate just that one thing, you could cut up to 70 percent of branch staff costs.

That’s a huge number. So ATMs were really a cost-cutting tool disguised as a convenience feature. And it worked. In the UK, 75 percent of all cash was being dispensed through ATMs. Consumers used them 2.87 billion times in 2011 alone.

But then the story kind of stopped.

ATMs got faster. They looked a bit nicer. Some added check deposits or bill payments. But at their core, they still did the same thing they did in the 1970s: spit out cash.

King calls this out directly. The promise of further automation through self-service was never really delivered.

Why ATMs Stayed Stuck

The reason is interesting. In the early days, banking was heavily regulated. Banks couldn’t really compete on rates or products. So they had no reason to push customers toward ATMs. Branches were being funded by the income from lending. There was no pressure to be efficient.

It wasn’t until deregulation hit in the 70s and 80s (UK, US, Australia) that margins got squeezed. Suddenly banks had to justify every cost. And that’s when ATMs became a serious part of the strategy.

But even then, the ATM’s job description stayed narrow: give people cash.

The Touch Screen Problem

One of my favorite parts of this chapter is when King talks about how our phones ruined ATMs.

Think about it. You use your phone every day. You tap, swipe, scroll. Everything is smooth and responsive. Then you walk up to an ATM and it has those sad little buttons on the side of the screen that don’t even line up with the text next to them.

King says he’s caught himself tapping the screen of a non-touch-screen ATM more than once. So have I. And I bet you have too.

He points to BBVA’s redesigned ATM (designed with IDEO) as the gold standard. It had a 19-inch touch screen that worked like an iPad. It learned your usual withdrawal amount. It let you swipe through denominations. No hardware buttons. Just a clean, modern interface.

And here’s the kicker. A survey from BuzzBack found that 88 percent of consumers are more likely to stick with a business based on their experience with its self-service devices. So that ugly ATM with the 10-year-old interface? It’s actually hurting the brand.

Our expectations for ATMs aren’t set by the ATM industry. They’re set by Apple, Android, and whatever the latest thing we swiped through on our phone this morning.

The Phone Eats the ATM

King saw this coming clearly. Your phone can already do everything an ATM can do. Check your balance. Transfer funds. Pay bills. Select an account. The only thing your phone can’t do is hand you physical cash.

So what does that mean for the ATM? King suggests two paths.

Path one: the ATM becomes just a cash dispenser. A simple box. Your phone handles all the interaction, and the machine just gives you money. NCR was already prototyping this. Small devices for high-traffic areas like convenience stores. No screen needed because your phone is the screen.

Path two: the ATM becomes a full-featured kiosk. Touch screen, marketing integration, mobile connectivity, coupon dispensing, ticket printing. Basically a smart terminal that does way more than cash.

The chapter has a great case study from HSBC in Hong Kong that shows how hard path two actually is. They tried selling travel insurance through airport kiosks. The product was good. The location seemed right. But the process was too complicated for people standing in a busy airport trying to get their credit card out while watching their bags. It flopped.

Meanwhile, a competitor sold travel insurance through kiosks at the border crossing to China. Two questions. Payment by contactless card. Done in 15 seconds. It worked because it was dead simple and perfectly placed.

The lesson: self-service only works when it’s fast, simple, and in the right context.

Cash Is Fading, and ATMs Know It

King drops a stat that still hits hard. Cash usage for retail payments in Australia fell more than 25 percent in just five years. In the UK and US, it was expected to drop 17 to 20 percent over the following five years.

Cash isn’t dead. But it’s slowly losing ground to mobile payments and contactless cards. And every percentage point it loses makes the economics of maintaining a huge ATM network harder to justify.

King predicted that banks would start outsourcing their ATM networks. In Sweden, Skandiabanken was already the first to do it, handing operations to an independent operator called Kontanten. In Australia, National Australia Bank and Cuscal combined their networks into rediATM, covering over 3,400 machines across the country.

His vision for 2020 was shared ATM networks where the machine recognizes you (through your phone or even facial recognition) and then skins itself with your bank’s branding. You get your bank’s interface. The ATM operator gets paid. The bank doesn’t have to own the hardware.

That’s… basically what’s happening now in some markets.

Biometrics and the Creepy Future

The chapter also covers biometrics. Fingerprint scanners, facial recognition. Colombia and Japan were early adopters for very different reasons. Colombia because of security concerns. Japan because people didn’t want to touch surfaces other people had touched.

King mentions Carnegie Mellon researchers who used publicly available Facebook photos and facial recognition software to identify 30 percent of anonymous college students. That was back in 2011. The privacy implications are obvious.

He paints a picture of ATMs that could recognize you as you approach. Show you personalized offers. Tell you about your outstanding bills. Remind you about that credit limit increase you applied for.

Some of this is helpful. Some of it is a bit much. The line between “personalized” and “creepy” is one that banks still haven’t figured out.

My Take

Chapter 7 is a story about missed potential. The ATM was supposed to be the start of self-service banking. Instead, it became a cash machine and stayed a cash machine for decades.

The phone did what the ATM was supposed to do. And now the ATM is scrambling to find a reason to exist beyond handing out bills.

King was right that ATMs would need to either simplify (just dispense cash) or get way smarter (become full kiosks). He was right that banks would start outsourcing their networks. And he was right that the phone would eventually make most ATM features unnecessary.

The chapter is a good reminder that technology alone doesn’t change anything. Someone has to actually think about what the customer needs. BBVA did that with their redesigned ATM. Most banks didn’t.

And that pattern repeats in every chapter of this book.

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