How ATM Outsourcing Benefits Financial Institutions
Updated: Apr 5
Nearly five decades ago, ATMs made their debut in London. Since then, the number of ATMs has increased substantially and despite a variety of new payment options and banking technology, ATMs are still the most popular self-service touchpoint used by consumers.
Last year Americans made more than 10 billion transactions at ATMs, according to Retail Banking Research. Sixty percent of consumers between 25 and 34, and 51% between 35 and 49 withdrew an average of at least $40 eight to ten times per month. With approximately 480,000 ATMs in the United States, the average terminal is used 225 times a month. However financial institution (FI) ATMs account for 89% of transactions, according to the 2020 Health of Cash study.
Innovations in technology such as mobile and online banking have actually increased use of ATMs. Over half (54%) of mobile banking users report an increase in ATM use, according to a study from Raddon Research Insights. This number also spiked for individuals who prefer online banking, with 58% reporting an uptick in ATM usage.
Consumers also prefer surcharge-free ATMs with 71% actively avoiding ATMs that charge fees, according to a study from Mercator Advisory Group. An industry report from ATM Marketplace notes 79% of the public believe access to surcharge-free ATMs are either “very important” or “essential” in their decision regarding which FIs they use. This preference for fee-free ATMs has led many FIs to join surcharge-free networks like Money Pass and Allpoint.
Investing in new technology, the fees to join surcharge-free networks, keeping up with compliance regulations and more are increasing costs for FIs.
Why FIs are Opting for ATM Outsourcing
Because ATMs are an expense and take up a lot of staff time, many FIs are turning to outsourcing to save money and free up employee resources. Some institutions are choosing outsourcing because it helps improve brand exposure and some opt for it because it takes the regulatory burden off their shoulders. No matter what the reason, ATM outsourcing is guaranteed to benefit a FI’s bottom line.
Reduction in Operating Costs - Maintaining an ATM fleet is not profitable for FIs. Studies show that outsourcing ATM operations can drop the overall cost by as much as 30%. With the cost of operating an ATM at $25,000 on average, removing the capitol expenses of purchasing hardware and keeping up with government and network required upgrades plus having fixed a monthly fee for operations translates into big savings.
Savings on Capital & Regulatory Investments – When FIs opt for outsourcing, the ATM partner takes ownership of the fleet – removing these capitol expenses from the institution’s balance sheet. The ATM partner is then responsible for replacing outdated equipment and maintaining the terminals to meet required compliance upgrades. By freeing up the FIs capitol, this allows banks and credit unions to reallocate money they would normally use for ATM hardware into more profitable endeavours.
Hassle-Free Service – When a FI partners with an ATM provider there is no need to manage multiple vendors. No run around from a variety of vendors blaming each other for a problem that might be hard to pinpoint. One contract with one vendor means if a problem arises, one phone is all it takes to have it resolved – saving valuable time.
Improved Account Holder Service - While outsourcing the management of ATMs is a direct way to cut costs, outsourcing also results in freeing up staff time. This allows the FI to utilize employee resources more efficiently and more profitably, such as devoting more time to assisting account holders, growing loan volume and other tasks that will affect the institutions bottom line.
Improved User Experience – Because an outsourcing partner specializes in ATMs, they are experts at preventing unplanned ATM downtime, which improves the user experience. And, with the option of having custom signage, transaction screens, and wraps for island and off-premise terminals the FI benefits by being able to use the ATMs to cross-sell products and services and increase brand exposure.
With increasing demands on FIs to expand surcharge-free ATM access, roll out new payment technology all while keeping up with ever changing regulatory burdens, it makes financial sense to switch to ATM outsourcing.
Lean How ATM Outsourcing Can Benefit Your Institution
Darren Smith, Vice President, ATM Management
Craig Helmers, Vice President, ATM Management