22 Sep 2014
Way back in 2014, I pondered the role of the ATM in a piece for bluenotes (then styled BlueNotes) titled “Death to the ATM - it’s a matter of time”. Seen as the harbinger of electronic banking when introduced in Australia in the late 1970s, I questioned if the death of the ATM was nigh.
The analysis at that time concluded: “Maybe it is premature to predict the ultimate demise of the ATM but its primary role as a dispenser of cash is less and less important as less and less cash is used. It’s just a matter of time until this staple of late 20th century banking morphs into something else or disappears.”
“ATM activity has been reducing at a huge rate over the last eighteen months with volumes down by more than a quarter in 2020 alone.”
Seven years (and a pandemic) down the road, it feels time to revisit a technology, which has actually remained a key network for the distribution of cash, to see if views have altered.
As a starting point, the use of cash must be a key consideration. On that score, the evidence is strong that big changes had been occurring to the way we pay. The Reserve Bank of Australia’s (RBA) surveys of consumer payment patterns have measured the share of cash payment transaction numbers by households as having fallen from 69 per cent of total payments in 2007 to 37 per cent in 2016. By 2019, this figure had dropped again to 27 per cent - accounting for just 11 per cent of the value of total household payments (down from 38 per cent in 2007).
A year after the RBA’s 2019 survey, the world suddenly faced upheaval from the COVID-19 pandemic. Several payments behaviours quickly shifted as Australians coped with avoiding infections and following restrictions.
The changes to the ways Australians worked, played and communicated did not necessarily introduce any fundamental differences to the way people made payments but they did accelerate trends that had already become apparent.
Overall, this meant the use of cash declined - but at a markedly greater rate; the use of digital payments grew throughout the lockdowns - but skewed significantly towards transactions where the cardholder and merchant were apart; and, where the cardholder was present, the transaction was invariably contactless and increasingly via a mobile device.
Because of this, ATM activity has been reducing at a huge rate over the last 18 months with volumes down by more than a quarter in 2020 alone. With many merchants discouraging or prohibiting the use of cash, the fact payment card transactions continued to grow through 2020 and are now increasing in double digit territory in 2021 is not a great surprise.
The growth in payment card activity was already skewed towards card not present (CNP) transactions, such as online shopping, in 2019 but this became considerably more pronounced in 2020 when the ability to process remote purchases was the salvation for many retailers facing closed doors.
Since 2014, the share of value of CNP transactions at Australian merchants has increased dramatically and the growth in such transactions means an increase in payments where cash is just not an option.
With the metrics as they are, there is no doubt the next RBA Consumer Payments Survey will register a further significant decline in the role of cash in payment activity. From a 69 per cent share of household payment numbers in 2007, MWE Consulting estimates it will have reduced to about 20 per cent in 2021 with an approximately 6 per cent share of the value.
The number of ATMs is also continuing to decrease, moving from 27,519 in June 2020 to 26,318 in March 2021 and 26,047 in June. This is 20.8 per cent below the peak of 32,879 in December 2016.
Growth in ATM transactions came to an end in 2009 and by June 2021 had contracted 15 per cent in 12 months. The decrease in total ATM transactions and value was clearly apparent pre-pandemic but the arrival of COVID-19 led to a marked increase in the rate at which Australians stayed away from what was perceived as “dirty” cash.
In 2009, annual ATM transactions in Australian were at 900 million. The outcome of the rates of contraction is total transactions in the 12 months to June 2021 were less than half at 400 million.
The decline in the number of ATMs has been outweighed by the decline in number of transactions, leading to a steady and considerable fall in the utilisation of the ATM network. In the 2014 article for bluenotes, I noted the average monthly transactions per ATM in 1995 was almost 5,000. Over the last 10 years, the average number has almost halved from 2,417 to 1,257.
The average ATM today is processing just one quarter of the volume of 1995.
The decline in ATM activity is analogous to the pattern of cheque processing. Twenty years ago, an average personal cheque account issued almost 33 cheques a year while a commercial account issued 166. Those numbers in 2021 are down to 1 and 9 respectively.
Unsurprisingly, discussions are now being had about the efficacy of expending resources to operate at these low levels. RBA Governor Phillip Lowe has indicated on several occasions he thought it in the national interest to close the cheque system but technology was required to satisfy those still reliant on cheques.
Are ATM terminals in a similar terminal spiral? MWE Consulting thinks not but they are quickly heading towards a scenario where they will require life support to continue providing cash to those who - for whatever reason - see the need to access it.
In the seven years since we first questioned the lifespan of the ATM for bluenotes, annual volumes have reduced from 757 million to 401 million. Should that decline be emulated again over the next seven years, many ATMs will need to have the cobwebs brushed away before use.
Mike Ebstein is Director at MWE Consulting
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
22 Sep 2014
17 Feb 2021