Cashless Society and ATMs
Despite rumors of the imminent demise of cash, it is here to stay. It will change, digitize (or not) but the utility and privacy it serves far outweighs its physical drawbacks. With this out of the way, let’s focus on the customer edge cash infrastructure and how it will evolve.
Automated Teller Machine (ATM) has been at the forefront of banking infrastructure and convenience services. Paired with suitable authentication, often a bank card, it did away with the fixed banking hours and the necessity to visit a branch to source cash. Adoption was rapid and their presence today is ubiquitous.
Current markets exert pressure on ATM makers: obsolete software has been the focus of security concerns for years. Additional services, mobile integration, and new payment methods have tipped the scales of profitability and lifecycle refresh costs to trigger industry consolidation. Arch rival Diebold absorbed Wincor Nixdorf to trigger efficiencies of scale.
Another trend which is rising directly in the SWOT eye of ATM and infrastructure retail financial institutions is blockchain. The level of security and automation it delivers is pouring talent and venture capital to fuel development of hyperscale distributed ledger technology (DLT), suited for millions of transactions per second (TPS). Current bottlenecks of scalability, interoperability and consensus are quickly pushed to the open where only the fittest solution will progress.
ATM is at the customer edge and is a direct interface. It serves cash but, in return, it harvests a plethora of information and patterns which banks and ATM operators increasingly read and use for product and customer strategy. Theoretically, our society is going cashless and virtualizing the banknotes and coins — what is to happen to the existing infrastructure? Should it be pushed to exit the technology product life cycle? I have a different view and it fits well in the circular economy. ATMs should be repurposed and reused as touch point of trust. Here is how:
An average ATM today is equipped with the standard security features and locks but, more importantly, is connected. Each time you walk to a machine to draw some cash or run basic operations on your account, a camera is observing you, recording you and logging your presence.
A few days ago, the Reserve Bank of India did something that went unnoticed by the majority of media — it “promoted” ATMs to bank branches. To my mind, this is the first step in the path of emancipation of customer edge financial infrastructure and opening the doors to unexplored use cases on the crossroads of digital and fiat currency.
In the next couple of years, until blockchains are scaled to the promised millions TPS and near-zero transaction costs, off-chain settlement and transfers may be the norm. Users will equate their transactions to verbal contracts and if both are in agreement, transactions will be carried seamlessly and reflected in the balance /state of each user. In case there is a dispute, either/both can push the transaction to the chain where a smart contract (the coded equivalent of law) will judge and decide on whether a transaction is executed or annulled.
Here, I see a possibility for ATM to evolve and deliver consensus-as-a-service portfolio. It will not only instantly offer a settlement of deals pushed to the chain but, possibly, record the disputing parties. It could connect them to near/offshore call center that can offer mediation. It could be the entry point for smart contracts where two parties log their agreement in person. Examples are limitless, from landlord and tenant agreeing on rent terms and conditions, buyer getting leasing on equipment and digitally signing the payment schedule, instant transfer of ownership below a certain threshold, and so on. Any two parties that wish to transact legally are a potential target market. In the not so simplified sketch, we have more at play, digital identity and authentication, API ecosystem for services and market applications but these are subject to different discussion.
Smarter marketing minds will find catchy names and rebrand ATMs beyond recognition but the underlying infrastructure footprint is essential for the spread and reach of smart contracts, blockchain transactions and serving as gates between the physical and digital retail financial world.