Before heading to lunch, Kirsten Keary-Taylor, 29, uses an iPhone app to request $20 from a nearby ATM. Passing the cash machine on her way out, she scans it with her phone to retrieve the bill. “It’s significantly faster than fumbling for my card and opening my wallet,” says Keary-Taylor, who works in the Chicago area for Wintrust Financial. The $17.1 billion bank, which has been testing its mobile-cash feature among employees for about two months, plans to release it publicly later this year, says Senior Vice President Thomas Ormseth. “We think we’ll attract a new client base, 35 and under, we didn’t cater to before,” says Ormseth. New ATM hardware and software can cost from several thousand dollars to more than $75,000 apiece, but Ormseth says banks need to invest to appeal to younger consumers. “If you look at the competition banks are facing down the road, it’s from Google, it’s from PayPal,” he says.
About half of U.S. financial-services institutions surveyed between December and March by research firm CEB TowerGroup plan to replace their ATMs before 2017. Of those, most say they’ll have done so by the end of next year. These mark the banks’ first major ATM upgrades in more than a decade, says TowerGroup research director Nicole Sturgill. While major software updates used to come along every three to five years, banks now want them annually, says Douglas Brown, a senior vice president at FIS, which manages a network of more than 400,000 ATMs for various banks. “The demand for this is somewhat unprecedented in my view,” says Brown, who’s negotiating with 12 banks interested in mobile-cash software.
ATM makers are trying to mimic iPad-style menus operated by drags of a finger across a touchscreen. “We are starting to see the beginning of where the ATM experience mirrors the tablet experience,” says Raja Bose, senior director of consumer transaction solutions at Diebold. Wells Fargo’s ATMs customize user menus, so someone who frequently withdraws $60 and asks for a texted receipt will see a one-button option to get both. At 240 test branches, JPMorgan Chase has introduced cash machines whose screens look like large tablets. “It’s all about approachability,” says Bill Sheley, head of branch and ATM innovation at Chase. “You want to pick something consumers are very familiar with.”
Online and mobile payment services from Internet companies pose a threat to commercial banks’ lucrative interchange fees, the surcharges they collect from merchants when a customer makes a purchase with a bank-issued credit or debit card. “Unless the bank is directly involved, their revenue portion would be very, very small, if any,” says Bob Meara, a senior analyst at researcher Celent. As many as 62 percent of transactions through EBay’s PayPal deliver zero in fees to the banks, according to mobile payments adviser Crone Consulting. As checkbooks disappear, banks stand to lose the roughly $145 a year Crone estimates they earn per account, including interchange fees, overdraft fees, and interest. And every consumer using PayPal or Google Wallet instead of a bank’s mobile payment app means one less user the bank can profit from by selling ads.
While the new ATMs are typically pricey, they’ll allow banks to staff their branches more lightly or not at all, says Bob Tramontano, a vice president at ATM maker NCR. “About 95 percent of transactions you do in a teller line, you could do via an ATM,” he says, and more complex banking, such as mortgage lending, may not be far behind. Since April, weekend-hours video chats via ATMs at several Bank of America branches in Boston have allowed customers who forget their debit cards to withdraw cash by showing a remote teller their driver’s licenses. “As you’ve seen people adopt mobile and online experience, people are used to flexibility,” says Shelley Waite, a senior vice president at BofA, adding that the chat feature has lured customers from other banks. BofA spokeswoman Tara Burke says the bank doesn’t break out how many customers it’s converted from services such as PayPal.