Banks’ Gift to Independent ATM Deployers

As banks pull ATMs from underperforming off-premise locations, it is creating an opportunity for independent ATM deployers to fill the void, says a report from RBR, a London-based research and consulting firm.

The trend, which is being driven in part by banks’ growing emphasis on providing cashless payments to their consumers, such as through mobile wallets and contactless cards, could open the door for independent ATM deployers to increase their market share, especially in the United States. Independent ATM deployers in the U.S. have deployed more than half of the country’s 425,000 ATMs, according to RBR. Globally, independent ATM deployers accounted for 16% of the ATMs deployed in 2020, the firm said.

One reason independent ATM deployers are able to make ATMs deployed outside a branch location economically viable, when banks can’t, is that the independents have a lower-cost business model, observers say.

“Independent ATM deployers, which already represent more than half of the nation’s ATMs, often benefit when banks remove underperforming bank ATMs at locations that no longer make economic sense for a bank-operated ATM,” Sam Ditzion, chief executive of Boston-based Tremont Capital Group, says by email. “Independent deployers have far more cost-efficient operating structures and can fill those voids left by bank ATM deployers.”

One way independent ATM deployers can lower their operating costs is through a so-called merchant-fill strategy, which relies on the merchant to re-stock the ATM with cash as needed. “That saves on cash-in-transit visits,” Rowan Berridge, an RBR associate, says by email. “This means that they can operate at a lower threshold than banks in terms of the usage levels needed to make the machines economically viable.”

Also helping independent ATM deployers in the U.S. to increase their share of off-premise locations is that, despite the rising popularity of cashless payment options the past two years, cash still remains strong in many regions.

“Different regions around the world have shown very different trends in cash over the past decade,” Ditzion says. “The United States has a far more complex payments industry than most regions and demand for cash has been consistently resilient, even during Covid-19.”

As banks pull unprofitable off-premise ATMs, they are expected to focus on making their remaining ATMs more profitable. One strategy for this is greater levels of ATM sharing and cooperation. “In the past, having their own large ATM fleets was seen as a competitive advantage,” says Berridge, who leads RBR’s annual global ATMs research.

Advanced software to help maximize uptime is another way banks can improve the economically viability of ATMs in their fleet, Berridge adds.