ATMs are facing a fork in the road.
From maintenance costs to dwindling usage, the familiar high street cash machine is not without its problems. And for banks, it can be considered reasonable to wonder if they’re still a viable source of revenue.
But even in the age of contactless and COVID, cash machines have an important place. In fact, they could prove to be more important than ever.
As cash usage reduces in society, the ATM must change to meet these challenges. While the need persists for physical banks on our streets, those banks must invest in digital transformation to provide customers with safer and more versatile cash and service offerings – and nothing is more perfectly placed to do that than the ATM machine.
Safe and seamless
Despite the enthusiastic adoption of contactless technology, the majority of people wish to retain the option of paying for goods and services with cash – and they deserve to have that choice. ATMs are a lifeline to some parts of society and empower vulnerable and isolated people to exercise financial freedom.
But there’s a growing revolution that promises to reimagine the ATM for the twenty-first century. Next-gen ATMs are already here, supplying cash to those who need it and enabling people to pay bills, manage their money and more than ever before using smartphone-connected apps.
These machines are helping to futureproof banks against modern challenges – but there’s a way your ATM can do even more.
Travel money, simplified
No one is more relieved to have cash than a traveller abroad. In fact, despite the COVID-19 pandemic, global cross-border payment flows will reach $156 trillion by 2022, according to research by EY, although the overwhelming majority of these are B2B payments. Consumer to business payments nudge a mere $3 trillion – a figure that’s still not to be sniffed at.
Cash will always be king when travelling in a foreign country. Restaurants, stallholders and gift shops will always take cash. No need to translate signs. Thanks to the prevalence of tipping culture abroad and tourists’ unfamiliarity with local infrastructure, cash remains the most reliable and easily accessible form of payment.
But currency exchange rates and charges are every traveller’s worst headache.
Each cross-border transaction incorporates a currency conversion fee. That presents a billion-dollar currency exchange opportunity that’s ready to take advantage of – as long as banks and stakeholders are willing to maximise this opportunity by simplifying FX transactions for consumers.
For example, innovative fintech providers such as Wise have entered the cross-border payments market, offering much lower fees and better exchange rates than incumbent banks. The subsequent rise of Wise and others has been impressive, but digital-only neobanks with their currency wallets have not yet revolutionised cross-border transactions entirely. Despite the efforts of Visa and Mastercard to promote cash-free cross-border payments, Generation Z (18-34 yrs) consumers are unexpectedly the heaviest users for ATMs. As they enter the workforce and explore the world, withdrawing cash before or during a trip lingers as a deeply ingrained habit for these tourists.
According to the ATM Industry Association, there are now three million cash dispensing machines around the world — even drive-thru ATMs — with a further 280 being installed each day. Cash is a universal language.
But when customers withdraw cash from an ATM overseas, Visa and Mastercard benefit the most – leaving both customers and banks short-changed. For each transaction, Visa or Mastercard will charge a service fee and calculate the exchange rate based on the daily foreign exchange rate.
And until 2018, Visa customers outside the Visa Europe region had no option but to accept the local currency rate. Since the introduction of Dynamic Currency Conversion for global Visa markets, however, there is actually a viable alternative.
That’s where we come in.
DCC@ATM allows international cardholders to withdraw cash and pay the cost of the transaction in their own currency with full disclosure of the exchange rate and fees.
No longer will your users have to rely on back-of-the-envelope maths. It’s all displayed with up-to-the-minute information, including the same total in both the local and home currencies of the user, so they can easily see how much they are going to take out.
Not only that, but the details of the exchange rate and margin are also displayed for full transparency. At a glance, the consumer can instantly make an informed decision: nothing is left out.
Then, the user chooses the currency they wish to withdraw in, the transaction is processed, the money dispensed and a receipt is printed.
It couldn’t be simpler. And on the back end, that simple process is extrapolated into comprehensive data by our state-of-the-art business intelligence system. It provides historical, current, and predictive views of operations, with web-enabled, user-controlled access available 24/7 for on-demand reporting and delivery scheduling.
Take a look at this hypothetical situation:
Non-DCC Enabled ATM: The holder of a US dollar account is travelling to the UK and wishes to withdraw £200. With a non-DCC ATM, at the moment of withdrawal, the cash is dispensed but the total cost of the transaction is unknown. A day or so later (longer if the customer is not using a mobile banking platform), the customer’s statement will show the USD amount leaving their account – this total amount is a combination of the £200, but potentially at an unknown rate and margin. This means our cardholder does not know how much they were charged for the FX transaction, at the time of the transaction. The FX revenue on the transaction is earned by the card scheme (Visa/Mastercard), and also the bank that issued the card in the US.
Outcome: Given the strong likelihood that the exchange rate has moved, the customer ultimately can pay more for their transaction than if they had chosen the DCC offer.
alternatively, comparing this to:
DCC Enabled ATM: If the ATM is DCC-enabled, however, greater transparency underpins the transaction. In this case, the holder of the dollar account is given the option to accept DCC with the rate, and any margin displayed to them, when they withdraw their £200. Through accepting DCC, they know exactly what the transaction will cost them in USD and what will be taken from their account. On top of this, any revenue generated through the FX transaction goes directly to the ATM owner, not the card scheme or the US bank.
Outcome: Clearer budgeting for the customer, more accurate foreign exchange rates, and FX revenue going to the ATM host. And a better-informed customer.
Behind the scenes, a Fexco DCC@ATM enabled ATM offers an extensive suite of 20+ management dashboards which cover:
- Programme management and performance
- Financial reporting (settlement and reconciliation)
- Commission calculation
- Flexible export mechanisms: CSV, PDF, XLS
- Data warehouse feeds are available
- Visibility into performance across estate and growth
- Opportunity analysis
And what’s more, DCC@ATM also offers multilingual support for a truly international service. It is a fully white-labeled product, with customisable bespoke reporting available for an experience that’s tailored for how you work, nothing less.
With operations in 60+ countries and €34+ billion annual processed transactions, DCC@ATM is the safest and most popular choice for foreign transactions at local ATMs.
Head of Global ATM