ATM Benchmarking Study 2016 and Industry Report - Accenture

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ATM Benchmarking Study 2016 and Industry Report - Accenture
ATM Benchmarking
Study 2016 and
Industry Report
ATM Benchmarking Study 2016 and Industry Report

#02
Contents

#05   Foreword

#06   Executive summary

#07   ATMIA Benchmarking context

#08   Industry landscape

#12   ATM evolution and
      branch modernisation

#14   The relevance of ATMs for the
      purpose of financial inclusion

#15   Key findings from ATMIA’s
      ATM benchmarking 2016
      #16 Cost and profitability dynamics
      #18 Increased ATM functionality
      #23 ATM crime and fraud management

#26   Conclusions
                                            #03
ATM Benchmarking Study 2016 and Industry Report

#04
Foreword
The results of the third round of global ATM benchmarking in 2016 reinforce both the
central position the ATM occupies in today’s omni-channel1 banking environment and
the fact that there is a still a long way to go to reach optimisation in operating this
powerful self-service technology.

The benefits of investing in benchmarking include gaining new strategic direction,
significant cost saving and improved performance. Even today, though, businesses
continue to underestimate the power of benchmarking as a tool for continuous
improvement. With cost controls still high on the agendas of financial institutions,
it’s even more important now to use the benchmarking tool for objective
measurement of performance.

This report sketches the current global ATM landscape before delving deep into
the vast range of metrics our study has developed since its inception. You will also
thoroughly enjoy the section on the growing list of Value Adding Services at ATMs.

We set out to provide fresh insights into the performance, cost and profitability
structure of ATM estates of participants. A comparison of the results of three
separate ATM surveys between 2011 and 2016 shows the evolving trends in our
industry across all the most important metrics of ATM operational performance. In
particular, this new study reveals that there are several ongoing inconsistencies in
the way the ATM industry manages its costs. In fact, there is clearly still considerable
scope for improving cost efficiencies across the ATM operational lifecycle.

In an environment of intense competition with “disruptive” technologies in the
electronic payments space, in which some banks may even face a threat of
disintermediation, and in a time when the costs of compliance and of migrating to
new operating systems continue to pose a challenge, cost optimisation in the ATM
industry has become nothing less than a competitive necessity.

I’d like to thank Accenture’s team for another powerful study giving ATM deployers,
whether banks or IADs, a step-by-step approach to increasing the efficiency of their
estates. I’d also like to place on record my sincere appreciation for Ron Delnevo’s
strong support for this third round of benchmarking.

June, 2016

Michael Lee

CEO
ATMIA

                                                                                                                                 #05

1
    Omni-channel banking: provision of access to financial services across a variety of channels with a consistent interaction
ATM Benchmarking Study 2016 and Industry Report

             Executive summary

          The ATM channel is still maintaining its             ATM provides leverage for the provision of           undertaking against the ever-present
          central role as a core banking touchpoint            customer convenience services that often             threat of criminality, this is having cost
          with the consumer and has become an                  provide fee-based-revenues to the ATM                implications, with a notable increase in
          integral part of the banking omni-channel            operator. The wide selection of services             security and fraud-investigation costs
          experience, not only playing a key role in           made available at the ATM that emerged               registered between 2012 and 2014.
          the broad context of modern banking but              during the previous study of 2012, and
          also being a major enabler of mission-               which appeared to be selectively focused             Overall and despite having been
          critical “access to funds” functionality             during the 2014 study, now appears to                introduced as long as 50 years ago, the
          within financial inclusion initiatives. The          have been further focused to a broader               ATM remains central to the banking
          channel is taking an even more important             but more defined, range of services.                 industry in what appears to be a
          role as branch network optimisation leads                                                                 complementary role to the more recently
          to a reduction in the number of branches             The trend towards introducing cash                   introduced electronic payments facility.
          while consumers still express a preference           recycling ATMs is likely to accelerate               ATMIA and Accenture believe that the
          for banks with a physical presence2.                 around the globe as highlighted by ATM               ATM will retain its importance for banks
                                                               Marketplace based on a comprehensive                 and consumers alike in the foreseeable
          Following the success of the previous                industry survey3. The well-established               future and that the untapped potential
          ATM benchmarking exercises and                       success of this innovation in a number               for cost optimisation, highlighted
          the positive feedback received by                    of markets, particularly Asia, justifies             during the course of the three rounds
          participating organisations, ATMIA has               a world-wide commitment to its                       of benchmarking, will ultimately lead to
          decided to undertake a third round of                introduction that sometimes necessitates             an evolution of ATM operating models,
          ATM benchmarking and is pursuing a                   changes in national laws and central bank            including further enhancements of the
          partnership with Accenture, one of the               regulations, as well as innovation by ATM            transaction sets available at ATMs.
          leading advisory and technology services             networks. With bank branches seeking
          provider to the financial services industry,         cost efficiencies in almost every market,
          for the purpose of developing this                   this service will be core to efficient cash
          industry report.                                     management and vital to the smooth and
                                                               convenient circulation of cash.
          Findings from the third round have
          confirmed the conclusions from the                   The positivity in relation to expanded
          previous two in terms of the untapped                transaction sets is in stark contrast
          cost efficiency that is still available within       to negative connotations surrounding
          the ATM industry and of the evolving                 the increased number of ATM crime
          role of the ATM in modern banking. The               prevention measures that are reportedly
#06       ATM is a channel through which multiple              being rolled out in many ATM estates.
          current account-related services are made            While this is a reflection of the intensity
          available to consumers. In addition, the             of the battle that the industry is

      2
          Bank Branch Transformation – Towards Affordable Customer Service, Ron Delnevo, Retail Banking Forum - Vienna, November 2014
      3
          ATM Marketplace, ATM Future Trends 2015
ATMIA Benchmarking context

Following the success of the first two        As in the case of the two previous           For the purpose of this analysis, and
rounds of ATM benchmarking studies, and       benchmarking exercises, anonymous            with the particular objective of releasing
the feedback received from participating      data was gathered across the key areas       the ATMIA ATM benchmarking study
organisations, ATMIA decided to pursue        of the ATM value chain, with the purpose     2016 industry report, ATMIA has decided
a third benchmarking round. On this           of providing participants with renewed       to partner with Accenture, one of the
occasion 43 ATM operators participated        insight in the performance, profitability    leading strategy, consulting, technology,
in the exercise, a slightly increased         and cost structure of the ATM estates.       digital and outsourcing financial
number of participants over the second        This is coupled with insights on the         services provider.
round. Among these there is a core of 27      evolution of the ATM functionality
participants that have taken part in one      (e.g. Value Added Services, or VAS) and      As on the previous two occasions, the
of the previous two rounds and, amongst       with added detail on fraud management        industry report illustrates the general
these, there are some of the largest ATM      and prevention.                              findings from the benchmarking exercise
operators globally and players whose ATM                                                   on a “base 100 normalised index” in order
business is core to their strategy.           The value of such insights is particularly   to guarantee the confidentiality of the
                                              important as the ATM installed base          data submitted by the participants and
The third round of benchmarking shares        keeps growing, while the ATM remains         protect sensitive information.
the structure of the second round with        a core banking channel within the
the addition of few more data-points          context of branch innovation and             Once again, the underlying philosophy of
within the “Transaction Statistics”, “Cash    omni-channel banking, and is also            the exercise is that through cooperation,
Management” and “Fraud, Crime and             proving a key enabler to financial           the ATM industry, together with ATMIA,
Dispute” sections. The questionnaire          inclusion initiatives designed to foster     will be able to provide pointers leading to
is now deemed to be complete to the           social and economic development in           improved efficiency and performance of
point that it is expected to be rolled over   many emerging economies.                     ATM businesses.
without any further modifications into
the next rounds of benchmarking.

                                                                                                                                         #07
ATM Benchmarking Study 2016 and Industry Report

                                                 Industry landscape

           The original concept of ATM appears to                                                           The installed base of ATM machines is
           have developed rapidly across different                                                          growing with an estimated 3.2 million
           countries at the same time out of two                                                            units installed in 20145, up by 12.4%
           initial similar inventions called the                                                            compound annual growth rate (CAGR)
           Bankomat. “By 1971, manufacturers were                                                           from the 2.0 million units in operation in
           mushrooming and building ATMs around                                                             2010. The numbers are projected to grow
           the world, including in the UK, U.S. and                                                         to over 3.5 million by 2020.
           Japan”4. The industry has progressed
           significantly since those days and, while
           the ATM is still core to the provision
           to access to cash, its role within retail
           banking is evolving rapidly.

             Fig. 1 – Number of ATM (world, millions of units)

                                                 4.5                                                                                                                                      4.8%                              4.3
                                                                                                                                                                                                                 4.1
                                                                                                                                                                                                 4.0
                                                 4.0                                                                                                                             3.8
                                                                                                                                                                3.6
      Number of ATMs (world, million of units)

                                                 3.5                                                                                            3.4
                                                                                            12.4%
                                                                                                                                3.2
                                                 3.0
                                                                                                                2.6
                                                 2.5                                           2.4
                                                                               2.1
                                                 2.0          2.0

                                                 1.5

                                                 1.0

                                                 0.5

                                                 0.0
                                                            2010             2011             2012            2013             2014          2015 (f)        2016 (f)         2017 (f)        2018 (f)         2019 (f)   2020 (f)
                                                 Source: World Bank statistical database (http://data.worldbank.org/indicator/FB.ATM.TOTL.P5), BIS Red Book (http://www.bis.org/list/cpmi/tid_57/index.htm),
                                                 ECB (https://www.ecb.europa.eu/paym/intro/book/html/index.en.html), RBR (http://www.rbrlondon.com/about/G20_Press_Release_050116.pdf), Accenture analysis

#08                                               Europe                                     East Asia & Pacific                    Middle East & North Africa
                                                  Central Europe and the Baltics             North America                          Sub-Saharan Africa
                                                  Central Asia                               Latin America & Caribbean              World (total)

             4
                                Quote from: http://www.bloomberg.com/view/articles/2013-03-27/how-the-atm-revolutionized-the-banking-business
             5
                                World Bank’s statistical portal (data.worldbank.org/indicator/FB.ATM.TOTL.P5?page=1), ECB, BIS, Accenture analysis
Growth happened in all regions with the                                                     number of units installed during the year    ATM penetration increased globally to
        exception of Europe where the number of                                                     2014. Nonetheless the ATM penetration        43.97 ATM / 100k in 2014, a 52.1%
        installed ATMs shrunk by a 6.0% CAGR                                                        in China is still low with 55.03 ATM per     increase from the 28.90 ATM / 100k in
        between 2010 and 2016. The fastest                                                          100,000 people (henceforth referred as       2010. Nonetheless, in Europe, in line with
        growing region is the Asia Pacific, with                                                    “ATM / 100k”) in 2014, growing rapidly       the decrease of installed ATMs, there is a
        Central Asia growing at a 37.2% CAGR                                                        from the 9.62 ATM / 100k of 2006, but        drop in penetration from a peak of 83.42
        and East Asia and Pacific growing at a                                                      far from reaching yet the higher ATM         ATM / 100k in 2010 to 64.78 ATM / 100k
        26.2% CAGR over the five-year period.                                                       penetration of other countries. North        respectively in 2014 as illustrated in
        As at the end of 2014, the largest ATM                                                      America remains the region with the          Fig. 2.
        market is China, with 750,770 units,                                                        highest penetration, with 222.27 ATM /
        which means that China overtook the US                                                      100k at the end of 2014.
        as the largest ATM market in absolute

        Fig. 2 – ATM penetration by region (ATM / 100,000 people)

                                                                                                                                                                    North America
                                           240
ATM penetration (ATM per 100,000 people)

                                           220

                                           200                                                                                                                      OECD members

                                           180                                                                                                                      European Union
                                                                                                                                                                    Central Europe and the Baltics
                                            80
                                                                                                                                                                    East Asia & Pacific
                                            60
                                                                                                                                                                    Europe & Central Asia
                                            40
                                                                                                                                                                    Middle East & North Africa
                                            20                                                                                                                      World
                                                                                                                                                                    Latin America & Caribbean
                                             0
                                             2004         2005          2006          2007          2008          2009   2010   2011      2012     2013      2014
                                            Source: World Bank (http://data.worldbank.org/indicator/FB.ATM.TOTL.P5)

                                                                                                                                                                                                     #09
ATM Benchmarking Study 2016 and Industry Report

         This dynamic in Europe can be due to                              withdrawals, hinting at a re-balancing
         a number of reasons, including the                                of cash vs. electronic payments usage,
         consolidation of the banking industry                             potentially driven by phenomena like
         that is continuing in some parts of                               the growing adoption of e-commerce
         Europe. This could also be due to some                            and electronic payments. Figs 3 and
         extent to the rapid growth of electronic                          4 illustrate the European and global
         payments at Point of Sale (POS) vs ATM                            transaction trends at POS and ATM.

            Fig. 3 – Value and number of ATM and POS transactions in Europe                                     Fig. 4 – Value and number of ATM and POS transactions globally

                                                                                                                                                                                                      11.25%
                                                                                                                                                                                                      CAGR
                                                                                              7.43%
                                           3000                                               CAGR                                              20.000
                                                                                                                                                                                                      16.42%
                                                                                                                                                                                                      CAGR
      Value of transactions ($Bn)

                                                                                                            Value of transactions ($Bn)

                                                                                              2.51%                                             15.000
                                                                                              CAGR
                                           2000
                                                                                                                                                10.000

                                           1000                                                                                                  5.000
                                              2010                                    2014                                                           2010                                      2014

                                                                                                                                                                                                      8.26%
                                                                                                            Volume of transactions (millions)

                                                                                                                                                                                                      CAGR
      Volume of transactions (millions)

                                          20.000                                                                                                60.000
                                                                                              0.79%
                                                                                              CAGR

                                          10.000                                              7.42%                                             30.000
                                                                                              CAGR
                                                                                                                                                                                                      11.47%
                                                                                                                                                                                                      CAGR
                                              0                                                                                                     0
                                              2010                                    2014                                                          2010                                       2014

          Source: World Bank database (http://data.worldbank.org/indicator/FB.ATM.TOTL.P5), Statista (www.statista.com),
          BIS Red Book (http://www.bis.org/list/cpmi/tid_57/index.htm), ECB (https://www.ecb.europa.eu/paym/intro/book/html/index.en.html), Accenture analysis

                                          ATM        POS                            GDP   1.02%                                                                                                GDP    4.38%

           Overall, whilst ATMs are central for
           access to cash purposes and central to
           the banking experience, in some markets
           their role has evolved from being a
#10        primary banking customer touchpoint to
           a channel complementary to branch,
           mobile and internet banking.
ATMs are central
for access to cash...
    and the banking
       experience. In
some markets their
  role has evolved...
     to be a channel
  complementary to
 branch, mobile and
   internet banking     #11
ATM Benchmarking Study 2016 and Industry Report

          ATM evolution and
          branch modernisation

      ATMs have evolved significantly from                     MultiCarta in Russia provides customers              There is still room in many markets for a
      their invention and early developments of                with internet banking access and credit              significant expansion of the transactions
      nearly 50 years ago. Originally brought in               card application facilities through their            offered at ATMs in a self-service
      to reduce congestion in branches and to                  ATMs; Leto Bank, another Russian                     perspective. Cash recycling – both notes
      prevent banks from having to extend their                organisation, offers customers express               and coins – is likely to be one increasingly
      opening hours in order to serve a large                  loans through its ATMs; PrivatBank                   commonplace service offering, as ATMs
      number of customers, the number and                      in Ukraine allows Western Union                      replace deposit-taking roles previously
      type of services provided at ATMs have                   international remittances and currency               fulfilled by bank tellers. This is particularly
      expanded significantly.                                  exchange capabilities; some bank                     relevant in markets where bank branch
                                                               branches in the UK offer ATM cheque and              networks are being revisited or where
      For example, ATMs in the UK offer                        cash deposits, statement printing, direct            bank branch numbers are declining, such
      consumers the ability to top-up prepaid                  debits and standing orders management,               as in Europe where in 2013 5,300 bank
      mobile phones and to make charity                        and credit transfer facilities6.                     branches were sold or shut based on
      donations; in the US, ATMs sell stamps;                                                                       Reuters’ estimates7.

      Fig. 5 – Evolution of ATMs and growth of their functionality

                                                  Timeline                                Functionalities

             Initial developments               Early 1960’s               • Cash withdrawals (no return of card)

                                                                           • Cash withdrawals
                                                                           • Account balance check
                  Basic ATM                   1970’s to 2000’s             • Printed receipt
                                                                           • Limited envelope cash deposit

                                                                           • Mini-statements
                                                                           • Mobile top-ups
                                                                           • Ticketing
                                                                           • Utilities payments
            Multi-functional ATM              2000’s to 2010’s             • Mobile and prepaid top-ups
                                                                           • EMV
                                                                           • Cash recycling
                                                                           • General advertising
                                                                           • Money transfers

                                                                           • Targeted marketing and advertising
                                                                           • Information services
             ATM in omnichannel                                            • Multi-media ATMs
                                               2010’s onwards              • Rapid dispensing capabilities
               user experience
#12                                                                        • International remittances
                                                                           • Contactless

      Source: Accenture analysis

      6
          ATM Marketplace, “The humble ATM: So much more than a cash machine”, 26th January 2016
      7
          Reuters – Top European banks close or sell 5,300 branches in 2013, April 11th 2016
Even where bank branch networks                          Branch re-design is extending the
are being expanded, the increase of                      internet self-service experience into a                 United Bank for Africa (UBA) operates
functionality and the core self-service                  physical banking environment, providing                 across 19 African countries and handles
feature of the ATM proposition is not                    financial institutions with the ability                 over 2 million transactions per day across
only enabling ATM operators to seek new                  to replace clerical activities and focus                multiple channels ranging from over 600
types of revenues but also facilitating                  branch staff to higher-value customer                   branches, 1700 ATMs, 13,400 POS, internet
branch modernisation in pursuit of cost                  interaction activities. It is a space and               banking, mobile banking and social media.
savings and better performance of the                    resource optimisation exercise, united                  Through a real-time transaction monitoring
retail franchise.                                        with a user experience re-think, by giving              platform, UBA is able to proactively
                                                         to the branch a completely new structure.               manage transaction performance, have a
Development of the internet and mobile                   Enhanced ATMs, multifunction ATMs,                      view of customer behaviour and monitor
banking has radically changed the way                    deposit taking ATMs and cash recyclers,                 third party hosted switches and integrated
retail and corporate customers bank                      video teller ATMs are the core building                 applications across all banking channels
today. Despite this, branch banking and                  blocks around which to conceptually                     including multi-functional ATMs8.
the ATM are still core to the overall                    re-think the customer journey and design
banking relationship, even if their role has             a branch with welcoming spaces for
transformed to a choice of confidence                    customer engagement.
                                                                                                                 Royal Bank of Canada (RBC) ’s mission
and convenience. With the increase
                                                                                                                 is to be the undisputed leader for financial
of functionality and the evolution of                    While ATMs are a core enabler for
                                                                                                                 services in Canada and to be the leading
hardware and software, ATMs have                         branch redesign, they cannot be taken
                                                                                                                 wealth management provider globally.
become de-facto versatile instruments of                 in isolation for the purpose of modern
                                                                                                                 RBC’s client interaction strategy provides
customer engagement that are central                     banking as the underlying analytics
                                                                                                                 real-time support at the point of the client
to the branch re-design into a high-tech,                enable an omni-channel banking
                                                                                                                 interaction in a full service face-to-face,
self-service, technology-intensive banking               experience by providing a coherent
                                                                                                                 an assisted, or in on-line self-service
experience that combines efficiency with                 content and engagement across all of
                                                                                                                 channels including ATMs. The visibility
the value of a personalised, but time                    the customer’s touch points, including
                                                                                                                 over customer behaviour provides with the
efficient, interaction.                                  the ATM.
                                                                                                                 ability to act on insights from behavioural
                                                                                                                 patterns. The ability to engage across all
                                                                                                                 channels, including self-service channels
                                                                                                                 like multifunction ATMs9.

                                                                                                                                                                #13

8
    Source: Inetco Insight, case study: UBA. 13th January 2016
9
    Source: blogs.teradata.com, “RBC: Doubling Success & Earning the Right to be the Client’s First Choice” 17th September 2015
ATM Benchmarking Study 2016 and Industry Report

           The relevance of ATMs for the
           purpose of financial inclusion

      Access to financial services is one of the               There are various financial inclusion                    three years”16 practically officialising
      key social and economic challenges of                    initiatives, each of very different                      the role of the ATM as a core channel
      modern times. Today there are 2 billion                  nature, whose success and effectiveness                  for the provision of banking financial
      adults worldwide without access to a                     ultimately relies on the ability of                      services to the underbanked. As the cost
      basic financial services account and,                    beneficiaries to access funds either                     of establishing wide branch networks
      while this figure is still high, it represents           through electronic payment acceptance                    increases, in particular in rural locations,
      significant progress as the number people                or through a cash withdrawal.                            it is proving challenging, leading to a key
      worldwide with an account “grew by 700                                                                            barrier to universal access to formal bank
      million between 2011 and 2014. 62%                       For example, the government in India                     accounts. Multi-function ATMs can act
      of the world’s adult population has an                   aims to have every Indian household with                 as a “mini branch” where customers can
      account; up from 51% in 2011”10 based                    a bank account and an ATM within 15                      conduct the vast majority of transactions
      on World Bank statistics. While multiple                 minutes’ walk of every Indian citizen by                 as they could in a bank branch.
      propositions have been developed to                      201613. Starting from a low penetration of
      increase financial inclusion, ranging                    13 ATM / 100k people, this is a significant              These are only two of the many case
      from mobile money solutions and                          ambition that the government has set for                 studies available, suggesting the
      basic banking financial services, to the                 itself and, for that purpose, the Reserve                complementary nature of cash access
      development of banking agent networks                    Bank of India “decided to merge both the                 and electronic payments, but is also
      from small retailers, the provision of basic             Financial Inclusion Fund and Financial                   pointing to the ATM as one of the
      financial services depends on the ability                Inclusion Technology Fund into a single                  most important channels, which can
      to leverage low cost channels in order                   Fund — Financial Inclusion Fund (FIF)”14 to              be leveraged for the provision of basic
      to be able to provide affordable basic                   foster the expansion and reach of banking                financial services to the underserved.
      account and payments services.                           services. “Reserve Bank of India panel
                                                               has recommended that the 2,000 crore                     In this context the ability to run a cost
      In this context, the ATM is proving                      Financial Inclusion Fund should be utilised              effective and sustainable ATM business
      its value and potential for financial                    to encourage installation of ATMs”15                     is critical, not only for the success of the
      inclusion. “Banking agent transaction                    in rural and semi-urban centres. In his                  financial services industry, but also for
      costs can beat branch costs by 50 percent                2016-17 budget speech, finance minister                  the social good. Based on these premises,
      [compared to banking branch transactions                 Arun Jaitley stated that “To provide better              the ATMIA ATM benchmarking acquires
      costs]; automatic teller machine (ATM)                   access to financial services, especially in              even more relevance, providing ATM
#14   transaction costs in high-traffic locations              rural areas, we will undertake a massive                 operators with a baseline reference for
      can beat branch costs by as much as 90                   nationwide rollout of ATMs and micro                     the improvement of their ATM
      percent”11 based on CGAP’s12 analysis.                   ATMs in post offices over the next                       portfolios’ performance.

      10
         Source: World Bank, The Global Findex Database (http://www.worldbank.org/en/programs/globalfindex);
      11
         CGAP Focus Note “Advancing Financial Inclusion though Use of Market Archetypes”, April 2013
      12
         CGAP (the Consultative Group to Assist the Poor) is a global partnership of 34 leading organisations that seeks to advance financial inclusion
      13
         NCR Blogs, “ATMs seen as key to India’s financial inclusion revolution”, 17th May 2016
Key findings from ATMIA’s
     ATM benchmarking 2016

ATMIA, in partnership with selected                   ATM estates. The value of such insights                Others, meanwhile, reflect findings from
consultants, collected statistics from                is especially important as ATMs are core               the full sample.
43 ATM operators on global basis.                     to branch modernisation, within an
Interestingly, 65% of these are continued             omni-channel banking concept, and a                    In the same way that the second
participants from the previous two                    core access to cash channel in financial               benchmarking round confirmed the
rounds, a figure similar to the one                   inclusion initiatives. With cost controls              findings from the first benchmarking
registered between the first and the                  being kept high on the agendas of all                  study, this round re-confirmed the
second round of benchmarking. Of these,               financial institutions, and particularly in            findings from the two previous rounds.
18 participants were from Europe, nine                times of more precise capital allocation               As such, the analysis has gone deeper
from Asia, five from the Middle East and              due to tighter compliance requirements,                in respect of some of the main topical
Africa and 11 from the Americas.                      such a capital intensive channel that                  areas: in particular, for cost performance
                                                      is also central to customer interaction                and the profitability of the channel, the
The third round of ATM benchmarking                   benefits from an objective view of                     increased functionality of the ATM and in
was based on the categories and                       performance and a way to compare                       connection with fraud management.
metrics of the second round, with the                 against industry best-practices.
addition of some targeted additional
data in the Estate Statistics, Transaction            Some of the statistics gathered are
Management, ATM Performance                           included in this report below on a “base
Monitoring and Fraud, Crime and                       100 normalised index” basis in order to
Dispute sections.                                     provide an illustration of the general
                                                      conclusions from the third ATMIA ATM
As on the previous occasion, the purpose              benchmarking round. Some graphs and
of this survey was to provide participants            statistics include most of the sample, but
with fresh insights into the performance,             not all of the 43 respondents, since some
cost and profitability structure of their             submissions were not fully completed.

                                                                                                                                                          #15

14
   The Times of India, “Rs 2,000 crore fund to push financial inclusion: RBI, 15th October 2015
15
   The Hindu BusinessLine, “Use 2,000-cr financial inclusion fund to set up more ATMs, says RBI panel”, 15th December 2015
16
   The Times of India, “Rs 2,000 crore fund to push financial inclusion: RBI, 15th October 2015
ATM Benchmarking Study 2016 and Industry Report

         Cost and profitability dynamics
         Unsurprisingly the analysis of the cost                                  organisations from the same region, likely                                                     data sample. Fig. 7 provides the graphical
         and profitability of the channel has,                                    reflecting processing cost similarities on                                                     illustration of the updated statistics from
         once again, proved consistent with the                                   a geographical / supplier basis. This is a                                                     the third round of benchmarking. In this
         findings of the previous studies. The                                    working hypothesis that will need to be                                                        case, the correlation between the
         cost per transaction, as illustrated in                                  validated by the participation of larger                                                       frequency of replenishment and the cost
         Fig. 6, highlights no correlation with the                               groups of ATM operators from the same                                                          per replenishment per year is a common
         number of transactions or the size of the                                region in subsequent studies.                                                                  feature that has been consistently
         ATM estate. This said, the analysis and                                                                                                                                 highlighted since the first benchmarking
         the comparison of data across the three                                  Cost per replenishment has, for the third                                                      exercise of 2012.
         benchmarking studies highlights that                                     time, provided the only correlation with
         there are similarities of costs for                                      scale to be found in the whole of the

        Fig. 6 – Cost per transaction vs. number of transactions                                              Fig. 7 – Cost per replenishment vs. number of replenishments per year

                                                        0.12                                                                                                                       0.60
                                                                                                        Cost of replenishment events per year per ATM

                                                  R2=                                                                                                                        R2=
      Cost per transaction

                                                         Number of transactions                                                                          Average number of replenishment events per year per ATM
#16
                             Source: ATMIA ATM Benchmarking Study 2016                                                                                  Source: ATMIA ATM Benchmarking Study 2016

         N.B Quantifiable metrics have been removed to anonymise results
The study has, for the second time,           When looking in depth at the economic          Fig. 8 – ATM profitability
included the collection of full costing       performance of the channel, larger
and full revenue data, with the renewed       financial institutions with large debit             +92.5%
conclusion that only a small proportion       card portfolios and large installed ATM
of ATM operators are running their ATM        estates tend to be amongst the worse-
                                                                                                 100
business profitably. Amongst these,           performing ATM operators, in terms of
“Independent ATM Deployers (IADs)”            ATM profitability, out of the full sample
represent the majority, with the few          of all participants.
banks represented proving to be more an
exception than the rule. From a banking       ATM profitability, as illustrated in Fig. 8,
perspective, the ATM channel is still         is proving to have significant variance.
                                                                                                 -278.6%
very much run as a lower cost option to       While the above mentioned cost /
bank tellers. Exacerbating the negative       revenue allocation policies between                                Profittability of ATM channel
economic performance of the channel are       debit card and ATM product lines have          Source: ATMIA ATM Benchmarking Study 2016
commonly cost and revenue allocation          a part to play in this, there are also a
policies that dictate no reverse-             significant number of cost inefficiencies
interchange recognition from the debit        that need to be taken into account. The
card product line to the ATM in case of       industry is proving once again to have an
on-us transactions. This not only inflates,   untapped potential of cost optimisation,
inappropriately, the profitability of the     as indicated by the lack of benefit from
debit card business but also drags the        economies of scale.
ATM economic performance into losses.

                                                                                                                                                 #17
ATM Benchmarking Study 2016 and Industry Report

       Increased ATM functionality
       Since the very first benchmarking round,              Fig. 9 provides an illustration of the VAS               preferences for VAS have evolved over
       the data collected about the increased                that are currently available or are planned              time. The 2012 benchmarking study
       functionality of ATMs (otherwise referred             to be made available by participating                    registered a broad spread of interest
       as Value Added Services, or VAS)                      ATM operators.                                           to roll out an array of additional
       provided evidence of the expanding role                                                                        functionality at the ATM, while by 2014
       of the ATM channel for the provision of               The fact that a significant part of the                  an increased selectivity was apparent
       services well beyond cash withdrawals                 sample participated in both the 2014 and                 concerning which application to make
       or the related “card / transaction-                   2016 benchmarking study, and provided                    available across the ATM channel.
       supplementary” services (e.g. balance                 the data for this section, enables a
       check or PIN change).                                 meaningful comparison of how the

       Fig. 9 – Value Added Services

           Services offered or planned to be rolled-out                                                                     Not willing to add service

      100%
        100%                                          0%0%                                                        0%0%                                   100%
                                                                                                                                                           100%
                                                                             Balance enquiries
                                                                              Printed receipts
                                                                                PIN services
                                                                              Mini statements
                                                                               Bill payments
                                                              Account transfers (cardholder owned accounts)
                                                                            Cardless withdrawal
                                                                              Mobile top-ups
                                                             Person to person domestic remittances (initiated)
                                                             Person to person domestic remittances (collected)
                                                                                 Couponing
                                                                             Pass book printing
                                                                          Payment of taxes / fines
                                                                             Charity donations
                                                                             Licences renewals
                                                                              E-Wallet top up
                                                                                Stamps sales
                                                          Person to person cross-border remittances (initiated)
                                                          Person to person cross-border remittances (collected)
                                                                        Third party loyalty rewards
                                                                               Lottery tickets
                                                                            Sports event tickets
                                                                        Entertainment event tickets
                                                                       Travel tickets (urban e.g. bus)
           Planned 5 Years                                         Travel tickets (extra-urban e.g. train)
#18        Planned 1 Year                                          Travel tickets (extra-urban e.g. flight)
           Offered now                                               Road tolls payment / prepayment

          Source: ATMIA ATM Benchmarking Study 2016
#19
ATM Benchmarking Study 2016 and Industry Report

      The selectivity is becoming even more              selected range of services that are related   rounds, the priority given to specific value
      evident from the results of the third              to shifting further services from teller to   added services appears to have gained
      benchmarking round. The top VAS in the             ATM and increased consumer convenience        uniformity across geographies.
      first four positions continue to be core           (e.g. bill payment).
      ancillary services to withdrawals and card                                                       The range of selected services hints at the
      management-related services. Fig. 10               Another observation is related to the         fact that there is an increased selectivity
      provides an illustration on how VAS ranking        distribution of the availability of these     of the services available through the
      has evolved during the course of the last          services amongst participants on a            ATM and that this selectivity has become
      two rounds of benchmarking.                        geographical basis. While six years ago       more prominent over time, but that
                                                         the relevance of available and planned        VAS available on the ATM fall mainly
      Other VAS that appear to gain                      VAS was related to the geographical           in two groups: current account services
      prominence are either current account              location of the ATM fleet in question, over   (intended as banking services otherwise
      services (e.g. account transfers) or a             the course of the three benchmarking          available on other channels) and

      Fig. 10 – Value Added Services relevance comparison between 2016-14

                            Value Added Service                        2016        2014       Status
       Balance enquiries                                                      1           1
       Printed receipts                                                       2           2
       PIN services                                                           3           3
       Mini statements                                                        4           4
       Bill payments                                                          5           7
       Account transfers (cardholder owned accounts)                          6           6
       Cardless withdrawal                                                    7        13
       Mobile top-ups                                                         8           5
       Person to person domestic remittances (initiated)                      9        14
       Person to person domestic remittances (initiated)                    10         15
       Couponing                                                              11       12
       Pass book printing                                                   12         19
       Payment of taxes / fines                                             13         17
       Charity donations                                                    14         10
       Licences renewals                                                    15         24
       Stamps sales                                                         16         27
       E-Wallet top up                                                      17         22
       Person to person cross-border remittances (initiated)                18         18
#20    Person to person cross-border remittances (collected)                18         18

      Source: ATMIA ATM Benchmarking Study 2016 & 2014
consumer convenience services (intended        coins will become even more important        services. These will be focused either to
as fee-bearing services provided on behalf     than they are today. ATMs with this          enable further cost efficiency through
of third parties that may or may not be        functionality could present a revenue        the provision of current account-centric
available at teller).                          opportunity for ATM operators, whilst also   services or in the development of fees /
                                               playing a major part in optimising the       revenue generating business models
While today statistics about cash              cost of cash management.                     based on the provision of third
recycling have been collected separately                                                    party services to consumers as a
under the Estate Statistics section, it will   On the basis of this data, the working       convenience driver.
be interesting to see if cash recycling        hypothesis is that ATMs will evolve
becomes a significant VAS in the coming        into more different, for-purpose built
years. As bank branches are being              range of value propositions that will be
redefined, ATMs that provide deposit           targeted to the provision of a defined,
services and full recycling of notes and       and numerically limited, range of

                                                                                                                                        #21
ATM Benchmarking Study 2016 and Industry Report

               Fraud poses a
      significant challenge
             to the industry
              and increasing
            investment and
       effort is required to
                   address it
#22
ATM crime and fraud management

      As the 2014 report highlighted, fraud                                                  throughout estates and an overall
      and crime are having an impact on the                                                  increased incidence of the related
      industry, not only in terms of losses but                                              costs over the total operating costs.
      also in terms of increased effort from
      ATM operators in respect of investment of                                              Fig. 11 provides an illustration of the
      capital and resources aimed at preventing                                              measures reported by participants
      fraud. This is resulting in an increase in                                             for the purpose of the third round
      fraud prevention measures implemented                                                  of benchmarking exercise.

      Fig. 11 – Security measures quoted by number of respondents

                                                                                                                  Number of respondents quoting the measure
                                                                                                            0%                                                100%
                                                                                         Building alarms
                                                      Anti-cash trapping physical prevention measures
                                                                      Anti-skimming jamming measures
                                                 Remote monitoring for unusual ATM device behaviour
                                                                                   Anti-ram raid bollards
                                                                       Anti-skimming detection sensors
                                                                   Anti-card trapping detection sensors
                                                                                          CCTV coverage
                                                                       Mirror to detect shoulder surfing
                                                                            Have PIN pad shields/guards
                                                   Anti-ram raid anchorage plinths / anti-theft devices
Measure quoted by number of respondents

                                                                          ATM fascia and cabinet alarms
                                                           Enhanced physical security for cash shutters
                                                              Enhanced building and perimeter security
                                                         Enhanced ATM locking systems for the cabinet
                                                             Transaction encryption measures / MACing
                                          Transaction reversal fraud / dispenser manipulation detection
                                                   Remote monitoring for unusual transaction patterns
                                                                                   Other securty features
                                                                      Alarms in ATM security enclosures
                                                                   Anti-cash trapping detection sensors
                                                                               Anti-gas attack measures
                                                   Cash protection systems such as IBNS / dye staining
                                                       Internal cages / locking bars to protect cassettes
                                              Enhanced ATM locking systems for the security enclosure
                                                                Higher specification security enclosures
                                                                Anti-deposit trapping detection sensors
                                                                   Anti-solid explosive attack measures
                                            Sensor surveilance on the pin pad to detect false keyboards
                                                               Defensible spaces (painted lines) at ATMs
                                                                   ATM room smoke protection systems
                                                                          Security guards at ATM lobbies
                                                                                                                                                                     #23
      Source: ATMIA ATM Benchmarking Study 2016 & 2014
ATM Benchmarking Study 2016 and Industry Report

                                                 Fig. 12 – Security measures relevance comparison between 2016-14

                                                                      Fraud prevention measure                      2016    2014    Status
                                                  Building alarms                                                       1       1
                                                  Anti-cash trapping physical prevention measures                       2      12
                                                  Anti-skimming jamming measures                                        3       5
                                                  Remote monitoring for unusual ATM device behaviour                    4      18
                                                  Anti-ram raid bollards                                                5       4
                                                  Anti-skimming detection sensors                                       6      13
                                                  Anti-card trapping detection sensors                                  7      15
                                                  CCTV coverage                                                         8       2
                                                  Mirror to detect shoulder surfing                                     9      17
                                                  Have PIN pad shields/guards                                          10      18
                                                  Anti-ram raid anchorage plinths / anti-theft devices                 11       7
                                                  ATM fascia and cabinet alarms                                        12      11
                                                  Enhanced physical security for cash shutters                         13      19
                                                  Enhanced building and perimeter security                             14      16
      The fact that a significant part of the     Enhanced ATM locking systems for the cabinet                         15       6
      sample participated in the 2014 and 2016
      benchmarking, and that they provided        Transaction encryption measures / MACing                             16       3
      the data for this section, enables a        Transaction reversal fraud/dispenser manipulation detection          17       8
      meaningful comparison of investment
                                                  Remote monitoring for unusual transaction patterns                   18      14
      in fraud prevention measures that has
      been evolving over the course of the        Other securty features                                               19   NEW
      last two years.
                                                  Alarms in ATM security enclosures                                    20       9

      Comparing the results of the two rounds     Anti-cash trapping detection sensors                                 21      26
      of benchmarking, there has been a slight    Anti-gas attack measures                                             22   NEW
      increase in the reported number of fraud
                                                  Cash protection systems such as IBNS / dye staining                  23      21
      prevention measures, with a significant
      change of frequency with which the          Internal cages/locking bars to protect cassettes                     24      22
      various security measures are being         Enhanced ATM locking systems for the security enclosure              25      10
      implemented. Compared to the previous
      round, during which “Building alarms”,      Higher specification security enclosures                             26      20
      “CCTV coverage” and “Transaction            Anti-deposit trapping detection sensors                              27      27
      encryption measures / MACing” were
      the top three fraud prevention measures     Anti-solid explosive attack measures                                 28      28
      implemented, on this occasion the           Sensor surveilance on the pin pad to detect false keyboards          29   NEW
      three most frequently implemented are
                                                  Defensible spaces (painted lines) at ATMs                            30      29
      “Building alarms”, “Anti-cash trapping
      physical prevention measures” and “Anti-    ATM room smoke protection systems                                    31      25
#24   skimming jamming measures”. Fig. 12         Security guards at ATM lobbies                                       32      24
      provides an illustration of such changes
      between the 2014 and 2016 exercises.       Source: ATMIA ATM Benchmarking Study 2016
When analysing the data, one of the                                       Further analysis has highlighted a             Between the last two rounds, the
    working hypothesis was that the change                                    correlation between the number of security     data highlighted an increase of fraud
    in the estate characteristics (e.g. ATM                                   measures undertaken by an ATM operator         investigation costs in the range of
    locations) of the sample could have been                                  and the size of its portfolio as illustrated   30% to 53% throughout the sample
    the main driver for such a change but,                                    by Fig. 13. While no region appears to         of participants, regardless of their size.
    based on a few targeted interviews, it                                    be safe from ATM crime, there are also
    emerged that there has been a re-focus                                    interesting geographical patterns, with
    of investment in fraud prevention                                         ATM operators in Europe, North America
    measures because of the evolution of                                      and Latin America implementing a wider
    the nature of threat faced by the                                         range of number of security measures,
    ATM operators.                                                            regardless of the size of their portfolios.

    Fig. 13 – Number of security measures by size of ATM estate

                                                 R2=   0.52
Number of ATMs in portfolio

                                                                              Use of Security Measures
                              Source: ATMIA ATM Benchmarking Study 2016

                              N.B Quantifiable metrics have been removed to anonymise results

    Fraud poses a significant challenge to the                                to keep ATMs safe in the medium term,
    industry and increasing investment and                                    in particular for smaller estates located
    effort is required to address it. In general                              in areas where ATMs can be more
    terms, based on these trends, the amount                                  exposed crime.
    of security measures is expected to keep
    increasing leading to a question about the                                                                                                                            #25
    sustainability of the investment required
ATM Benchmarking Study 2016 and Industry Report

        Conclusion

      After nearly 50 years of existence, the        The ATM is a channel through which           two rounds of benchmarking. While these
      ATM channel is still proving to have           multiple services are provided to            investments are required for the safe-
      retained its central role as a core banking    consumers, both in an approach that          keeping of this core banking channel, the
      touchpoint with the consumer. While            appears to be pushing a self-service         increase of required resources and the
      initially this role was held on an exclusive   access to an increasing number of            increasing variety and complexity of the
      basis, at least for all “vanilla” operations   current account-related services, but        security measures required to operate an
      that were moved away from a counter to         also in terms of leveraging the channel      ATM estate to a reasonably secure level
      a self-service channel, nowadays the           in a more focused manner, for the            will keep increasing the ATM operating
      ATM has become one of the core                 provision of customer convenience            costs and may call into question the
      channels, complementing internet and           services that often provide fee-based-       sustainability of smaller estates.
      mobile banking. Its role is not only           revenues to the ATM operator. This
      continuing to be core to the financial         dynamic is emerging as a working             Overall and despite having been
      services industry but is also evolving into    hypothesis for the industry on the basis     introduced as long as 50 years ago, ATMs
      the provision of mission-critical “access      of the evolution of the value added          are still central to the banking industry in
      to funds” functionalities for financial        services that are made available through     what appears to be a complementary role
      inclusion initiatives.                         the channel industry-wide. The selectivity   to the more recently introduced electronic
                                                     of functionality that emerged during         payments facility. ATMIA and Accenture
      Nonetheless, once again on the occasion        the study of 2014, in contrast with an       believe that the ATM will still retain its
      of the third round of ATM benchmarking         ”all-out” development approach of 2012,      importance for banks and consumers alike
      undertaken by ATMIA, the channel is            is now appearing as a focus of ATM           in the foreseeable future but also that the
      proving to have an unexploited potential       operators on a well-defined range            untapped potential for cost optimisation
      for cost optimisation and profitability        of services.                                 and revenue generation will lead, in the
      enhancement. The fact that ATMs are                                                         medium term, to an evolution of ATM
      still considered in many cases as              By contrast, ATM crime prevention            operating models.
      ancillaries to debit card portfolios           measures appear to be proliferating,
      and as a sort of necessary evil for the        probably as a reflection of the struggle
      reduction of the overall branch banking        of the industry against the ongoing and
      operations does not do justice to an           ever more sophisticated attacks to which
#26   industry that has shaped the modern way        the channel is subject. The cost of crime
      of banking and that is core to all branch      prevention has increased during the two
      modernisation efforts.                         years that have passed in between the
#27
About Accenture                              About ATMIA                                   Contributors

Accenture is a leading global professional   The ATM Industry Association (ATMIA),         Massimo Proverbio
services company, providing a broad          founded in 1997, is a global non-profit       Global Managing Director
range of services and solutions in           trade association with over 6,000             Accenture Payment Services
strategy, consulting, digital, technology    members in 66 countries. ATMIA has            massimo.proverbio@accenture.com
and operations. Combining unmatched          chapters around the world in the United
experience and specialized skills across     States, Canada, Europe, India, Latin          Piercarlo Gera
more than 40 industries and all business     America, Asia-Pacific, Asia, Africa and the   Global Managing Director
functions – underpinned by the world’s       Middle East.                                  FS Distribution & Marketing Practice
largest delivery network – Accenture                                                       piercarlo.gera@accenture.com
works at the intersection of business and    ATMIA has just launched a new
                                             international certified eTraining             Francesco Burelli
technology to help clients improve their
                                             programme for ATM Operators (for both         Managing Director
performance and create sustainable value
                                             banks and independent ATM deployers.          Accenture Payment Services
for their stakeholders. With approximately
                                             In addition, the association runs an ATMIA    francesco.burelli@accenture.com
373,000 people serving clients in more
than 120 countries, Accenture drives         Consulting and Training practice as well
innovation to improve the way the world      as a range of industry committees to deal
works and lives.                             with Government Relations and regulatory
                                             monitoring, ATM security, best practices
Visit us at www.accenture.com.               and ATM deployer issues.

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