• Norbert Gehrke

In a digital economy, physical ATMs will not survive

As we have previously reported, ATMs are ubiquitous in Japan, numbering close to 200,000, and sporting a world-beating density of 128 machines per 100,000 adults. Approximately two thirds are run by national, regional and shinkin banks as well as the Japan Post Bank, while a good third are managed by retailers and convenience stores (see “Where will all the ATMs go?”).

Convenience store chain Lawson started operating its own bank almost two years ago, absorbing its expansive ATM network connected to more than 100 financial institutions (see “The Bank of Lawson”), and competitor Seven Bank invests in next-generation ATM technology, while Mega Banks MUFG and SMBC have started sharing ATM operations.

With the pandemic, ATM transaction volumes have seen a noticeable, albeit brief dip, in case of Lawson shrinking to 61m transactions in April before recovering close to the previous level around 70m transactions in June. Although cashless transactions are increasing, Japan remains a heavily cash-based society for now.

So on the one side we have the convenience stores having invested heavily into their ATM networks over the last decade (where the ATMs provide many more services, such as event ticket printing, insurance, etc), and on the other side we have Mega Banks like MUFG that introduce plans to cut 50% of their bank branches, with some of the activity at least moving to ATMs.

However, what if the solution is not a reconfiguration of the ATM network, but the elimination of ATMs as a whole, going the way of bank branches? It would be like installing sophisticated landline phone switches while everybody else starts to migrate to mobile, and we know how that story ended. It comes down to asking the right question. It is not “How many ATMs should there be?”, it is rather “Why are there ATMs in the first place?”. Here comes the virtualization of ATMs.

Even as some countries that have already migrated to largely cashless societies enforce a minimum number of bank branches and/or ATMs, what easier and more cost efficient way would there be but to allow any shop to function as an ATM. In a world where the payment is digitized, reversing the QR code usage to withdraw cash does not sound outrageous at all. And it is already being done.

Please give it some thought, and share your point of view.

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