Death of the ATM?

The largest bank headquartered in Washington, DC, Chevy Chase Bank today is a $US14 billion enterprise with more than a million accounts in the Washington metropolitan area, offering customers a network of more than 250 branches and 1000 ATMs, and routinely opening new full-service branches throughout the region. The bank promises every customer — including low-to-moderate income earners — an experience replete with banking convenience. Keeping that promise means allowing customers to bank when, where and however they wish.

This is the vantage point from which he has been observing some of the unexpected ways in which technology is changing the banking world, particularly as growing numbers of people use their bank debit cards in place of cash. For instance, with the need for both cash and cheques rapidly diminishing, and Generation Y generally regarding a debit card as just another form of cash, how does a bank with one of the largest ATM networks in the Washington metropolitan area avoid having its ATMs effectively turn into "telephone booths"?

As the world turns into, if not precisely a cash- or cheque-less society then certainly what Spicer calls a "less cash, less cheque, more transactional society", what is the "killer idea" that will leverage that massive investment in ATMs as their traditional purposes diminish?

"What's happening is all the banking systems were built on the fundamental assumption that people write cheques and they want cash — those two things," he says. "So you spend all of your life building systems that optimize that, and you even build ATMs to give cash, then all of a sudden the model starts to change: the Internet comes to life and the debit card comes to life, and you can now do transactions without a cheque and without cash."

People who have always considered the primary function of the thousands of ATMs scattered across the US is to dispense 20-dollar notes are, as a result, changing their views. Customers like ATMs and many prefer using them to conducting transactions face to face with a teller. Some customers even select their bank based partly on ATM convenience. Evidence suggests many have become quite savvy at avoiding ATM charges. But the economics of ATMs is deteriorating, with many new ATMs already losing money by some accounts. As customers turn away from cash, the role of ATMs must clearly be redefined, Spicer says. The question, is in what ways?

"For a younger person with a debit card and access to the Internet who pays their bills online, which is very popular, and who can buy a stick of chewing gum with a debit card, the debit card is cash. They couldn't care less if [a transaction] is only for five dollars. It didn't cost them anything, at least as far as they can see. The merchant pays something, I know that. But from the [young person's] perspective that debit card is cash," Spicer says. "So now suddenly they have less need for cash."

He says everyone is hunting for the big, new transformational idea that will protect the future of ATMs. "But if ATMs lose their main role as cash machines, how can the banking industry maximize the investment that has already been made in this technology?" Spicer wonders.

Spicer cannot answer this yet. ("Please, somebody, write your master's thesis on that, and send it to me," he joked during a CIO Forum presentation in 2005.) But he says possibilities include providing more personalized functions, like no-envelope deposits for both cash and cheques, or using the ATMs for direct marketing purposes. "As machines become more intelligent, they are going to do more transactions, and maybe there will just be a slow haul where they transform themselves into taking deposits and transferring money and stuff like that. But there's got to be something else. And trust me, a year or two from now we will know what it is. Some clever young person is going to figure it out." And presumably in another three of four years' time the whole paradigm will change again, CIO magazine suggests in conversation with Spicer. "Isn't it great?" he replies. "See, that's the whole beauty of IT: It's nothing but transformations, it's never sitting still, and so it's moving at the speed of light, technically and figuratively."