A new report from Mercator Advisory Group's Retail Banking Practice focuses on the ATM and the multifaceted role it plays in the retail banking market. While ATMs are no larger in footprint than a microwave, they are a strong tool for keeping customers connected to their money and to their financial institution, Mercator says.
 
ATMs far outnumber traditional bank branches, and thus extend the bank's brand well beyond the expensive bank branch system.
 
According to Mercator, technology enhancements, footprint deployment saturation, surcharges/surcharge-free networks and transaction channel optimization are keys to banks leveraging their current and future installed base of ATMs.
 
Banks have long been committed to the ATM, growing the number of installed units steadily. But in recent years they have experienced competition from alternate channels — whether from potentially cannibalizing technology such as online banking or the rapid growth of the credit unions' surcharge free networks. In order to allay these competitive forces, there has been a surge in deployment of more technologically advanced ATMs.
 
Report highlights
 
With more than four times the number of ATMs than bank branches in the United States, an ATM is a billboard for the bank and an anchor to the customer's relationship with the FI.
 
Fee surcharges for using foreign or out-of-network ATMs are just one barrier banks erect to drive customer loyalty. As millions of bank customers involuntarily find themselves (post-merger or post failure) with new banks, the ATM provides the perfect platform for banks to introduce themselves to their new customers. Providing leading edge machines with enhanced services in convenient, surcharge-free locations might be the ultimate introduction.
 
Mercator Advisory Group research has found that ATMs featuring technology capable of imaging banknotes and checks can reduce costs by $1 per transaction.
 
“The convergence of a number of forces is affecting the current ATM market landscape,” said Elizabeth Rowe, author of the report group director of banking advisory services for Mercator Advisory Group. “Competition, emerging technologies, a vastly and rapidly altered retail bank network affected by the subprime market and recent mergers and acquisitions are key factors in how banks will manage and deploy current and future ATM networks. Mix in consumers' constantly evolving payment preferences, and this is just about the most significant time in the history of ATMs.”

Rowe says banks are leveraging off-premises ATMs to extend their brands and fulfill consumer demand for enhancements such as envelope-free deposits, which could turn the ATM into a customer acquisition tool.