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Story URL: http://www.silicon.com/financialservices/0,3800010322,39158224,00.htm

Are cash machines heading for extinction?
Will the hole in the wall ever be filled?

By Dan Ilett

Published: Tuesday 25 April 2006

Some people argue the days of using cash are numbered; already more shopping is done using debit cards than cash.

Plastic has certainly outstripped the use of cheques - which some shops won't even accept anymore. So what does this inevitable march of the credit and debit card mean for the ATM, the humble 'hole in the wall' where most of us pick up our paper spending money?

Analyst Tower Group predicts that we could soon see the demise of the ATM as new technologies such as contactless and biometric payments replace the old-fashioned folding money.

Chris Skinner, associate director of Tower Group, argues: "If you can pay for things with fingers, why would you use cash?

"The more you see contactless payments the less you will see ATMs. What will their use be? Maybe ticketing and [phone] top-ups but I don't see banks spending money on that."

Visits to the cash machine have become part of everyday life. The world's first ATM emerged in London in the late 1960s but it wasn't until the 1980s that banks started to deploy them on a nationwide scale.

For most of that time their purpose has been to simply dispense cash but now banks are realising the added value of their machines.

The technology inside ATMs has also seen a rapid upgrade over the last few years, making them much more flexible in what they offer.

For example, some ATMs are starting to run on Windows XP, and banks and other companies are seeing opportunities in personalised advertising, ticketing and other integrating applications.

Graham Mott, head of development for Link, the ATM company, says: "Mobile phone top-ups are the most obvious of these [opportunities]. It's not universal yet but beyond that ATMs are seen as multimedia terminals."

But adding too many services means the risk of queues.

Mott says: "In some countries you can buy tickets on them but [UK] ATMs are busier so there's a problem with queues. You don't want to extend the queue time with someone trying to buy a train ticket.

"There's also advertising," he adds. "With Windows XP you can generate pretty good graphics and use things like film tie-ins and the use of customer relationship management (CRM) to channel to customers. It's a very effective way of targeting people. They can press a button to see further information on adverts."

CRM is an important step, Mott says, and banks are now looking at providing in ATMs the same type of personalised marketing - such as overdraft extension offers - as they do via mail marketing.

Research from analyst Forrester last year said that high street banks must improve their customer service and highlighted making better use of customer data for a more personalised service.

So while cash might be on the way out, the cash machine is likely to evolve into a richer channel that customers can use for a range of services, taking the pressure off the branch.

As Roger Bracken, VP of financial solutions division for ATM manufacturer NCR, told silicon.com: "Wouldn't it be nice if, say as a premiere customer, you were to get a customised reception when you use an ATM. There's going to be a much greater level of personalisation in this area.

"That's just what we're doing in the ATM interface. There's a huge investment from banks in branch infrastructure trying to take more transactions away from the counter."