Published January 20, 2021
The year 2020 has certainly been a year like no other—and particularly for financial institutions across the world, who found themselves having to quickly adapt their business to enable safer socially-distanced banking through self-service.
One of the key impacts of the pandemic has been the acceleration of trends that were already beginning to transform the face of self-service banking. And digital has received the most significant growth—according to eMarketer, ecommerce and mobile trends have been accelerated by 10 years thanks to COVID-19.
For financial institutions (FIs), 2021 will likely see continued fast tracking of investments in digital initiatives and banking automation to meet increased consumer demands and offer more of their services digitally. Pivoting tellers into a work-from-home mode and navigating cash management through unchartered waters will likely continue to be a trend in 2021.
So, what will this mean for 2021? Here’s are the top 10 trends we expect to see next year.
2020 has opened many consumers’ eyes to new ways of making payments and engaging with their financial institution. And, digital saw a huge increase in adoption—a recent Deloitte report states that 35 percent of customers increased their use of online banking during the pandemic. In the report, PNC Bank’s CEO William Demchak sums up the digital impact of 2020 succinctly, saying “The bank’s sales jumped from 25% digital to nearly 75% during COVID-19, condensing 10 years’ worth of changes into two months.”
So, as branches try to return to normal in 2021, FIs can expect that customers who’ve adopted digital during the pandemic will continue to use this channel for the convenience—and likely still the safety—it offers. Branches will still remain an important part of the mix, but the transformation to advisory service will see similar acceleration. And, light, micro-branch or shared-branch resources may see increased popularity.
This means FIs will continue to invest in digital strategies and technologies —not just from an app perspective, but in a way that ensures that the entire banking ecosystem is digitally enabled and locked together for a cohesive and seamless customer experience, whichever way a customer decides to engage from.
Self-service banking saw an increase in Interactive Teller Machine (ITM) installations and use during the pandemic—and this is expected to continue into 2021. And, ITMs really proved their worth in 2020. For those operating ITMs (financial institutions primarily in the US and the Middle East) they enabled the face-to-face communication customers craved through video, providing both employees and consumers a safe, interactive and engaging environment.
And, because more people used video conferencing services (like Zoom) to connect socially last year, banking will also see uptake increase in video use at the ITM as consumers, who traditionally conducted their banking inside the branch, are now accustomed to using this technology. This gives FIs an easy route to migrate more transactions to self-service or at least a centralized hub of remote tellers. And, this also gives the branch network the ability to extend their hours of operation, providing consumers with an even greater ability to manage their finances, where, when and how they want to.
So, in 2021 and beyond, expect to see ITM use increase in other markets. The value they bring is undeniable, including providing more choices for customers, enabling quick adjusts to similar experiences in the future, and giving FIs the business benefits of migrating more transactions to the ITM.
Cash recycling ATMs are expected to see the most growth across the world over the next few years, with a projected increase of 248 percent in Latin America, 133 percent in North America and 41 percent in Western Europe by 2024. Enabling FIs to recycle cash that’s deposited by customers straight back into the ATM will significantly support the drive to find efficiencies in the cash management supply chain.
As cash use declines, ensuring that ATMs are restocked at the right time is becoming increasingly challenging and costly. But, the use of recycling modules can significantly reduce the need for cash fulfilment—ensuring better availability in high cash deposit locations, such as those used by small businesses, while reducing the number of fulfilments needed for ATMs with high withdrawal footfall, like shopping centers, cinemas or transport hubs.
The pandemic has people thinking about what they touch, and let’s face it, we now actively try to avoid touching things that are frequently used in public (like door handles). And, that includes the ATM. So, whether it’s avoiding using the touchscreen or pin pad, FIs are rapidly deploying contactless solutions to attract consumers. The initial contactless transactions (which NCR developed with ANZ) focused on card-less readers to reduce card skimming. Now it’s also about using a mobile app to pre-stage the entire transaction, so consumers can simply take the cash without touching anything else at the ATM.
This convergence of the physical and digital channels is going to be vitally important in 2021 and beyond as consumers want a seamless omnichannel experience—from ATM, to mobile app, in branch and back again. And, security and authentication can be improved through the use of smartphone biometric recognition (facial and fingerprint scanning), enabling FIs to increase safety to themselves and their customers.
Acceleration of digital will undoubtedly impact the branch and the role it plays with consumers. While it’s no longer at the heart of customers’ everyday transactions, the branch will continue to transform into a center for advice and support for the more complex financial services, like mortgages and loans. While the use of automation at the ATM will increase, the needs of business banking customers also remain important with the need for cash and coin withdrawals and deposits and check cashing seeing renewed interest.
Branches have been evolving for years, so this ongoing trend is no surprise. But, what we will see, as we have in so many of the other trends, is that COVID-19 has accelerated the required transformation and FIs will see their transformation strategies reshaped or fast-tracked by the need to better meet customer expectations around convenience as well as their own needs to reduce costs.
What 2020 has really put the spotlight on is the siloed, legacy architecture that is so prevalent in the financial industry. The ‘if it’s not broke, don’t fix it approach’ meant that FIs really lacked the agility that the likes of retail and hospitality businesses had to shake up the status quo by finding different ways to do business in a world of “lockdowns,” “social distancing,” “shielding” and all those new, COVID-19 words that are now part of everyday conversations.
And this approach showed in the ATM channel. Many markets around the world, like in the Middle East, would replace ATM technology every seven years. In other more mature markets, like the UK, in some cases ATMs might not be replaced for 15 years. So, there is a need for banks in mature self-service banking markets like Western Europe to increase replacement of older technology in 2021 in order to meet the digital-first needs of today’s consumer.
FIs are going to look hard at how they can eradicate channel silos and embrace next generation enterprise architecture to ensure that all systems are digital-first and have the ability to seamlessly interlock to enable easy transaction and information flows, reduce reliance on the switch and have more agility to adapt. The consumer experience in banking must now be in sync with retail, travel and hospitality and the deployment of aging self-service terminals will see increased modernization.
In times of financial uncertainty or recession, outsourcing increases. As a Service is one model that’s predicted to see significant uptake in the financial industry over the next few years—the ATM as a Service market is expected to see annual growth of 33 percent until 2025, with trends showing FIs are shifting away from traditionally managed services.
ATM as a Service involves offering a complete ATM solution that includes software, hardware, maintenance and managed services for a single monthly cost. Because it's a manageable operational expense, ATM as a Service is a great solution for FIs that want to upgrade their networks with the latest innovations without significant capital investment.
The drive for this will be two-fold with internal teams needing to focus on the changes they have to make in light of how COVID-19 has impacted the banking sector, while there’s greater awareness of the benefits that can be realized by someone else taking responsibility and accountability for the ATM channel alongside subscription-based pricing.
It’s no longer about cash vs. digital payments. It’s about providing consumers with choice. Each payment option has an important part to play, but in the 2020s no one single method will prevail or disappear.
The growth of digital payments has certainly accelerated during 2020 and that’s going to continue. Meanwhile, cash withdrawals fell significantly with lockdowns. But just as important, the levels of cash in circulation vastly increased (trends show cash in circulation tends to increase year on year). So, while the number of transactions fell, the value of each transaction grew. This is important, as many industry leaders are using the pandemic to predict the loss of cash. And there will always be a need for cash, for specific situations (like gifts) and in areas of the world that still have a cash-led society or where there are still high levels of unbanked populations.
Ultimately, it’s all about providing consumers with the luxury of choice, the ability to pay or bank wherever, whenever and however they wish. In today’s 24/7 world, with falling branch numbers, FIs can no longer restrict access to services or expect consumers to come to them. They have to be ready to meet consumers where ever they want to be.
Already a growing concern before the pandemic, cybersecurity will also be a major focus for retail banks in 2021. Indeed, a 2019 survey by Clearswift revealed that in the UK, for instance, 70 percent of financial firms reported security incidents in that same year.
Improving anti-fraud efforts will be a key part of improving security. From real-time transaction monitoring, to contactless ATMs that can prevent skimming attacks, FIs will have to invest in anti-fraud solutions to reassure customers their finances are secure.
The issue of corporate social responsibility has become a major consideration for many industries in recent years, and consumer banking is no different. Reducing the carbon footprint of banking technology will gain greater focus. Today's consumers expect every company they do business with to consider sustainability.
For the banking sector, this will include greater pushes towards paperless banking, the use of sustainable materials and suppliers, and tools like video banking that reduce the need for customers or representatives to travel to the branch. And, ATM technology, like the SelfServ 80 Series with at least 10 percent lower operating costs than prior generations of self-service technology, will likely gain further traction in the market. Whether it's lower energy displays, less power intensive LEDs or more efficient cores, the savings that can be realized from modern self-service technology can also help FIs get on the road to a more sustainable future.
Whatever happens in 2021, it’s certainly going to be one of evolution for the banking sector as it continues to adapt to meet the changes that 2020 introduced.