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The ATM is critical to driving financial inclusion

Categories : Cash covers a broad range of transactions, Cash is a public good, Cash is the first step of financial inclusion
August 22, 2019
Tags : ATM, ATMs, Financial inclusion
The impact digital and mobile technologies have had on the financial services industry is undeniable, but innovation in the ATM self-service channel and the unique characteristics of cash will prove just as significant in the quest for greater financial inclusion.
James Shepherd-Barron

Disaster Risk Management Consultant, Author, and Founder of The Aid Workers Union

This post is also available in: Spanish

Far from being a typewriter in a touchscreen world, the Automated Teller Machine (ATM) plays a critical role in the financial inclusion revolution. Interactive, multi-channel, deposit-taking ATMs promote financial literacy while allowing cash to recirculate reliably, quickly, cheaply and safely in local markets. This facilitates access to formal financial services by merchants, agents, and the un-banked, thereby reducing global poverty.

Promoting an environment in which payments choice is constrained as many aid agencies do is not only discriminatory on many levels, but counter-productive in as much that it fosters financial exclusion. Aid agencies, central banks and commercial financial institutions must work together to champion diversity and choice where ATM channels co-exist alongside other forms of digital payment solutions.


At the G-20 summit in July 2019, world leaders pledged to shape the financial technology revolution sweeping across Africa by lifting the threat of the world’s poorest being excluded from digital financial services. They recognised that those at risk of being denied access to formal financial services in an era of rapid change – refugees, internally displaced people, the poor, those living in remote areas and low-income countries – mustn’t get left behind. But too many are. According to the Centre for Financial Inclusion, just 24% of people in low-income countries have access to formal financial services through a bank account, compared to 89% in high-income countries. And the gap is not closing fast enough.

With this firmly in mind, G-7 Finance Ministers announced on 18th July 2019 that they would be addressing this sort of inequality “by supporting the digital and mobile financial inclusion revolution.” But the vision encompassed by this otherwise noble aim seems to leave no room for cash or the Automated Teller Machine (ATM).

In its next-generation form, the ATM will play an increasingly crucial role in the ongoing global effort to alleviate poverty by accelerating financial inclusion. Robust, interactive, haptic, multi-channel recycling ATMs can promote financial literacy while allowing cash to recirculate reliably, quickly, cheaply and safely in local markets thereby facilitating access to financial services by merchants, agents, the un-banked and financially under-served.

According to NCR, a global payments technology company, ‘The drive towards financial inclusion will also depend on a diverse combination of technologies and channels for service delivery. There is no doubt that technology will have an important part to play in the journey towards universal financial access and inclusion. However, it would be a mistake to assume that digital and mobile technologies will come to define the future of banking services at the expense of more traditional, physical channels.’

In other words, it would be a mistake to write off the ATM as a relic of a bygone era; a typewriter in a touchscreen age. As Sweden’s move back to cash proves, speculative moves to replace cash with digital alternatives will always be marginal. This is because, despite the hype by the private sector and intense lobbying by groups such as the Bill Gates’ Foundation and the UN-led Better Than Cash Alliance, two thirds of the planet’s population are, and are likely to remain, heavily dependent on physical currency. Mostly, this is because the value and authenticity of cash is the result of centuries upon centuries of use and an ingrained appreciation for the role banknotes have always played in people’s daily lives. It is a proven technology that works, and works independently of government or commercial interference. People trust cash.

But partly it’s because consumers are becoming increasingly sceptical about the touted benefits of financial technology, much of which seems to be about maximising profit for the provider rather than increasing utility or facilitating access for the user. There are suspicions, too, about innovations whose benefits take too long to become apparent (sometimes known as ‘Engels Pause’), while fears of online fraud grow. And, having evolved a certain sense of pragmatism, consumers are aware that digital channels can be fragile. They break. As the Swedes are belatedly re-discovering, and as new research by the University of Grenada in Spain will soon make clear, cash has always been more reliable, universal, faster and cheaper than its digital alternatives.

Seen in this way, digital money seems to be a technological solution looking for a problem, at least for the majority of the planet’s population, most of whom subsist on less than $2 per day.

Perhaps this explains the ‘inconvenient truth’ that, despite de-monetisation efforts by countries such as India, Mexico and Nigeria, cash use around the world is not falling but rising. According to a recent report by the Bank for International Settlements (BIS), cash in circulation as a share of GDP is rising at a rate that far outstrips inflation despite the fact that the cash share of the payments mix is declining in more developed economies owing to the expanding range of payment options available.

None of this is to deny the importance of digital payments – the ATM is, after all, part of the digital payments landscape – but the distinct tangibility and universal usability of cash, especially in parts of the world where the physical payments infrastructure is weak, should always be borne in mind.

Perhaps more importantly, encouraging an environment in which payments choice is limited and consumers are segregated by their ability to manoeuvre a digital landscape is discriminatory on many levels, especially when financial literacy is low, the infrastructure poor and electricity in short supply.

For all its limitations, cash is an accessible, reliable, and cheap technology whose efficiency and utility has been proven time and time again in times of crisis. If the option of using it is taken away, everyone except the electronic payment provider is worse off.  In effect, this means that those advocating for financial inclusion are, wittingly or unwittingly, supporting financial exclusion of the poorest in society by preventing them from using their preferred, and often only, means of payment, cash.

It is also generally agreed that digitisation, while bringing significant opportunities, tends to exacerbate inequality and centralise power. In effect, it privatises what for centuries has been a common good. This means it comes with significant risks. These need to be mitigated, especially when it comes to experimenting with vulnerable people’s personal data.

The ATM will become an increasingly important touchpoint in the financial inclusion revolution. In February 2017, Retail Banking Research published a report highlighting financial inclusion as a key factor in the recent trend of rising ATM withdrawals. The overall number of cash withdrawals grew by 10% in 2015, with growth in all regions, particularly in Asia-Pacific, the Middle East and in Africa, and particularly by women. This illustrates a number of the most effective features of the ATM as a tool for driving financial inclusion:


As far as services are concerned, next-generation ATMs can do more than ever before, and do so reliably using a range of haptic touch-screen or voice-activated interfaces that the functionally illiterate can understand: They can dispense and accept deposits of both physical currency and paper vouchers – an invaluable innovation for aid agencies, cash agents and merchants when it comes to account reconciliation, liquidity management and security; they can process money transfers – including international remittances – and enhance financial literacy by providing on-screen, real-time video connection to remote tellers.

Enhancing financial inclusion is clearly a major challenge. Partly, this is due to local cultures and consumer attitudes, but a lot of it is to do with the practical and logistical difficulties of delivering banking services in low-income countries where, according to the Centre for Financial Inclusion, only 11% of people save money with a bank.

The World Bank and other members of the UN-facilitated Better Than Cash Alliance have set an ambitious target of achieving universal financial access by 2020. This laudable but rather optimistic aim would mean all global citizens having access to a transaction account or electronic means of storing payment and handling money by then. To achieve this goal, there will need to be widespread collaboration between the public and private sector; between regulatory bodies, governments, financial institutions, consumers, and a whole host of various non-aligned stakeholders such as the UN and industry association bodies.

The impact digital and mobile technologies have had on the financial services industry is undeniable, but innovation in the ATM self-service channel and the unique characteristics of cash will prove just as significant in the quest for greater financial inclusion. Together, the aid and payments industries must strive to be defined by diversity and choice, where ATM channels co-exist alongside other forms of digital payment solutions.




© James Shepherd-Barron, August 2019

James Shepherd-Barron is an independent disaster management consultant and humanitarian adviser to Cash Essentials, a private sector research group.


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This post is also available in: Spanish