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A Surprise Profit Center May be Lurking in Your ATM

Stop taking those off-premise ATMs for granted.

Long considered to be a cost center, there is growing evidence that these machines can provide meaningful contributions to growth, customer experience and efficiency. And bank executives may be surprised to find that they more than justify the expenses that they incur.

Roughly half of the ATMs around the world are located away from bank branches, according to a study issued last year by RBR, a U.K.-based consulting firm that specializes in ATMs.

While their financial benefits can be difficult to quantify, the prospect of off-site ATMs as profit centers can push banks to be more innovative in managing their fleets. That is especially the case at a time when branches are closing. Customers see little differentiation between banks and institutions battle fiercely for deposits.

Novantas believes that banks should consider establishing branding partnerships with third parties, joining large ATMs networks or finding fresh ways to market existing machines.


When an ATM is located away from a branch, it becomes an instant commercial, billboard and headline for the bank. Those additional contact points with customers (or potential customers) drive perceived convenience, which Novantas has repeatedly found is the most accurate single predictor of primary checking purchase rates. Such perceived convenience, therefore, is crucial for banks that are looking to grow their deposits. The connection between ATMs and convenience has remained strong even as consumers move away from the branch (and from cash) and digital engagement is on the rise.

The customer growth provided by off-site ATMs, however, can vary significantly from machine to machine. As one might expect, ATM signage, location, placement, and model all affect marketing value on an individual basis.

Novantas research has found that, on average, the installation of five ATMs — and the perceived convenience that accompanies them — has the potential to generate the same amount of new business as a single branch.

Less intuitively, market position plays a significant role as well. Like most forms of investment, incremental ATMs experience diminishing returns as penetration increases in a given geography. Banks should therefore seek to obtain balanced off-site ATM share across markets instead of high share solely in priority markets.

A bank’s branch share also has a significant impact on the ultimate value of an off-site ATM. Banks with a larger branch share tend to experience greater benefits from incremental ATMs due to network effects and synergies; many customers still want to open accounts in a branch.

This means banks must determine the optimal number of ATMs for each presence in a specific market, allowing the institution to be smarter with where they invest. (See Figure 1).

Customer experience and retention are other factors that create value for off-premise ATMS. Increased transaction activity leads to higher engagement with the bank, increasing customer retention. Customers are likely to perform more transactions when there see ATMs in assorted places near where they live, work and shop.

Those benefits vary significantly by customer segment, however. Any transaction by a customer with long tenure or diversified product holdings with the bank tends to have a lower impact on their likelihood of retention than the same transaction with a new customer. That therefore means that increasing engagement of a newly acquired customer with one product is therefore more impactful than increasing engagement of an already loyal customer who has a broad relationship with the bank. Whether this increase in retention is attributed to forming habits that are hard to break or to creating brand affinity, there is a clear link between customer transactions and retention.


Finally, ATMs drive efficiency benefits by migrating transactions away from the branch to a lower-cost channel. That is especially true for deposit transactions. To maximize efficiencies, off-premise ATMs must therefore be able to accept deposits.

When ATMs were first introduced, transaction migration alone provided enormous value, allowing banks to reduce teller counts and enabling them to increase surcharge-free access to cash. Today, however, it is easy to write off these benefits since many branches already are operating at minimum staffing. Adding or subtracting a single ATM on the margin likely won’t affect teller lines.

Nevertheless, the efficiency benefit persists. Large branches in urban centers continue to provide opportunities for FTE savings and the growing number of universal bankers allows for transaction savings to be converted into sales time when real costs cannot be removed.

Some national and super-regional banks have led the way in building out enormous ATM networks or leveraging branded ATM partnerships. Oftentimes, those same banks are gobbling up deposits.

Banks must start to view ATMs as potential revenue drivers instead of pure cost-sinks, and should reevaluate their investment strategies, cost-cutting priorities and product mix accordingly.

Jonte Boysen
Manager, Toronto

Andrew Hovet
Director, New York

For more information, contact Novantas Marketing

+1 (212) 953-4444

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