Mercator Blog

Market Trends Suggest It Is Time for Banks and Credit Unions to Take Another Look at Cash Access Strategies
Date: February 10, 2017
Sarah Grotta
Director, Debit Advisory Service
Resources within banks, credit unions, community banks, and other financial institutions (FIs) are increasingly channeled toward strategy creation, development, and deployment of new payment types and new payment form factors. While big budgets and teams of employees figure out when and how the next new thing in payment is going to emerge, consumers are still relying on cash for many if not most of their day-to-day transactions. Although newer payment forms like person-to-person (P2P) payment apps are starting to decrease the market’s reliance on cash, it remains stubbornly popular. Curiously enough, those building new payment form factors are often trying to replicate some of the same features that cash offers, like ubiquity, ease of use, and anonymity.

The persistent need for cash, despite calls to eliminate its use, requires convenient points of access. FIs that create strategies around cash access consider how to right-size their ATM fleets to ensure that their ATMs are located where their customers need and want cash. Smaller community banks and credit unions traditionally looked to ATM sharing and surcharge-free networks to expand their geographical reach and achieve ATM location parity with large banks. What is new is that larger FIs recently have begun to reevaluate surcharge-free ATMs as well, realizing the competitive pressure not just from other FIs but also from providers of general purpose reloadable (GPR) prepaid cards and alternative financial services companies. With the general rise in surcharge-free prices, FIs offering surcharge rebate accounts need to calculate the economics of their rebate expenses against offering access to surcharge-free locations. Surcharge-free networks are also finding their way into strategies for branch expansion as well as branch closures and as an alternative to FI-operated off-premise ATM fleets.

In the research report, New Trends Underscore Role of Surcharge-Free ATMs, Mercator Advisory Group examines the current use of cash in the United States, how consumers get cash, the role of the surcharge-free networks, how and why financial institutions determine the need for surcharge-free services, and the surcharge-free market providers.