NCR and Diebold’s Troubles Point to the Decline of ATMs (and Cash?)

NCR Corp. and Diebold Nixdorf Inc. reported earnings in the last few weeks, and it wasn’t pretty.

“Hardware revenue was down 16% in the quarter and margins were down 400 basis points,” said NCR’s CFO Bob Fishman. (It’s not all bad for NCR, which also owns the digital banking software provider Digital Insight — software revenue, particularly cloud revenue, is looking up.) Diebold revenue was also down 6% year-over-year. Both companies hired new CEOs this year.

Ron Shevlin, director of research at Cornerstone Advisors, commented, “Maybe branch transformation ain’t what it’s cracked up to be,” noting late that “The likely reality here is that despite the press reports — and various consumer research studies — branches really are in the dying process.” Payments analyst Michael Moeser noted pressure from Square and Stripe, who continue to introduce new products in the retail space.

Shevlin also showed skepticism about consumer research showing a preference for branch banking:

According to Novantas, 60% of Americans said they would rather open a new checking account in person at a bank branch than on a phone, tablet or desktop computer. Two questions should come to mind hearing this: 1) Are those 60% of Americans actually in the market for a new checking account today or in the near future? and 2) Is the reason they would prefer to open an account in a branch versus a digital channel because the digital experience just isn’t that good right now?

As might be expected, talk of ATMs figured prominently on both earnings calls. Banks have invested tremendous sums in next-generation ATMs that resemble large iPads with functionality like video chats with remote agents. NCR’s ATM revenue was down 21% on the quarter — supply challenges with the newer devices were noted. Later Fishman noted, “Our view of ATM revenue is unchanged at roughly flat for the year and is supported by strong backlog.”

Gerrard Schmid, Diebold’s new president and CEO as of Feb., acknowledged the industry ambivalence about ATMs and cash:

While there are a few differences of opinion regarding the long-term role of the ATM channel, there is broad agreement that ATMs will continue to be an important customer touchpoint for the foreseeable future. Many customers view the ATM channel as a highly strategic asset. Others are seeking to leverage it to better understand changing customer behavior. And there is a third group who views this channel as a necessary cost of doing business.

Diebold also noted problems in its ATM supply chain and noted it would try to simplify its product line going forward.

There is a broad industry consensus that ATMs, while still a healthy business, are trending downward, and how can they not, as mobile channel use increases across the board? But it is interesting to see signs of decline beginning to make themselves obvious.

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