Cashless Transaction Volumes Reach new Highs, Global ATM Machines Decline

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The growth of fintech’s market share is putting real pressure on traditional banks to revise their business model. Cashless transactions are witnessing new all-time highs while banks cut down on ATM units and local branches. This according to an article from Nikkei Asian Review, August 5, 2019.

Financial Innovation

Cash payments are constantly declining and are leading commercial banks to develop new ways to survive in an environment where competition is tighter than ever. Cashless payments are booming and new technologies like cryptocurrencies are shaking the competitive dynamics of the whole financial sector.

Meanwhile, according to Retail Banking Research, a London based research institute that investigates banking and finance, the total number of ATMs worldwide has decreased significantly. A leap of 1% to roughly 3.24 million units worldwide, with countries like China, the world’s largest ATM market, experiencing a plunge of 6.8% from the previous year to a total number of 690,000. In the second-largest market, the U.S., ATM units decreased “only” by 0.9%. to 433,500 units; India, the third world’s largest market for ATM, is also facing a considerable reduction in the number of units.

Retail Banking Research thinks the sudden fall of ATM units worldwide may be due to the increasing adoption of noncash payments. New technologies like QR Codes that enable user-friendly exchanges of values through cashless payment services have spread significantly in Asia and especially in China. According to RBR, cashless payments are popular, particularly for young people.

Japan has historically been a country that loves cash, with ATMs that became nearly ubiquitous in the whole national territory, has experienced a 0.2% decrease annually in ATM units, down to 202,300. Though this is a tiny reduction, it is still further evidence that the phenomenon is spreading worldwide, even in areas that are still very attached to cash transactions.

Banks Feeling the Burn

Traditional banks are also closing branches; according to IMF, the total number of banks branches for the 36 member states of the OECD dropped 2.8% in 2017 (excluding the UK for which data was not available). Physical locations are less sought after as users are enjoying online banking services. JPMorgan Chase, a leader in investment banking based in the U.S., cut down 11% of the operative branches in just five years. Meanwhile, on the same period, mobile banking services rose 110%. Similar initiatives are being undertaken by Japanese banks such as  Mizuho Financial Group and Mitsubishi UFJ Financial Group which are planning to close 130 and 180 branches respectively over the next five years or so.

According to the World Bank, 1.7 billion people are still unbanked even though more than two-thirds of them have access to mobile phones through which they could ideally access online financial services. The increasing popularity of fintech services alongside the growing impact of cryptocurrencies can certainly trigger banking inclusion, lower prices, and better services for the users.

While these technologies bring to the market some benefits for the final users, they still carry many challenges for regulators and law-makers who have the complicated task to shelter people from unsafe shadow payments that may be used for illegal transaction or money laundering. In addition, a cashless economy allows the government to fully control your holdings with banks, sacrificing privacy and caging financial freedom.

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