[These Days] Decreasing ATMs, a 'Gyereuk' or Not?

CD and ATMs are gradually decreasing. Banks excuse this by saying that operating them results in losses. Have CD and ATMs become a 'gyeruk' (a necessary but burdensome thing) for banks?
[Photo by Asia Economy DB]

[Asia Economy Reporter Kim Jong-hwa] These days, people rarely use cash. With an abundance of credit cards, debit cards, and various payment services, there is no need to carry inconvenient cash in wallets or pockets. Hence, it is called a 'Cashless Society.'

However, there are times when cash is absolutely necessary. It happens only a few times a year: during Lunar New Year, Chuseok, various family events, and when buying lottery tickets, cash must be used. At such times, what is needed are 'Automatic Teller Machines (ATM)' and 'Cash Dispensers (CD)'.

The first ATM, which only had deposit functions without cash withdrawal, was installed in 1961 at Citibank in New York. The world's first ATM with both cash withdrawal and deposit functions was installed in 1967 at a branch of Barclays Bank in London, UK. In South Korea, the first ATM was installed in November 1979 at the Myeongdong branch of Choheung Bank.

During the heyday of ATMs in the 2000s, bank buildings were essential, and ATMs were found wherever many people gathered, such as shopping centers, airports, grocery stores, convenience stores, gas stations, and restaurants. Although there are no official statistics, according to the financial sector, as of 2013, approximately 2.8 million ATMs were installed worldwide. Considering the global population of 7 billion, it means about 2,500 people use one ATM.

However, even just over ten years ago, CDs or ATMs were easy to find just by turning your head, but nowadays, they are not easy to find. People have to visit bank branches or pay high fees at some convenience stores. This is because banks are gradually reducing the number of CDs and ATMs due to losses.

According to the '2018 Financial Informatization Promotion Status' announced by the Bank of Korea in September last year, the average daily number of mobile banking transactions increased from 52,948,000 in 2016 to 74,623,000 in 2018. The proportion of internet banking transactions, which are hardly restricted by time and space, increased from 35.4% in 2014 to 53.2% in 2018, a rise of 17.8 percentage points in four years.

What should people who cannot use mobile or internet banking do if there are no CDs or ATMs available?
[Photo by Getty Images Bank]

The transaction amount increased from 3.1266 trillion won to 5.3435 trillion won, growing annually by 25-30%. The number of bank branches decreased from 7,401 in 2014 to 6,771 in 2018, meaning 630 branches (8.5%) disappeared.

The number of CD and ATM transactions (cash withdrawals + account transfers, total annual transactions) decreased from 2,192,000 in 2014 to 1,875,000 in 2018. The transaction amount also decreased from 906.4 billion won in 2014 to 894.2 billion won in 2018. The number of CDs and ATMs inevitably decreased as well, from 121,317 units in 2014 to 119,899 units in 2018, showing a trend of 1-3% annual decline.

Installing one CD or ATM costs about 11 million won, with additional expenses for rent, maintenance, and cash transportation labor costs. The Korea Institute of Finance estimates an annual loss of 1.6 million won per ATM. However, banks are reducing CDs and ATMs at a relatively slow pace.

Banks, which are otherwise very strict with debtors, are not abandoning the CD and ATM business despite clear losses, but are maintaining it moderately. Why is that? From the banks' perspective, the CD and ATM business is a 'gye-ryuk' (a Korean idiom meaning a 'chicken rib'?something of little value but hard to discard). They fear criticism if they discard it, but maintaining it yields little benefit.

The reason banks continue to maintain the 'gye-ryuk' CD and ATM business is due to the banks' 'public function.' The more banks eliminate CDs and ATMs, the more financially vulnerable groups who cannot use internet or mobile banking become isolated. And what if the general public, who need to use them a few times a year, are told to completely stop using CDs and ATMs and only use mobile or internet banking?

Although the number of CD and ATM users is decreasing, about 30% of customers handling financial transactions still use CDs and ATMs. If CDs and ATMs are eliminated, all banks' declarations of valuing customers become empty words.

We look forward to the evolving CD and ATM machines, becoming more like ATMs for people with disabilities.
[Photo by Asia Economy DB]

Banks would not engage in loss-making business, right? That is why fees are raised. The cash withdrawal fee for CDs and ATMs was increased from 800 won to 1,000 won per transaction starting this month. It would be good if security is also enhanced proportionally with the fee increase. Korean security company AhnLab warned that various theft attacks on automated devices such as PCs, mobile devices, and CDs and ATMs will continue to be rampant this year.

Especially as the cashless society becomes full-fledged, devices like CDs and ATMs, where direct monetary transactions occur, are expected to become major targets for attackers (hackers). Hopefully, they will not deliberately steal customers' personal information as before. We only hope that customers' information and assets are well protected from cyberattacks.

CDs and ATMs cannot be seen only as 'gye-ryuk.' It has already been several years since digital kiosks applying vein recognition technology opened the era of self-banking, allowing cash withdrawal just by placing a smartphone. Moreover, functions such as transportation card charging, utility bill payments, insurance premium payments, and even account opening have become possible.

Nowadays, most people do not hesitate to learn new functions. We look forward to CDs and ATMs evolving into better services by developing functions that can compete with mobile and internet banking.