Automated teller machines, ATMs for short, have been around since the early 1960s — and, strange to consider, the very first ones only made loans. But these everyday machines are poised to facilitate digital lending trends in an ever more connected world.
Of course, ATMs are now known for dispensing cash from users’ savings or checking reserves rather than making loans. But that could change very soon, giving banking kiosks a dynamic new purpose in an increasingly competitive marketplace.
And that’s thanks mainly to digitalization. In recent years demand has begun to catch up with technology, opening the way to digital lending through a range of portals, not just hand-held devices and newfangled cash registers.
“By converting ATMs into lending machines that a customer can use to apply for a personal loan, get a decision in seconds, and receive the funds either as cash-in-hand or as a direct deposit, ATMs can extend the reach of banks and non-bank lenders alike,” says Elena Ionenko, co-founder and COO of TurnKey Lender, a provider of financing software to e-lenders around the world. “Some ATMs are doing it already,” she adds. “And our cloud-based, no-code, one-stop, AI-powered Enterprise platform was specifically conceived to put lending technology wherever it’s needed.”
History, evolution, and impact of ATMs starting more than 60 years ago
Despite the loan-making focus of an early version of the ATM, adding these machines to the broad financing matrix is an innovation that makes more sense now than ever.
Coming a few years after the deposit-only “Bankograph” machine debuted in New York in 1961, the first dispensing ATM, called the “Computer Loan Machine,” made three-month cash loans to credit-card holders before it faded from history, seemingly within months of roll-out. Perhaps it didn’t help that credit-card holders were rare in those days.
Meanwhile, cash-dispensing machines slowly gained traction, appearing first in the UK, then in Sweden, and in Australia by 1969. That year, US inventors began tinkering with networked ATMs that allowed for withdrawals directly from bank accounts, aided in terms of security and convenience by the introduction of personal identification numbers. Remember, before then, cash dispensed by these early ATMs were technically loans, redeemable within a set period to the credit provider.
Fast forward to the present, and there are roughly 42 functioning ATMs for every 100,000 adults worldwide — a total easily topping 2 million, according to the US-based ATM Industry Association. And most of them facilitate cash withdrawals from bank accounts, balance queries, and, quite often, deposits of cash and checks.
Though the ATMIA asserts the total number of working ATMs has increased yearly since 2008, other sources tell a different story. In this view, ATMs are in decline, reflecting consumers’ growing comfort with online banking from home — a development accelerated by recent coronavirus lockdowns. So, as more people use their computers and phones to conduct routine banking tasks, banks have been closing branches, and taking in-branch ATMs out of commission in the process.
Hiding in plain sight: ATMs are poised to advance a broad-based digital-lending transformation
Meanwhile, the steep fees these machines sometimes levy can leave consumers feeling vexed. And banks that deploy them are constrained to pay between $1,000 and $10,000 per machine, not counting ongoing maintenance costs. Contrasted with the ubiquity of internet-connected mobile devices, these drawbacks seem poised to make ATMs as rare as coin-op phone booths.
But this view may be wrong. The very thing thought to spell the ATM’s demise — digital technology — could give it a new lease on life.
Provided it has an RJ45 jack, an ATM can access the internet and conduct banking business at the behest of authorized users and make cash loans. And these days, most ATMs come off the assembly line with the gear needed for hard-wire or wifi connectivity already installed.
Designed to deal with complexity, TurnKey Lender’s Enterprise edition is also well suited to the task of enhancing ATMs. The Enterprise version is configurable to the exact needs and specifications of any organization and scalable to the needs of businesses large, small, and in-between. Further, the platform comes with a decision engine that, thanks to AI, can be set to take account of behavioral inputs — such as spending and bill-pay habits — as well as traditional data gleaned from questionnaires and credit-bureau reports. And crucially, an ATM equipped with TurnKey Lender financing technology can reach a decision in minutes rather than the days or even weeks it can take using a traditional underwriting engine.
This, TurnKey Lender’s Ionenko explains, means “the lender can set its credit-scoring parameters to reflect the needs of specific customer niches in specific locales.”
Smarter ATMs usher in less risk, more flexibility, and happier customers overall
Extending the benefits of digitalized lending to ATM interfaces confers five principal benefits to banks and other lenders looking to make better use of new or standing ATMs:
- Cutting credit risks with AI-driven credit scoring
- Eliminating cumbersome paperwork and unnecessary human error
- Replacing outdated processes with software that’s customizable to the needs of the enterprise
- Reducing the cost of running a lending business
- Reducing time to market
In addition, ATM-based lending can impress consumers with:
- Faster approvals
- Lower fees
- Better interest rates
- Queries that don’t impair credit scores
On-premise ATM deployment, a given for banks and credit unions, can also help non-banking businesses extend credit without flagging a direct connection between the business itself and the lending. For example, medical, veterinary, and dental practices that wish to keep the healthcare and lending sides of their business separate, may direct clients who want financing to an on-site ATM linked to the practice’s lending platform. In this way, these businesses can enjoy a degree of discretion along with the benefits of:
- Not having to split fees
- Freedom to set rules, terms, and conditions
- A flexible, white-label environment
- Access to AI-sorted analytics to hone and enhance marketing efforts
- Continuous improvement to the underlying technology
“For us, equipping ATMs to make loans in a best-of-breed technical environment that brings to bear the decisioning and analytical power of artificial intelligence and minimizes human error isn’t really a tall order,” says TurnKey Lender’s Inonenko. “Any secure connection to the cloud is eligible, and ATMs are definitely a case in point.”
