JP Morgan Chase recently announced it will add 800 new ATMs in California and four other Western states. Many other banks have also been making investments to expand the ATM network. Investing in ATM expansion is a good idea in our current economic environment if done right and has two main potential benefits.
First, it could reduce the need for customers to transact in the branch. The branch is by far the most expensive channel of service, so this could help banks reduce costs. But to actually realize these cost savings, banks need to understand the impact to the branch on metrics like the total number of teller transactions and transactions by time of day. This could allow banks to reduce teller staffing or cut back on hours while still meeting customer needs. Without understanding the impact on the existing network, banks will simply be adding in more cost.
Second, having a more convenient network could bring in new customers or help retain existing customers. Major ATM network expansion should be accompanied by marketing campaigns to make current and potential customers aware of the bank’s investment. Ideally, banks would experiment with different marketing approaches (e.g. radio, local marketing, or social media) to find what is most effective.
Banks should also measure the impact on new account generation and retention for branches near the new ATMs and identify whether there are particular cases where the new ATMs are most effective to inform future investments. Do they have more of an impact when placed close to the branch or further away? Do demographics or competitive factors influence the effectiveness of the ATMs?
Investing in ATMs can be a smart idea as banks try to find the right service model and make the most of less expensive channels. However, just adding ATMs is not enough by itself and can simply be one more additional cost. To make ATM expansion successful, banks need to market the new ATMs, locate them in the right places, and identify opportunities for offsetting cost reductions in the branch.