Reflections on ATMIA US 2017

By Daryl Cornell on ATMmarketplace.com

Last week, more than 1,000 ATM industry participants descended on Orlando to learn, share, laugh, cry and reminisce.

With a full slate of speakers, panels, exhibits and meetings, the annual ATM Industry Association conference once again offered the opportunity to stay abreast of developments in the global ATM industry.

As is true every year, a number of themes tended to dominate the conversation. Here is what we learned at ATMIA this year:

We are getting old. This year the ATM celebrated its 50th birthday, while the ATMIA celebrated its own 20th birthday. One of the biggest benefits of attending ATMIA is to catch up with old friends and to make new ones.

Inevitably the same cast of characters resurfaces every year at ATMIA, some in new uniforms. There is always an assortment of fresh faces, also, many with innovative new technologies which they hope to peddle.

Let's be honest though, we are starting to see the ATM industry grey, as veterans retire in increasing numbers.

As this trend accelerates in the coming years, it will create opportunities for the younger players. What we are losing, though is part of our history and much of our institutional knowledge.

The scope and pace of change in the ATM industry are accelerating. Even as the ATM industry matures, the volume of change seems to be growing.

As is common in mature markets, the ATM industry is now witnessing a contraction in the number of ISOs and other industry players, as acquisitions continue at a robust pace.

The whales are feeding in an attempt to grow scale. Meanwhile, many of the minnows have been nimble enough to thrive, offering high levels of customer service. It would appear that it is the regional players and the undercapitalized ISOs who are lumbering towards extinction.

ATM technological change also appears to be accelerating. Whether it is new operating systems, applications or ways to leverage the ATM footprint, ISOs today are faced with a dizzying array of strategic options.

The days of fielding a generic ATM and harvesting surcharge and interchange for 10-plus years are officially over. Some ISOs will embrace this change, differentiating themselves in the commodity swamp. Others will grow weary of the costs and increased maintenance and opt to sell out, further fueling industry consolidation.

EMV is yesterday's news … or is it? Industry stats bandied about in Orlando had it that FI ATMs are now 85–90 percent EMV ready.

Estimates of ISO EMV readiness generally fall between 60 percent and 70 percent, but most ISOs have by now begrudgingly accepted that upgrade to EMV is the required ante to stay in the game.

The real wildcard in U.S. EMV at the ATM are merchants. An estimated 200,000 retail ATMs are merchant-owned, and estimates of EMV readiness among them still fall well below 10 percent.

What will we see after October, when liability shifts apply to 100 percent of U.S. ATMs? Will MasterCard and VISA back down in the face of a potential blizzard of merchant lawsuits? Will non-EMV merchant terminals be turned off by nervous ISOs or sponsor banks?

With the fuel liability shift deadline pushed to 2020 and remaining POS EMV upgrades moving at a glacial pace, will a tsunami of ATM liability shift chargebacks in Q4 make for a very interesting holiday season this year?

After what seems like a decade of discussion about EMV, this year the topic was most obvious in its absence. Largely out of sight and out of mind, but not dead just yet is EMV.

Biometrics and the cloud are certainties … or are they? The buzz around biometrics was intense this year in Orlando.

As breaches and fraud costs mount, it seems that almost everyone is looking for the Holy Grail of user authentication. Beware the magic bullet, though.

The costs and challenges of collecting and storing customer biometric data are not trivial in an open global payment system. And while customer biometric characteristics might be unique, biometric data is simply converted to a series of bits and bytes when transmitted for authentication.

Hackers have proven to be highly adept at cracking most forms of user authentication. Do we really believe that biometric data will be any different? Plus, once hacked, biometric data cannot be easily changed by the user.

Maybe "biometrics-plus," two factor-authentication will ultimately prevail, but at what cost?

Moving applications and data to "the cloud" was also a hot topic in Orlando. Call me a Luddite, but when "everyone is doing it" becomes the primary rationale for making a move like this, count me out.

Hey, I get that managing internal servers and security is an expensive pain. I also don't dispute that purveyors of the cloud are really smart and really rich. However, it might make sense to wait and see how many of the cloud herd are culled before joining the stampede.

The US election produced audible sighs of relief. No, I'm not going political here and certainly there were a wide variety of political views shared at the show.

But let's be honest, the biggest threats to the ATM industry have been Operation Choke Point; the unchecked power of the CFPB; hostile regulatory environments at the state and local level; and a global war on cash.

It would seem that the new team in Washington will be open to shoving the choke point genie back into the bottle. And the apparent hostility of the Trump administration toward the CFPB and Elizabeth Warren will likely defang this agency.

State and local attempts at onerous ATM regulation will almost certainly continue to be an issue. But without express or even tacit support from Washington, these brushfires should be easier to combat.

And finally, it looks like a U.S. war on cash will have to wait at least another four years.

Happy 50th birthday ATM. Happy 20th birthday ATMIA.

God willing, we'll see many of you next year at ATMIA 2018 in Las Vegas.