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Banking industry seeks fresh ATM strategies

The Yomiuri Shimbun

A mobile branch operated by Shizuoka Bank in Mishima, Shizuoka Prefecture, on June 22

By Daisuke Ishikawa / Yomiuri Shimbun Staff WriterThe banking industry is being forced to review its strategies for managing ATMs, as maintenance costs become a burden amid the Bank of Japan’s negative interest rate policy and other factors pushing down profitability. Convenience store ATMs are increasingly gaining attention as an alternative, and as consumers move away from cash and toward cashless payments, there may be even less of a need for ATMs in the first place.

Mobile branches

A white truck was parked outside a supermarket in Mishima, Shizuoka Prefecture, in late June, with a notable message on its side: “Equipped with a counter and ATM.”

The truck is a mobile branch that Shizuoka Bank has operated since 2016. In addition to depositing and withdrawing funds, customers can change their address, discuss loans and access other services via the truck.

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  • The Yomiuri Shimbun

  • The Yomiuri Shimbun

“There’s no ATM in my neighborhood, so I use it when I go shopping,” said a 76-year-old homemaker who lives nearby.

Regional banks are struggling with declining profits as populations shrink in the areas where they are based and interest rates remain low. They’re under pressure to shrink their branch networks and cut back on ATMs, but regional banks play a major role in the local financial infrastructure. Mobile branches can help maintain services in sparsely populated areas. Their use is expanding, including by the Bank of Kyoto, Joyo Bank in Ibaraki Prefecture and Ogaki Kyoritsu Bank in Gifu Prefecture.

Larger banks are facing similar circumstances, and the megabanks have started considering standardizing their ATMs to cut down on installation and maintenance costs.

Contracting out

Partnerships among banks are also expanding. Mizuho Financial Group Inc. now allows customers to use the ATMs of Aeon Bank, which has many bases in local areas, for free during the day on weekdays. More and more regional banks have replaced some of their ATMs with those of Seven Bank and other firms.

Increasing fees is another trend. In October, Shinsei Bank will end a practice it launched in 2001 and start charging for some ATM services. The bank plans to save ¥1.5 billion per year by charging for some ATM services.

“It’s been more than a dozen years and times have changed,” Shinsei Bank President Hideyuki Kudo said at a press conference in May.

Banks have long competed with each other by increasing their number of ATMs. They were able to corral customers this way, but it came at a heavy cost.

A single ATM costs at least about ¥3 million to ¥9 million, plus about ¥300,000 in monthly maintenance costs. The financial industry is estimated to spend ¥2 trillion per year dealing with ATMs and cash. With many ATMs free to use during the day on weekdays, “It’s difficult to turn a profit in the ATM sector,” a megabank official said.

Meanwhile, ATMs with advanced functions are being developed to save on labor and allow banks to close some branches. Sumitomo Mitsui Financial Group Inc. will launch a service that allows customers to get cashcards with poor scanning abilities repaired automatically at an ATM. Mitsubishi UFJ Financial Group Inc. also plans to increase the number of its ATMs that can read tax and utility statements.

Convenience stores

Amid all this, the presence of ATMs in convenience stores is becoming more important. Over the last 15 years, the number of ATMs run by large banks has decreased by 10 percent, while convenience store ATMs have increased sharply from about 10,000 to about 50,000.

Convenience stores are located in places that are easy for many customers to visit.

There are also cost benefits. The ATMs of the largest player in the market — Seven Bank — cost only about ¥2 million apiece due to having fewer functions. For example, they cannot make account book entries. Maintenance costs are also lower — cash from Seven-Eleven sales are put into the machines, which is an affordable way of cutting down on the work needed to resupply them with cash. Most users are customers of other banks, making commission fees a major income source for Seven Bank.

Many banks allow their customers to use convenience store ATMs for free a certain number of times. With the number of users steadily increasing, convenience store ATMs “are becoming an alternative to bank ATMs,” a Seven Bank executive said.

Going cashless

The importance of ATM networks in Japan is largely due to consumers’ strong preference for using cash. Yet as people go cashless and smartphone-based payments increase, the situation could change completely.

Smartphone payments are mostly the non-contact type, in which customers hold up their smartphones to a store terminal.

While services such as East Japan Railway Co.’s Suica and Aeon Co.’s Waon are widely used, stores must pay to install terminals, which makes it difficult for them to spread into small businesses.

As one solution for this, payments using barcode-like QR codes are becoming more common. To use QR codes, both users and stores only need to install a smartphone application. To complete the transaction, one party uses a smartphone camera to read the QR code displayed by the other. Line Corp.’s payment service Line Pay uses QR codes, and also allows users to send each other money free of charge.

“It’s useful for splitting the bill with friends when we go out drinking,” a 31-year-old employee of a Tokyo-based company said.

Rakuten Inc., Yahoo Japan Corp., NTT Docomo, Inc. and others have introduced smartphone QR code payments, and KDDI Corp. has announced its entry into the sector.

In the banking industry, Mizuho Financial Group released a smartphone app this spring that has debit card functions. The bank plans to make the app QR-code compatible, as well as add credit card and electronic money functions.

“With a combination of branches, ATMs, smartphone [apps], internet banking and other functions, we want to offer services of the highest possible quality,” an executive of a major bank said. Speech

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