[Weekender] Digital payment drives out ATMs

As bank consumers embrace digital payment methods, they are gradually turning their backs on automated teller machines, as cash machines on the street here have fallen to decline.

Korea’s leading five banks ran a total of 29,611 ATMs as of the end of last year, down 4.4 percent, or 1,378, from a year earlier, according to data from the industry.

The banks are Shinhan Bank, Kookmin Bank, Woori Bank, KEB Hana Bank and Industrial Bank of Korea. 

Kookmin Bank has shut some 571 ATMs in the past three years, attributed the closure to the mobile banking trend.

“As more people prefer transaction channels such as smartphones and online banking, the number of average daily transactions on each ATM has been consistently coming down,” an official at Kookmin Bank told The Korea Herald.

If the trend continues, experts said, sustainability of such devices will be an issue, as they are costly to operate.

“If losses (from the conventional banking services) keep growing, customers can experience inconvenience as it forces banks to reduce the number of ATMs or shift the cost to customers by raising rates,” said Kim Woo-jin, a senior researcher at Korea Institute of Finance.

Banks spend an average of 20 million won ($17,400) a year to operate an ATM for rent and maintenance costs while they earn some 10 million won from ATM fees. Kim said one ATM incurs a loss of about 1.66 million won every year.

Despite the continuing closures, Korean banks still have too many ATMs.

According to data compiled by the KIF, Korea had 290 ATMs per 100,000 people as of 2012, higher than 222.8 in Canada, 180.9 in Portugal and 173.1 in the United States.

“The Korean bank industry is nearly overbanked. Lenders need to seek ways to cooperate to develop and run a multi-bank ATM to minimize costs,” Kim said. 

By Park Han-na (hnpark@heraldcorp.com)