We all know what ATMs are—but what about reverse ATMs? In a world where convenience is everything, a reverse ATM offers businesses and consumers more options for shopping and banking. They are already quite common in Asia and Europe and are gradually becoming more common in North America as well.
ATMs have been used for decades with very little innovation in style or function. Consumers use them to withdraw cash from their accounts using a credit or debit card. Reverse ATM machines do the opposite, offering a new and innovative way to make contactless and digital payments. We can expect to see them popping up more frequently as the world becomes increasingly cashless.
What Are Reverse ATMs?
As the name suggests, a reverse ATM, or a cash-to-card kiosk, is the opposite of a conventional cash machine. A reverse ATM is a machine into which customers deposit cash and are given a debit card with the amount they have deposited credited onto the card. The customer can then use this card to complete a transaction through the merchant’s payment gateway—either in-store or online.
Currently, consumers will most commonly see cash-to-card kiosks in venues or establishments that want to encourage their customers to use cards instead of cash for transactions in their establishments. In return for cash, kiosks dispense stored-value cards that can be used to purchase goods or services in that establishment.
What Purpose Do They Serve?
Reverse ATMs provide individuals and businesses with different solutions to different problems. For individuals who are unable to use traditional credit or debit cards, reverse ATMs provide one solution; for businesses wanting to go cashless, they provide another. Reverse ATMs are one more step towards a future of digital payments that will largely leave cash in the past.
Reverse ATMs Facilitate Contactless Payments
Contactless payments are currently consumers’ preferred method of payment. During the pandemic, contactless payments rose in popularity as a safer method of payment compared to handling cash.
A Solution for People Without a Bank Account or Debit Card
According to 2021 data from 38 countries, an average of 8.31% of European residents above 14 years of age are unbanked, with significant variations between countries. Reverse ATMs serve people who don’t have a bank account or debit card, but who need a payment method for contactless or online purchases for which it’s impossible to pay in cash.
A Solution for People Who Choose to Keep Their Cash Liquid
For various reasons, some individuals prefer to keep paper money liquid. However, this became more difficult after the pandemic as many establishments stopped processing cash transactions altogether.
Reverse ATMs provide a solution for people who prefer to store cash, enabling them to “top up” their prepaid card with the amount they need rather than maintain a minimum balance in a bank account.
Additional Benefits of Reverse ATMs
Reverse ATMs offer several additional benefits for individuals, businesses and society as a whole.
1. People with a poor financial history or who don’t meet the requirements to open a bank account can gain access to cashless purchases. For example, people who:
- Have recently become bankrupt
- Have unpaid balances on closed bank accounts
- Have bounced cheques or excessive overdrafts
- Don’t have a fixed address
- Don’t have the relevant documents to open a bank account
2. People who choose not to pay by card for personal reasons (including privacy and a lack of trust in the banking system) can still make purchases from cashless stores and gain access to mobile payment apps.
3. Tourists can load their cash onto prepaid international cards to reduce the risk of being robbed of cash on their travels.
- Reverse ATMs allow businesses to go cashless without losing customers.
- Reverse ATMs are great for businesses that want to avoid the hassles associated with handling cash, including theft, loss and frequent trips to the bank.
- Cashless businesses have less chance of being robbed than those with a lot of cash in the register.
- Businesses that only accept digital payments can centralise their transaction data and utilise merchant services such as real-time sales records, analytics and fraud detection algorithms with all of their customer purchases.
- A majority of consumers prefer cashless payments. In the Back to Business Study conducted by Visa in 2021, 65% of consumers expressed a preference for contactless payments.
- Card payments are more traceable than cash payments and are perceived to be more secure. While prepaid cards aren’t as traceable as bank cards, they are still more traceable than cash.
There are two important factors to consider before adopting reverse ATM technology in your store:
- The costs involved
- The type of card dispensed
Reverse ATMs come with an upfront cost of several thousand Euros, which makes them more viable for medium and large-sized businesses than for sole proprietorships. Once they’re set up, cash-to-card machines don’t typically charge for the prepaid card that is dispensed but may have a minimum top-up amount. When the cards are used to make a purchase, the vendor pays interchange fees just as they do for bank-issued cards.
Store-Specific vs. Generic Cards
Some cards are store-specific and some are generic. Some are rechargeable whereas others are designed to be used only once.
Some stores and venues such as sports stadiums, casinos and amusement parks use venue-specific prepaid cards as their preferred method of payment, especially if they don’t have cash registers or accept cash. Cash loaded onto this type of card can be spent in-store on things like entry tickets, physical items or gift vouchers.
Generic Cards (Prepaid Debit Cards)
Generic reverse ATMs dispense a Visa or MasterCard-brand prepaid debit card, which may or may not be rechargeable. These cards can be used to make purchases anywhere.
Challenges Associated with Reverse ATMs
Though reverse ATMs provide a new and innovative service, there are a few downsides:
- It may be hard to use up all of the balance on a card if only a small amount is left on it.
- Some cards carry a dormancy fee—a charge if the card isn’t used for more than three months.
- The upfront cost of the reverse ATM is an added cost for businesses. This cost can be offset over time by running adverts on the screen.
- Reverse ATMs may be less useful in cities that legally require businesses to accept cash.
- Technical problems with the machines can be devastating for businesses that don’t accept cash.
Reverse ATMs: Another Step Towards a Cashless Society
While many people still like to pay cash, the popularity and use of cashless payments are increasing around the world. Reverse ATMs, though not a complete solution, represent an important step in creating an inclusive society in which everyone can gain access to online and digital payments, regardless of their banking status or eligibility for a credit or debit card.
Reverse ATMs also help to streamline transactions, especially in places where speed is essential for good service. Reverse ATMs that are able to load digital wallets will be the next step in this technology, a step that will make these machines more inclusive and beneficial for many in society.