ATM Use When Traveling Abroad: A Bridge to a Cashless JourneyTim Sharman |
Cross-border spending behavior sits between the polar opposite of travelers who only carry cash when they travel overseas and sophisticated travelers who solely use credit or debit cards when going to a foreign country. In between there are travelers who arrive in their destination country and head to an ATM to obtain the local currency they need for incidentals. They often withdraw enough cash to fund their entire trip.
While the ultimate answer lies in using credit cards, ATM usage can be an opportunity to start to move traveling customers away from cash altogether. At first they may start with complete foreign ATM avoidance, which is not the right solution. Then, with encouragement, they may make one overseas ATM transaction to meet all their foreign currency needs. As they become more comfortable with the foreign ATM environment, they may learn to carry smaller amounts of cash from multiple ATM transactions. Finally they may minimize or eliminate cash in favor of using cards at point of sale.
While the $435 billion in annual cross-border ATM transactions represents an important revenue stream to the financial services industry, there remains significant foreign ATM avoidance — dollars that are not counted in the $435 billion. MasterCard analysis estimated that foreign ATM avoidance represents some $104 billion in “missing” ATM transactions, and therefore closely equates to a similar amount of currency being carried internationally in wallets, briefcases, and backpacks.
There are two opportunities here. The primary one is for the financial services sector to capture this $104 billion in ATM activity, either by getting this population to use ATMs by making them more user-friendly and accessible, or by getting them to use debit and credit cards and avoid cash entirely.
There is a further “card option” of general purpose prepaid cards that are targeted specifically to international travelers and intended for cross-border use, allowing storage of two or more currencies. In many ways, these kinds of prepaid cards can be considered the modern-day travelers’ check.
At a global level, there is also an opportunity to remove an impediment to international travel, when concerns over foreign ATMs and access to cash lead to people not taking the trip at all, with the consequence of lost economic activity for the foreign country and potentially lost business opportunities (for an avoided business trip) for both the originating and destination countries.