Bitcoin adoption may soon get a massive boost from an unlikely source: the ATM industry. Thanks to a recent report titled “Bitcoin: Virtual Currency with Real Opportunities,” issued jointly by the The Electronic Funds Transfer Association and the ATM Industry Association, expect to see prominent ATM operators move away from viewing crypto-currencies as a threat to their existence, and begin approaching them as a potential windfall.
“Bitcoin and digital currency integration could become a profitable value-added service for [existing] ATM operators, provided take-up of virtual currencies and digital cash continues to increase,” the report states.
Over the last half year, more than a dozen bitcoin-specific ATM manufacturers have entered the category, leading to a rash of announcements hailing the “first ever bitcoin ATM” in various cities and states. But the reality is, this has amounted to a few dozen units deployed at best. By contrast, there are already some 420,000 traditional ATMs in America, a footprint which the crypto-currency-only players will be hard-pressed to duplicate.
A year ago, with regulatory ambiguity and law enforcement licking its chops over fraudulent actors, it was difficult to imagine traditional financial institutions moving into bitcoin. But recent months have brought increased clarity from financial regulators, the securities industry, and the IRS.
With these obstacles falling by the wayside, the stage is set for a major influx of investment from finance industry incumbents, including ATM providers. Most importantly, the market is still wide open and the first company to establish a sizable footprint will find itself in the driver’s seat.
The primary challenge facing old world ATM operators is the switching cost associated with adopting bitcoin technology. It’s a process that will require more than a simple software update, but in nearly all cases will involve ripping out existing hardware – infrastructure which was installed at considerable cost. Upstart crypto-ATM providers will need to make a similar investment, but have less existing legacy assets to retire. At the same time, they have little to no existing locations into which to install this new technology, meaning that each new installation will come at significant business development cost.
The primary beneficiary of this land grab competition should be to the bitcoin community at large. The biggest challenges facing the burgeoning crypto-currency are a lack of liquidity and the unnecessary complexity of everyday consumers acquiring and exchanging their digital assets. A nationwide network of bitcoin ATMs would go a long way toward solving both problems.
It may be a year or more before we see a meaningful response from the ATM industry to the bitcoin opportunity. But if the latest report suggests anything it’s that the powers that be are waking up and smelling the dollars.