ATMs vs. POS Terminals: A Horse Race?

23 Pages Posted: 10 Sep 2008 Last revised: 26 Aug 2012

See all articles by Santiago Carbo-Valverde

Santiago Carbo-Valverde

Bangor Business School; Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF)

Francisco Rodriguez-Fernandez

University of Granada - Department of Economic Theory and History

Date Written: November 12, 2008

Abstract

This paper analyzes the adoption, diffusion and interaction patterns of the widely observed expansion of ATM and point-of-sale (POS) devices in the banking industry. POS (debit and credit) card transactions are considered as a main paradigm of a welfare-improving transition from cash to electronic-based payment instruments. This transition, however, is following a slow path in many developed countries which can be, at least partially, due to the over time overlapping of the objectives of banks in deploying ATMs (moving some front-desk activities away from branches) and POS devices (increasing the use of cards for purchase transactions). The results of various empirical tests in this paper suggest that the adoption and diffusion of ATMs and POS machines at banks is mostly driven by rival precedence, network effects and market power while demand factors do not seem to be significant. The growth of ATMs is found to negatively affect POS adoption which, in turn, suggests that the promotion of cards relative to cash is diminished by the co-existence and joint promotion of these two rival technologies. Additionally, we provide estimates of the effects of these technologies on the demand for currency. The results show that POS devices and higher POS transactions may reduce significantly the demand for currency and offset the negative effects that the deployment of ATMs and ATM use may have on the demand for currency.

Keywords: Technology diffusion, payment instruments, banks, ATMs, POS.

JEL Classification: G21,O33,L11

Suggested Citation

Carbo-Valverde, Santiago and Rodriguez-Fernandez, Francisco, ATMs vs. POS Terminals: A Horse Race? (November 12, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1247078 or http://dx.doi.org/10.2139/ssrn.1247078

Santiago Carbo-Valverde

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF) ( email )

Serrano Anguita 9
Madrid, Madrid 28004
Spain

Francisco Rodriguez-Fernandez (Contact Author)

University of Granada - Department of Economic Theory and History ( email )

Granada
Spain

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