Photo/IllutrationA staff member sets up a notice informing customers of cross-service ATM program in Tokyo’s Chiyoda Ward on Sept. 18. (Shinji Hakotani)

  • Photo/Illustraion

Two megabanks, MUFG Bank Ltd. and Sumitomo Mitsui Banking Corp., on Sept. 22 started sharing their ATMs at around 2,800 locations to survive changes in the financial sector, including moves toward a cashless society.

The joint ATM service, which began at 4 a.m., is part of the banks’ plans to eventually save billions of yen a year in maintenance and other costs associated with ATMs.

To deal with the decline in ATM use, the two megabanks have halted their competition and instead collaborated on their ATM networks for efficiency.

Bank customers have normally been charged 108 yen ($1) for using an ATM of a different bank in the daytime on weekdays.

Those charges are now waived for customers of the two banks for ATM use at about 1,600 MUFG and about 1,200 Sumitomo Mitsui Banking spots. All of these ATMs are located outside of the banks’ branches, including in front of train stations and in shopping malls.

However, charges for using the ATMs on holidays or after business hours will still apply.

With the spread of electronic money, including the popular Suica cards, the number of ATM users “decreased by 20 percent in the past 10 years,” according to an official of Sumitomo Mitsui Banking.

As part of the joint project, both MUFG and Sumitomo Mitsui Banking are scheduled to abolish or consolidate 600 to 700 ATMs that are placed closed to each other. They are also considering sharing their ATMs within their branches.

The cost to buy an ATM is millions of yen, while expenses for maintenance, including rent and security, can run up to 300,000 yen a month.

The banks have faced the reality that their customers’ transaction fees cannot cover the costs to operate the ATMs.

The situation for banks has been exacerbated by low returns from lending amid the extremely low interest rates.

The banking industry reduced the number of ATMs by about 6,000 units over the past 10 years. To reduce the inconvenience for their customers, banks are now working together on sharing their ATMs.

Jun Izumi, general manager of channel strategy of Sumitomo Mitsui Banking, said: “Both banks will set an example by (collaborating on ATMs). We would like other banks to eventually join us.”

An executive of MUFG Bank said: “We are sharing what is inflicted upon us. We want to do this (under the concept of) ‘all Japan.’”

While banks are removing ATMs, conglomerates that have entered the finance industry have increased the number of their machines.

Seven Bank, for example, now has about 25,000 ATMs, up by 80 percent from the number 10 years ago.

The company, the banking arm of Seven & i Holdings Co., which oversees Ito-Yokado supermarkets and Seven-Eleven convenience stores, on Sept. 12 announced the development of Japan’s first ATM that uses facial recognition technology.

Seven Bank intends to eventually allow users of these ATMs to deposit or withdraw money without the need of a cash card.

“It is necessary to create new social values with innovative technology to allow the ATM business to survive,” Yasuaki Funatake, president and representative director of Seven Bank, said.

Aeon Bank, established by supermarket chain Aeon Co., is collaborating with megabanks MUFG Bank and Mizuho Bank on sharing their ATM systems.

Seven Bank and Aeon Bank obtain profits mainly through fees paid by their alliance partners, not by interest payments.

They also do not need to pay rent for their ATMs because they are set up in shopping facilities run by group companies. The arrangement is also advantageous because ATMs can draw customers to their stores.

“With the dwindling number of banks’ branches, ATMs set up at convenience stores or other facilities might flourish as ‘mini branches,’” said Toshihisa Hirano, managing director and partner of U.S.-based Boston Consulting Group who is knowledgeable about the financial industry.

“If ATMs are also equipped with a system to connect bank staff with customers, and they can talk about possible loan services via videoconferencing, the convenience store might be the place to link banks and their customers,” Hirano said.

(This article was written by Tetsuya Kasai, Yuriko Suzuki and Shinji Hakotani.)