Wells Fargo Offers New Sweetener for ATM Users

Add redeeming rewards to the list of things Wells Fargo ATMs can do.

The San Francisco bank, which is regarded as an ATM innovator, announced the new redemption option at its 12,500 ATMs last week. Consumers can withdraw the cash rewards, transfer them into checking or savings or apply them toward loans.

Customers earn the rewards when they use their credit cards, and they may redeem them at the ATM once they accumulate $20 worth.

The idea, which company officials had begun discussing about five years ago, finally made the cut in 2014; other projects such as envelope-free deposits had taken priority. The decision to move ahead stems from the San Francisco bank's observations of changing consumer behavior: customers are withdrawing more cash.

"Over the last several years, we continue to see cash usage go up in the network," said Alicia Moore, who heads ATM banking at Wells Fargo.

Federal Reserve research has seconded that notion. A report published in April by the Fed banks in Boston, Richmond and San Francisco found that consumers chose to do business in cash more frequently than any other payment instrument — particularly for small-value transactions.

Wells Fargo's ATM-redemption service, which actually began in December, is meant to add convenience at the place consumers most seek cash.

"We are looking for ways to help customers do what they want to do," Moore said.

The bank, which develops its own ATM software, has let customers check their reward balances at its ATMs since 2009. Granting rewards access is part the overhaul of ATMs, which date back to the 1960s, for the digital age.

While some banks have been enhancing their ATMs in a bid to widen self-service (think streaming video tellers instead of live ones), others have been working to tie the ATM to other channels. For example, Wintrust Financial launched in January a feature that lets customers use their smartphones to withdraw cash at ATMs instead of inserting a physical card to authenticate themselves.

Wells Fargo, which is intrigued with the idea of using smartphones to prearrange ATM transactions, sees all the updates as tools to cultivate more consumer loyalty. After all, the bank knows the only way to raise a satisfaction score is to make product improvements each year.

And providing more transaction types generally also means making customer relationships stickier, said Brian Riley, a senior research director at CEB TowerGroup. Certainly, Wells Fargo is also known for its ability to cross-sell and for touting more accounts per customer than its rivals.

Yet Riley wonders whether the redemption feature will appeal to high-end customers, or those who are low on funds and need to dip into their rewards.

"That's the biggest question here," Riley said.

Madeline Aufseeser, senior analyst with Aite Group, said the broader implications of the update are exciting.

"We are seeing more effort to be able to do real-time, physical point-of-sale redemption of rewards," Aufseeser said. "That is where the market should be going."

American Express cardholders can pay for their McDonald's orders with their card points, for example.

These examples, she said, are signs that the industry is getting to the point of immediate redemption.

And for a bank, such updates are but one smaller example illustrating the broader race to become top of wallet.

Quicker redemptions "could make the customer feel better about the bank," Aufseeser said.