Market Drivers of Bitcoin ATMs

1000 dollar bank notes
Cryptocurrencies such as Bitcoin, dogecoin and Ethereum have seen tremendous growth over the past few years as consumers seek out ways to speed up financial transactions, bypass traditional financial institutions and minimize fees. The value of a single bitcoin, for example, has risen from zero in 2008, the year it was created, to values over $50,000 recently.

One of the challenges when it comes to cryptocurrencies, though, is converting those digital currencies to cash, and vice versa. There are online exchanges that can accomplish the task, but the process can take several days, or longer. That undercuts the “speedy transaction” aspect of cryptocurrencies and can be a significant hurdle to those who either want to purchase digital currency quickly or need quick cash. Additionally, for those who primarily use cash (22% of U.S. households are unbanked or underbanked according to a 2019 report by the Federal Reserve), the ability to allow cash when transacting bitcoin is essential for enabling this base of cash consumers.

Bitcoin ATMs are emerging as a way to overcome those challenges.

Opportunities for Growth

A bitcoin ATM, or BTM, is a kiosk that enables customers to purchase bitcoins or sell bitcoin in exchange for cash. BTMs produce blockchain-based transactions that send cryptocurrencies to the user’s digital wallet, often via the use of a QR code.

BTMs operate in much the same manner as a traditional ATM, with a few major differences. BTMs accept cash for instant cryptocurrency purchases and dispense cash from instant cryptocurrency sales.

Consumers have long been comfortable with conducting their financial business via a self-service device. ATMs, for example, have long been a feature of the self-service landscape, with more than 470,000 machines deployed in the United States alone.

But while the growth rate for ATMs is expected to remain relatively flat for the foreseeable future, the growth of bitcoin ATM placements is expected to explode.

There were 21,287 bitcoin ATMs in the United States as of August 2021 operated by 600 different companies, according to the trade news site Coin ATM Radar, an 86% increase from 11,400 machines at the beginning of the year. The rate of bitcoin ATM placements is only expected to accelerate from there. One report projects the market for BTM placements will grow at a 46.6% annual rate through 2024.

It’s a safe bet that those who operate a fleet of ATMs, automated retail devices and/or other types of machines are constantly on the lookout for the next self-service device to add to their fleet. BTMs may be that opportunity.

Addressing Market Needs

BTMs offer several benefits for everyone involved in a cryptocurrency transaction.

For the customer, BTMs enable the use of cash for bitcoin transactions as well as quick delivery of cryptocurrency, unlike online exchanges that may take days to settle. In addition, some banks won’t do business with those online exchanges, making the process of process of buying cryptocurrency online inconvenient. The same goes for selling that cryptocurrency. Having to wait a week to access funds isn’t helpful for those who may be in a cash crunch. BTMs avoid those hassles.

For the retail store, supermarket, or shopping center where that BTM may be located, benefits include increased foot traffic from those coming in to use the machine. Financial services firm TripleA estimates there are more than 300 million cryptocurrency users around the world as of 2021, up from just 5 million in 2016.

A recent report by cryptocurrency exchange Gemini pegged the typical use as a person in their late 30s and highly educated. And while the perception is that most cryptocurrency users are male, the report found that more women than men are expressing interest in the currency. Those traits match those of the people retailers like to have in their stores, especially if they make a purchase after conducting their cryptocurrency business.

And of course, for those operating a fleet of self-service devices, BTMs offer a new avenue for growing their businesses.

Best Practices vs. Operator Hurdles

As with any new technology, there are challenges deployers of BTMs will face.

A key part of BTM deployment is the ease of integration between the bitcoin operator’s software and the BTM manufacturer’s hardware. The more difficult the process, the longer the development cycle and speed to market.

Machine uptime is a critical consideration as well. If the BTM isn’t functional, it isn’t making money. In addition, if a user encounters a BTM that features a scrawled “Out of Order” sign taped to the screen, they’ll gladly do business with your competitor.

And security is a prime concern as well. Issues with BTM security could seriously impact a network operator’s reputation.

So when considering adding BTMs to your fleet of self-service devices, advice from a seasoned vendor can be invaluable.

Kiosk machine manufacturer KIOSK Information Systems, for example, has extensive experience with financial services platforms, with a long history of success in high-volume nationwide deployments. The company already has hundreds of kiosk machines in the field earning money for their operators.

KIOSK has adopted several best practices when it comes to simplifying BTM deployment and operation. The company has a modular approach to hardware/software integration, providing a “hardware integration module” that more readily enables the software integration to the hardware’s components thereby accelerating development time. One KIOSK customer reported that using the HIM resulted in a 50% reduction in deployment costs and an equal reduction in time to market.

KIOSK can also provide turnkey site survey, installation, spare parts stocking & warranty, and field technician services. Equally important elements include advanced managed services such as payment security management and KIOSK-led proactive remote monitoring.

If you are looking to build out your BTM network or already have a portfolio of ATMs in locations such as airports and retail outlets wherein BTMs may be a great fleet addition, KIOSK is here to help advise you of options to achieve your goals and assist with the process.

Edited by Anne Guenther, Strategic Marketing Director
KIOSK Information Systems