New Bills Make ATM Shortage Likely

Customers of financial institutions are likely to be inconvenienced next year due to delays in the replacement of current automatic teller machines (ATM) with ones that can deal with new 10,000-won and 1,000-won banknotes, scheduled to be issued on January 22, 2007.

Some manufacturers of ATMs have asked the Bank of Korea (BOK) to delay the issuance of the new banknotes. However, the BOK has decided to stick to its schedule and come up with measures to minimize the possible negative side effects.

According to the BOK and ATM manufacturers on December 27, it is estimated that only 60 percent (about 26,000) of 39,900 ATMs currently installed in financial institutions, including banks, will be replaced by January 21, the day before the issuance of new banknotes. The BOK said on December 8 in its report on the progress of ATM replacement that 76.3 percent of all ATMs, or about 30,400 ATMs, will be replaced by January 21 next year.

The current disruption in replacing ATMs can be traced to the fact that ATM manufactures cannot supply new ATMs on the scheduled date set by the BOK and other financial institutions.

The head of one ATM manufacturer said on condition of anonymity, “In foreign countries, a new banknote starts circulating in the market at least one year after the announcement of its issuance. However, the BOK gave us only six months after it announced a new banknote. That is the reason behind the current trouble.”

Another reason is that most of the orders for new ATMs by financial institutions were made after October. Due to the backlog in orders, it has become difficult for ATM manufacturers to supply ATMs on time even if they operate factories seven days a week.

Some inconvenience to customers seems to be inevitable-

If only 26,000 out of total 39,900 ATMs will be replaced by January 21, it means that one of three ATMs cannot handle new banknotes for a certain period of time. Those who want to withdraw or deposit money with new banknotes will likely to have to put up with some inconveniences of waiting in line to use new ATMs longer than before. In some bank branches, where the usage rate of ATMs is particularly high, some level of crowding will be unavoidable.

It is reported that ATM manufacturers recently asked the BOK to delay the issuance of new banknotes, but the BOK rejected the request, saying that the schedule was decided by the Monetary Policy Committee.

The BOK is now trying to come up with measures to deal with the delayed replacement of ATMs.

First, financial institutions will be asked to set up a window that will exclusively deal with customers requesting new banknotes in each of their branches or to be equipped with at least one new ATM until the replacement of the current ATMs is completed.

A measure to minimize the usage of new ATMs by reducing the amount of new banknotes issued in the early stage is also under consideration.

jinhup@donga.com legman@donga.com