This article appeared in the ATM & Financial Self-Service Executive Summary, Winter 2006.
Predicting the future isn't easy. Like the weather, forecasts in the ATM industry often conflict.
So it was with a grain of salt that bankers and independent deployers soaked in some of the ATM predictions made at November's Bank Administration Institute's (BAI) Retail Delivery Conference & Expo in Orlando, Fla.
From outsourcing to advanced functionality, everybody had an opinion — some of which conflicted from one presentation to the next. Take the topic of outsourcing ATM operations to a third party as an example:
Outsourcing and branding attract attention
From an FI perspective, outsourcing had been taboo for a number of years, at least in some circles. But notable U.S. banks, such as Pittsburgh-based PNC Bank, and a handful of innovative credit unions have made strides in outsourcing and branding relationships that have garnered attention.
New York-based Citibank, which outsources operation and management of all of its 485 off-premise ATMs, has relationships with eFunds; Irving, Texas-based Genpass Technologies/Elan Financial Services; and Spring, Texas-based Spring Interests Inc.
Recently, Kansas City, Mo.-based UMB Bank inked branding/outsourcing deals with two third parties — Peoria, Ill.-based Welch ATM Systems and Scottsdale, Ariz.-based eFunds Corp. — for the management and/or operation of more than 300 off-premise ATMs.
Executives from both Citibank and UMB touted the success of their outsourcing and branding deals during a presentation at BAI. "We can operate off-premise outsourced ATMs for half of what it costs us to run our (on-premise) ATMs," said James Braddock, vice president of UMB. And Bryan Pisciotti, vice president of automated channels for Citibank, said simply, "We don't make money on our ATMs. We use them to provide a service to customers." And providing more access to Citibank ATMs is the kind of service customers are interested in, he said.
But some FI leaders have their doubts.
Jonathan Velline, senior vice president of ATM Banking and Distribution Strategies for San Francisco-based Wells Fargo, said FIs that outsource do consumers a disservice.
Velline views the ATM as a critical touchpoint — much more than merely a machine of convenient placement. "We need to remember that the ATM is more than just a cash dispenser," Velline said. "We believe in offering customers many options at the ATM."
Unlike UMB and Citibank, Velline said FIs, regardless of size, should be making ATM investments that revolve around personalized service.
A division in thought
Tony Hayes, vice president of financial services for Boston-based Dove Consulting Inc., a division of Hitachi Consulting, entered the outsourcing debate with a black-and-white prediction about the future. According to Hayes, FIs have a simple decision to make: Choose between shared ATM access and improved ATM experience.
"As the average monthly transaction volume continues to drop, banks (and credit unions) will have to make a decision," Hayes said. They will opt for either a more mass-market or a detailed approach.
Hayes suggested that FIs soon will be divided into two camps: In Camp 1, the "shared" camp, ATM access is either shared by multiple FIs or is rented from an ISO. In Camp 2, the "improved" camp, the ATM experience will be upgraded to be more personalized and offer greater functionality.
"The first camp is likely to include branding and surcharging deals, while the second camp is less likely to outsource, you would assume," Hayes said. "Banks will have to choose, since you can't — and probably shouldn't — do both."
In Camp 1, FIs will reduce cost and maximize access through outsourcing operations and/or management of their ATM networks, supplementing their networks with branded ISO ATMs and joining surcharge-free networks like Allpoint.
Some FIs, he added, may entirely eliminate their ATM networks and reimburse their customers and members for surcharges.
In Camp 2, FIs will be more likely to manage their own networks, invest in new tech and roll out next-generation software and functions, such as envelope-free deposits.
"I think we're going to rapidly see what is now considered state-of-the-art becoming much more basic. And the future of ATMs in Camp 1 versus Camp 2 is going to be very different."
