Sept. 7, 2011
By Alan Walsh
In the early 1990s, Wincor Nixdorf introduced the first bulk deposit automation experience. In fact, we're now into our fourth and fifth generation technology here in the U.S.
I've been very fortunate in that, with the introduction of Check 21, just before I arrived in the U.S., it was an opportune time for our company because a lot of the large financial institutions in the U.S were looking at how to automate the experience at the ATM by allowing the imaging of checks.
That was only allowed because of two things: the technology was available, and the U.S. government changed the legislation and allowed banks to swap the image.
We decided early on as a company in the 1990s, during the whole deposit automation cycle, that bulk check and bulk cash was the way to go. Everybody else was in single check and single cash mode. So, that really allowed us to rapidly grow our business share here in the U.S. In fact, we now have one-third of the deposit automation market segment. Five years ago, we probably had in the region of 2 percent.
Our success was because the market was ready. When you look at the history, why did the banks suddenly want deposit automation? First, they wanted to offer a unique customer experience. I always bring people back to the airport model. Pre 9/11, you walked into an airport, and it was chaos trying to get checked in for a flight. Now, it's completely automated.
That whole mindset changed in the U.S whereby society was getting more and more familiar with self-service devices. Pumping gas, checking into a hotel, checking in at the airport and so on.
What happened was the financial institutions wanted to take advantage of that too. They wanted to do it in a way that would reduce costs but still give the customers what they want. With imaging, the bulk check meant it was a fast transaction. The reader on the device meant it was a secure transaction because the notes are validated. So, from a security perspective it was a very secure way to deposit both checks and cash.
The other thing deposit automation did for the banks was save money from an operational perspective. Prior to imaging, the cost of depositing an envelope was roughly $1.40 to $1.70. The cost of processing an imaging transaction is less than 40 cents.
There are roughly 210,000 financial institution-operated ATMs in the U.S. now, and I would estimate that about 40,000 of those are deposit image ATMs. And that trend is still growing. It started with the large, household name banks like Chase, Bank of America and Wells Fargo, but now the regional banks are rolling out, and we're even seeing a quantity of the smaller community banks and credit unions embracing this technology.
Deposit automation is a trend that started in roughly 2006, and it's a trend that I think will continue indefinitely. What you will start to see is the smaller banks adopting the technology en masse.
As we look at the future, we have to look at self-service in general. With regard to some of the recent legislative changes in the U.S., such as the Durbin Amendment, the financial institutions may not have some of the income they had last year this year, so that's pressure on their cost base.
Banks are going to be forced into looking at ways they can reduce costs, sell more or charge more fees. And of course, no one really wants to charge more fees. The trend I think you're going to see going forward is the redesign of branches with more of a focus on self-service.
The best way to reduce costs is to use technology. When you invest in technology, the customers will become more loyal because they will see it as the norm, instead of the exception.
Sometimes we think of the next generation of banking customers as the university students with their iPads, iPods and other devices, but the reality is everybody is using technology today, not just the university students. It's your mom and dad, sons and daughters, me and you. It's now society in general becoming "the next generation" of technology users.
Alan Walsh is the executive vice president of the banking division for Wincor Nixdorf USA. Prior to his position with the U.S. arm of operations, he was the managing director for Wincor Nixdorf Ireland for five years.