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How do you know when it's time to outsource your ATMs?

You don't have to wait until alarm bells go off. There are at least three indicators that your ATM fleet is foiling your FI's attempts to grow.

July 21, 2015 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

There are something like 6,800 FDIC-insured banking institutions in the U.S., and every one of them has a reason to consider outsourcing some — or all — of their ATM operations. And that reason is cost.

Easiest to calculate is the cost related to fleet operation. An often-cited study by Dove Capital Partners estimated that a large bank could save almost 20 percent on its direct costs per month per ATM by outsourcing to a third-party managed services provider. This does not include additional savings on items such as contract administration, power and communications.

There are also the harder-to-quantify but no less real costs of opportunity lost because resources that might have been better used to build profits were, instead, devoted to the cost center of ATM operation, maintenance and management.

Plus, the FI has lost the opportunity for the ATM itself to generate additional savings and income. For instance, deposit automation could be reducing backoffice costs, while services such as direct currency conversion, bill pay, and on-screen advertising might be generating new fee income. Advanced ATM could help to reduce the cost of downtime, boosting that other unquantifiable — customer loyalty.

Here are three of the most compelling reasons for outsourcing ATM operations:

You've hit the wall when it comes to expanding your service footprint. It's all you can do to keep up with the demands of your current fleet. And as much as you believe your institution would benefit by casting a wider net(work) to attract new prospects, one look at your staff tells you that if you ask one more task of them, there will be capital H-E-double-hockey-sticks to pay.

An outsourcing specialist can often help your FI to pinpoint the most desirable locations for expansion (and in fact, might already have brandable ATMs installed in some of them), as well as the best ATM model and value-added services for each site. This partner also will be able to provide ATM analytics to indicate the effectiveness of that placement and its service mix. And, should adjustments be needed, they will be able to implement them cost effectively, because it's what they do ever day. Which brings us to the next reason to outsource:

You need proficiency that your budget does not allow. If you give tools and instructions to a person of reasonable competence he or she can almost certainly assemble any piece of furniture from Ikea. Eventually. And the final result might even look and perform as expected.

Alternatively, you can call in a team that does nothing all day but put together Ikea furniture and have the assurance that you will see the desired result in a fraction of the time — while you focus on doing your own job at a reduced stress level.

The same goes for your ATM network.

As David Dove explained in the guide, "The Key Benefits of Self-Service Outsourcing," managed outsourcing partners provide scale and focus that a single FI can't match on its own.

"They have developed an infrastructure and set of skills to do it well and they deliver cost advantages that the vast majority of banks and credit unions can't get close to."

You don't have the wherewithal to match the functionality of your competitors' ATMs. In the previously mentioned guide, Brian Bailey, VP and general manager of branch management at NCR Corp., said that FIs are increasingly finding that self-service devices are "a competitive weapon for customer acquisition."

"If the bank across the street doesn't offer intelligent deposit technologies that enable the consumer to deposit 24 hours a day or ... pay a last-minute bill through a self-service device, they're finding that it becomes a competitive liability."

However, many FIs find that the complexity of implementation and day-to-day operation of such a fleet is simply unmanageable for them — even before they add in the expense and complication of keeping their machines up to date with ever-changing regulatory requirements, security measures and machine enhancements.

Again, an outsourcing partner can provide the infrastructure and skills required because ATMs are their core business, not a sideline and necessary nuisance.

When is it time?

To answer a question with a question: Would you prefer to concentrate on the strategic aspects of the business instead of devoting resources to managing ATMs? According to Diebold Inc., if the answer is yes, it's probably time. The company offers a list of jobs that an outsourcing partner can shoulder — in addition to the obvious tasks of machine installation and maintenance — freeing an FI to focus on growth and profitability:

• cash management;
• regulatory compliance;
• remote monitoring;
• service and maintenance;
• software upkeep;
• transaction processing; and
• transaction security.

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About Suzanne Cluckey

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Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.

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Diebold Nixdorf

As a global technology leader and innovative services provider, Diebold Nixdorf delivers the solutions that enable financial institutions to improve efficiencies, protect assets and better serve consumers.

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