Outsourcing in banking is not new — the past decade has seen widespread use of outsourcing in areas from call centers to back office IT — and yet when it comes to ATMs, outsourcing is still to be fully embraced.
While individual elements of ATM provision are commonly outsourced, and outsourcing providers in fast-growing markets such as India and China are helping to drive the current breakneck growth, end-to-end outsourcing, particularly in more mature markets, is still relatively uncommon.
There is no shortage of organizations offering this type of service, with ATM manufacturers, payments processing organizations, IADs, CIT companies, IT providers and others offering a broad range of solutions.
So why has progress been so slow?
The traditional explanation has been that the ATM is a core channel that banks feel must be kept in-house, but this can only be part of the explanation, as banks do outsource other critical activities.
The explanation may be more mundane: Up to now, many banks, particularly larger banks, have not felt that the business case for end-to-end outsourcing is strong enough.
So what can outsourcing providers do to change the status quo?
Firstly, providers need to do a better job of presenting the business case for outsourcing, and help banks understand the true cost of their ATM operations (which I suspect that many banks underestimate).
Secondly, providers must play to their strengths and build on their intimate ATM knowledge and expertise. To some extent, the ATM market is moving in their direction with increasing regulation and technological complexity, which specialist organizations should be better positioned to address.
And lastly, providers must work with banks to truly understand their financial requirements. It is still too early to say for certain how the banking crisis will impact ATM operations, but with pressure on banks to build up capital, there has never been a better time to help banks transfer assets off their balance sheets.