As self-service terminals play an ever-larger role in consumers’ lives, sophisticated ATMs are proving to be a powerful tool for financial institutions (FIs) to attract, retain and empower customers. These busy consumers seek out transactions with the least amount of friction possible.
That’s the reason that, despite the financial turmoil of the past several years, FIs have introduced deposit automation at a record pace. According to London-based Retail Banking Research (RBR), more than 464,000 deposit automation terminals were installed around the world as of the end of 2009, a 44 percent increase over 2007 totals. During the same period, the number of non-deposit ATMs grew by only 12 percent.
The trend is expected to continue, as RBR predicts the number of deposit automation ATMs to triple by 2020. Worldwide, the number of automated deposit ATMs already outnumbers envelope deposit ATMs.
In the U.S. market in 2011 and the first quarter of 2012 as FIs upgraded their units for ADA and PCI compliance, deposit automation was often included to avoid upgrade costs later. This foresight paved the way for FIs to realize the benefits of deposit automation while addressing the other requirements of the market.
In addition, dramatic earnings pressure from U.S. regulatory changes such as the Durbin Amendment and Reg E, as well as the pervasive low interest rate environment, have fundamentally changed the financial basis of traditional transaction processing and branch banking. With deposit automation, FIs are able to fundamentally alter the cost basis for consumer transactions.
Clearly, FIs are seeing deposit automation as an indispensable part of their competitive strategy. Taking a “wait and see” attitude could be fatal misstep when competitors are applying a proven technology with a focused strategy.
“There are more than 60,000 image-deposit ATMs in the United States already, and the number is climbing quickly,” said Nicole Sturgill, research director, delivery channels, with Needham, Mass.-based research firm TowerGroup. “If you haven’t deployed a deposit automation ATM, you are most likely competing with an institution that has.”
The growth in the number of deposit automation ATMs comes in conjunction with a corresponding growth in the use of cash, likely a result of the economic downturn.
“We saw a huge public loss of confidence in credit, per se, as the full extent of household and consumer debt levels became apparent, exposed by the financial crisis,” said Mike Lee, CEO of the ATM Industry Association. “As a result, masses of citizens turned to cash, and cash regained its leverage as a time-honored household budgeting tool.”
Spurred by competitive pressures and the drive to lower costs, FIs are realizing the benefits of automated check processing and cash handling, as well as a reduction in deposit-based fraud. Tellers benefit by being able to spend more time interacting with customers and less time counting cash and tracing errors, while customers benefit from greater convenience, improved service and quicker access to deposited funds.
There are a number of factors to consider when implementing a deposit automation solution. The choice of vendor can have a significant impact on service and availability. In addition, employees and customers need to be educated before they will adopt the new technology in large numbers.
As a first step, deployers need to develop a strategy for implementing deposit automation. Should they phase in a solution over time, one city at a time or deploy it all at once? Should they implement deposit automation in every channel, or only those that handle either the fewest deposits, or the most? These are only some of the questions that should be considered when implementing a deposit automation solution.
Integrating all of the components of deposit automation can be a challenge. But when all the pieces are brought together in a seamless operation, FIs have the advantage of reduced operating costs and increased customer satisfaction.