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ATM leaders gather out West to talk security, fraud, reaching the unbanked

More than 220 ATM industry players met in Scottsdale, Ariz., Sept. 14-16 to discuss issues that will likely have an impact in 2006. At the top of the list: ATM security, the rippling effect of financial fraud, money remittance and the role multifunction ATMs will play in tapping unbanked and underbanked consumers.

October 19, 2005 by Tracy Kitten — Editor, AMC

See the ATMIA Conference West slide show.

The month of September is packed with ATM shows and conferences. From San Francisco to Miami, folks literally are gathering from coast to coast to talk ATMs. It's an exciting time in the ATM space - one filled with new ideas, new technology and a fear of the unknown.

ATMmarketplace couldn't commit to attending every show this month, so it chose two - Financial DNA LLC's Unbanked Financial Services Innovation 2005 conference, held Sept. 14 in San Francisco, and the ATM Industry Association's North American ATM Debit Summit, which ran Sept. 14-16 in Scottsdale, Ariz.

And the venues could not have been more appropriate.

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Beyond offering visitors some great eats, entertainment and photo opportunities, San Francisco is a city full of unbanked and underbanked consumers. For a conference about how best to reach the unbanked, San Francisco made sense.

Then there's Scottsdale.

Everything in Scottsdale is new, shiny and expensive. Thirty years ago, cowboys herded cattle down what are now the town's main drags. Nothing is the same. Social and economic changes have impacted Scottsdale's environment, dominant religions, etc.

Think about a conference that's geared toward ATM software and processing vendors and the parallel is clear.

The ATM industry has "new and shiny" technology, but it also faces a host of new challenges, such as those that relate to security and CRM.

Touching unbanked consumers

The San Francisco conference was Financial DNA's first, and it still pulled about 150 attendees - primarily investors. "I thought that was exciting," said Arjan Schütte, associate director of Chicago-based The Center for Financial Services Innovation and an attendee at both conferences. "It bodes well for what we're (CFSI) trying to do" - help companies reach the unbanked. (Please see ATMmarketplace's in-depth review of the DNA conference next week.)

ATMIA's summit, more commonly known as ATMIA Conference West, also touched on reaching the unbanked, primarily from the perspective of processors, software companies and independent sales organizations.

Security issues steal the show

Overall, however, ATMIA's attention focused on ATM security and identifying and defining ATM fraud. As one attendee, Ruby Steppe of ATM Services LLC, pointed out during a presentation about ATM card and PIN compromises, "There is a huge difference between ATM fraud and fraud at the ATM. I think we use a lot of internal jargon that has created some misunderstanding in the legislative world and confused the public."

Three presentations during the conference focused on defining ATM fraud and its connection, if any, to identity theft.

Ariana-Michele Moore of Boston-based Celent Communications LLC during her keynote address about ATM security said: "The point of compromise and the point of fraud are difficult to gauge. … Sometimes ATM fraud is identity theft, sometimes it is not. Right now, there is a great deal of confusion."

Moore went on to say that a fraudster with an account number and a PIN has enough data to go out on the Web and obtain personal information about the account number's holder.

"I think the industry needs to define identity theft and understand that it can cross channels," she added. "Fraud is an evolving beast. We need to not only consider frauds that are occurring today but those that will occur tomorrow."

Mike Urban of Minneapolis, Minn.-based Fair Isaac Corp. echoed that point, adding that the industry needs to understand the connection that exists between online phishing attacks and compromised ATM/debit cards. "ATM phishing fraud is not about phishing at the ATM; it's about criminals using information to get a cardholder's PIN," he said.

Understanding the role social engineering plays in phishing attacks, Urban added, can help the industry play a role in fighting card compromises.

"A lot of banks ask for a PIN when consumers set up an account," Urban said. "If the consumer is used to doing that (if he's socially engineered to readily enter a PIN), then he won't think twice about entering his PIN" when a spam requesting a PIN hits his inbox.

Urban went on to say that card-fraud loss is the fastest growing type of loss in the United States, and the industry, like it or not, is caught in the middle. "(ATM card fraud loss) hasn't surpassed phishing, but it's close."

Kirk Ergang, senior vice president of network administration for Star Networks Inc. - a subsidiary of Greenwood Village, Colo.-based First Data Corp. - said consumers are concerned about phishing, which has impacted their use of online banking channels.

According to Star's annual consumer usage study, Ergang said, "Consumers prefer PIN-based debit over signature, because they feel it's more secure."

But that sense of security is being challenged, he added. "I think the word is getting out about PIN fraud."

Like Celent's Moore, ATMIA international director of operations Lana Harmelink said the industry doesn't have accurate fraud numbers. Consumers are basing their opinions about fraud and security on what they read in mainstream media.

From left are Amelia J. Lewis, Dave Grano and Matthew Buhler of Portland, Ore.-based Vero, a financial technology company that has developed a check-cashing solution for FIs and retailers. The company demonstrated its solution, shown above, in Palm Desert National Bank's booth at the ATMIA conference in Scottsdale, Ariz. Vero and PDNB have been piloting the check-cashing solution since January at one of PDNB's bank branches.

To address that, Harmelink said, ATMIA's Global ATM Security Alliance is working to define and track fraud in Cognito, GASA's online fraud library. "It's estimated that between $50 and $60 million is lost annually in the U.S. (to ATM-related fraud)," Harmelink said. "But right now, all we have are estimates. The industry has had a hard time tracking fraud."

Discussions revolving around security and fraud also made their way into sessions on the unbanked tract.

Lori Breitzke of RBS Lynk and attorneys Daveed Schwartz and Deborah Thoren-Peden warned that there's more to consider in the prepaid-card realm than dollar signs.

"Compliance and legal issues surrounding prepaid cards vary from state to state," and the rules surrounding stored-value cards continue to evolve, Thoren-Peden said.

On the exhibit floor

Twenty-six exhibitors made up the exhibit floor, and for the first and only time during an ATMIA North American conference, manufacturers were barred from the floor. Representatives from manufacturers such as NCR, Diebold, Triton, Tranax and Tidel, for instance, came to the show, but only as attendees and speakers.

Harmelink said the arrangement was a one-time deal, and ATMIA isn't expected to prevent manufacturers from having booths at Conference West 2006.

"After the West '04 event, members and sponsors (mainly ATM manufacturer sponsors) appealed to ATMIA to provide relief in regard to exhibiting in our three North American events," Harmelink wrote in an e-mail. "ATMIA transformed Conference West 2005 for a one-year trial basis, excluding all ATM hardware exhibitions and manufacturer exhibitors. This will not be the case for future events."

Exhibitors at the conference included:

• American State Bank, which shared its booth with Merchant Underwriting LLC and Creative Strategic Solutions LLC. Merchant Underwriting, founded by Creative Solutions, is a unique underwriting company that focuses on helping ISOs, merchants and banks meet network regulations and U.S. Patriot Act requirements. ASB and Merchant Underwriting also were panelists during ATMIA's pre-conference workshop about the new Plus ATM Operator Agreement Rules that take effect in November.

From left are Ava Sagwin and J.P. Noles of Credit Union 24.

• ATM Components & Technology Inc. and Pi Systems International displayed a TC/IP conversion control module and Triple DES upgrade solution.
• Ron Schuldt, president of Columbus Data Services, stood alone in CDS's booth, since most of CDS's show gear is still in New Orleans. Schuldt said the company's headquarters will remain in Dallas, where CDS is currently based, after New Orleans is reopened six to nine months from now.
• Beyond handing out information about its financial services, Credit Union 24 distributed 300 Flexible Joes - the conference's most desired show trinket.
• Financial Payments distributed information about the processing and backend support it's providing for Tranax's and Tidel's check-cashing terminals.
• Palm Desert National Bank shared its booth with Vero and Info Touch Technologies. Info Touch, a PDNB partner, promoted Tio, a transactional kiosk deployed in early 2005. And Vero, another PDNB partner, displayed its check-cashing transactional solution - a solution PDNB is piloting at one of its branches. "If we can divert check-cashing to the ATM, people would love it," said Sandra Hartfield, PDNB's Electronic Banking Solutions' president and chief executive.
• Schurter and Kilian-Schilder displayed their 16-key metal PIN pads. The pads aren't yet encrypted.
• USA Payment Systems showcased its Web-based ATM monitoring and communication tool, which can, for instance, automatically dispatch technicians for cash replenishment.

Other exhibitors included Cash Connect, First Data, Fiserv, Elan/Genpass, Graphic Systems, Kaba Mas, NYCE, Pulse EFT Association, RBS Lynk and Switch Commerce.

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ATM Industry Association (ATMIA)

The ATM Industry Association, founded in 1997, is a global non-profit trade association with over 10,500 members in 65 countries. The membership base covers the full range of this worldwide industry comprising over 2.2 million installed ATMs.

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