Article

ATMs aren't losing share, they're gaining company

NCR explains the rationale behind its planned acquisition of mobile and online provider Digital Insight.

December 12, 2013

On Dec. 3, NCR Corp. announced its intention to acquire Digital Insight, a company that specializes in online and mobile banking services. This made us wonder whether the company was preparing for a decline in ATM demand as increasing number of consumers get on board with online and mobile banking.

Brian Bailey, vice president of marketing and strategy for NCR Financial Services says that the acquisition is not a signal of a lack of confidence in the ATM's future, but rather, the acknowledgement that the future will demand that FIs provide a seamless, omnichannel banking experience to their customers.

More than ever, consumers are demanding a convenient, comprehensive, high-quality — and friction-free — banking experience. And as Bailey explained in an email Q&A, the simplest way to ensure this is for NCR to offer its bank and credit union customers an all-in-one portfolio for omnichannel banking services.

AM: In an investor call about the Digital Insight acquisition, Bill Nuti said, "Today we are fundamentally and permanently changing [our] largest line of business: financial services." What did he mean by that?

BB:We are taking the steps to complete a journey of the transformation of our business in terms of how we help banks address the fundamental problems facing them over the next 5-7 years. We are doing this by creating solutions and services that help increase revenue, reduce cost and improve customer service. With the acquisition of Alaric Systems and our agreement to purchase Digital Insight, we are adding two important elements to our portfolio that will complete our vision for an omnichannel customer experience — this will be an unrivaled portfolio in the industry.

AM: There's a lot of chatter these days about omnichannel banking but not everyone knows what the term means. So, what defines the omnichannel experience?

BB:NCR has learned a lot about consumer interactions thanks to our industry experiences in retail, hospitality and travel. We're applying our knowledge of how consumers shop and behave in other industries to our banking experience. In particular, in the last three years, consumers are becoming even more demanding in how a financial institution interfaces with them across all channels, including digital. For us, omnichannel speaks to a consistency of experience in user interfaces and transactions — and how those channels operate together seamlessly. Our recent acquisitions will help us fulfill that vision.

AM: How does NCR plan to integrate DI's mobile and online banking technologies into its current financial services business?

BB:To clarify, we don't have plans to integrate the Digital Insight team overnight. Our first priority is to work to close the DI transaction, which we expect to happen in early Q1. Post close, our first step will be to create a roadmap and vision for how our digital and physical platforms interact. Ultimately, though, a consumer should be able to begin a transaction digitally and complete it physically across a wide variety of devices and locations. For example, simple use cases include adding e-receipts and marketing offers after an ATM transaction. These use cases come together more easily and dynamically with Digital Insight. We will also be able to offer FIs a holistic set of offers to transform their business across both physical and digital channels in a way that no other provider in the industry can.

AM: What new opportunities will open up for NCR as a result of its purchase of Digital Insight?

BB:Beyond their strategic role in our omnichannel strategy, Digital Insight represents a number of opportunities for synergy with NCR. For example, about three-quarters of Digital Insight's customer's do not use NCR's products or services. Thanks to Digital Insight's relationship with those customers and our omnichannel value proposition, we believe that over time we will be able to offer those customers NCR solutions as they replace physical channels. The Digital Insight team has unbelievable relationships with its customer base, which we believe will create opportunity for core NCR solutions.  Also, we'll look to take Digital Insight's SaaS offerings to other global markets, beginning with English-speaking markets.  

AM: What benefits or advantages will accrue to NCR customers as a result of the acquisition?

BB:We have a great customer and install base that doesn't use Digital Insight. I believe that NCR's relationship with large and mid-size banks gives us a platform for Digital Insight's products — not just mobile and online, but also new services such as bill payment services delivered through core NCR product offers such as ATMs. In addition, Digital Insight's ability to integrate into core banking systems is extremely valuable and we intend on leveraging those integration capabilities to bring common transactions into our core solutions.

AM: How will the "customer experience" change as a result of this acquisition?

BB:Consumers have a relationship with their bank, not with their bank's ATMs nor with their bank's online or mobile banking sites. For that reason, a bank needs to present itself as one company to its customers, not a series of siloed channels. We are going to be able to create a customer experience where you can begin shopping or transacting with your bank in one channel, continue it in another, and complete it in a completely different channel seamlessly. For financial institutions, this means a deeper, more personal — and therefore stickier — relationship with their customer.

AM: Does the mobile component include a digital wallet?

BB:Digital wallet is a roadmap element that the Digital Insight platform could provide as we move forward. The digital wallet is more than technology; it requires standards and adoption but the DI platform is modern and ready for this opportunity. Digital Insight can provide that functionality, though, and it will be a natural extension of their platform when consumer adoption takes hold.

AM: Does this broadening focus on mobile and online banking technologies signal that NCR anticipates a shrinking ATM base in developed markets?

BB:No. The ATM market will continue to grow, including in developed markets over the next 3-5 years. In particular, branch transformation technology platforms will expand, and we are excited about growth opportunities for that solution set. We need to provide our customers a more holistic technology base than the industry does today.  Our banking clients are looking for simplified vendor relationships that can provide a broader set of solutions and value.

AM: The online and mobile banking services markets seem to adding new players and product platforms at a pretty good clip. How will NCR differentiate itself to win in this marketplace?

BB:Differentiation will be all about user experience. For mobile phones and tablets, we know that user experience drives adoption of applications. Usability is critical for adoption. That's one of the reasons we were so excited about Digital Insight. They have one of the highest ranking consumer scores for mobile banking — 4.7 out of 5 stars on Apple App Store ratings; Higher consumer adoption for online banking compared to non-Digital Insight online banking sites — more than 14 percent higher. Digital Insight consumers use bill pay features 28 percent more than at other sites. I could go on. They have put an emphasis on platforms.  So we'll keep pace not only with the functionality of digital banking channels, but also [with] the consumer experience. 

AM: What impact, if any, do you think the new services will have on the ATM industry?

BB:As we roll out our omnichannel experiences to banks and credit unions, consumer demand for that type of experience will only increase. The industry saw this phenomenon with intelligent deposit. We will change the mental model of what a self-service device offers consumers. Whether that is interaction with mobile or online banking or whether that is with our Interactive Services platform, consumers will come to expect this level of service and functionality from the institutions with whom they choose to bank.

AM: When will we begin to see the effects of this acquisition?

BB:First we have to close our acquisition of Digital Insight, which should happen in the early part of Q1. From there, we'll begin pulling our development teams together and meeting with our customers.

AM: NCR has now completed the purchase of Alaric Systems. What are the company's plans for Alaric?

BB:Alaric is a bit of a secret jewel in the industry. Our first priority is to take this incredible technology platform and begin to communicate and make it available to a larger group of customers around the world. Alaric Systems is one of the most exciting new technologies that will help banks change their cost per transaction profile from their processing side. Beyond lowering the cost to serve, we'll align Alaric with NCR's existing solutions so that we can help a financial institution deliver a secure transaction beginning at the consumer end point and deliver it all the way to a processed transaction thanks to Alaric's Authentic solution. Fraud is a significant problem with banks today, and the combination of NCR card and PIN security with Alaric's Fractals solution will create an unparalleled offer for fraud and risk prevention.

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