Article

Home is where the ATM is

Will inhome ATMs spell the end of traditional automated teller machines? 'Eventually cash will go electronic, but it's not going to be any time in the near future,' said one observer. by Ryan DuBosar, contributing editor

March 10, 2002

You wake up, shower, eat breakfast and take your coffee into the study. You flip on the computer and get online to check the morning's news, your stocks and e-mail.

While you're at it you use the ATM. Not a clunky machine next to your desk, but a virtual version right on your screen. Money instantly downloads to your card, and you're ready for your trip that day.

While still far from widespread acceptance, the inhome ATM concept is a reality with Home Financial Network (HFN) in Westport, Conn.

Tom Dittrich, the company's president, sees the home banking trend creating a new role for ATMs instead of diminishing their use.

The stage is set for home banking, he said, because over 50 million households have PCs. And the growth of online users still multiplies every year.

Typically, people use ATMs to transfer money between accounts or monitor their balances. Companies like Home Financial Network and others have designed computer programs that look and act like ATMs, but work via the World Wide Web instead of from a dial-up remote machine.

HFN creates branded PC interfaces that look and act exactly like an ATM, and then provide it under a bank's label.

"Customers know exactly what to do, because they already know how to use an ATM," Mr. Dittrich said. "There's an ease of use factor there that has never been available to people with PCs who want to do online banking."

Home banking will grow

One company, Comerica of Dallas, worked with Home Financial Network on two PC banking programs that look an act like ATMs. Monthly service fees will range from $5.95 to $7.95, and the software will be free to customers.

As many as 21 million homes could join this home banking trend by the year 2003, according to a survey by Forrester Research. The early adopters--the first people to always apply new technology--have already started to bank at home.

"These early adopters pursue all types of new technology products and act as a reference group--evangelizing winners to the rest of the market," the report stated.

According to Forrester's survey, 3.3 million U.S. households conduct online financial transactions. Even if security and privacy issues are poorly addressed, as many as 15.7 million people intend to use financial services offered on the Internet.

Kenneth Clemmer, who wrote the Forrester report, said, "Software allows them not only to handle their banking transactions, but their stock or investment transactions. This permits the customer to manage their financial picture from one point."

Will ATMs bow to the smart card trend?

Using a concept similar to the home ATM, smart cards will be another essential component of personal computers, allowing customers to bank online and withdraw electronic cash that can be downloaded to a PC.

Florida-based Smart Disk already offers Smartie, which is the same size and shape as a PC floppy disk drive. Mr. Dittrich said it costs less than $30 to make the component, and that cost will drop as the readers are built directly into PCs.

To keep up with potential consumer demand for smart card refilling stations, ATM owners will have to install their own smart card readers. Future ATM models will switch between paper cash and electronic cash.

Until--and unless--the U.S. shifts to this futuristic cashless society, the smart card's role will be limited to the one it has played in Atlanta since the Olympics--as fare cards for public transportation.

According to Mr. Dittrich, "If I can use my smart card on the subways and buses, taxis and trains for commuters, and have one card without worrying about tokens or exact change, that will make life so much more convenient. And it will also make public transportation authorities happier because they would much rather not handle cash."

Defending the role of ATMs

Lyle Elias, president of ATM maker Greenlink Technologies in Hurst, Texas, said smart cards are unlikely to replace cash in his lifetime.

His company follows banking trends through DSI, its card activation service. He said banks have not warmed to the idea of replacing cheap, effective and accepted magnetic stripe readers with more expensive technology.

"The magnetic stripe is more cost effective," he said. "There is not a significant savings yet."

Electronic banking is a technology looking for a useful application, he said, which reverses the traditional trends of necessity breeding invention. "Technology has far outstripped the need for it in the marketplace," Mr. Elias said. "Smart cards can store a wide range of information, but when you ask why, everyone is groping for an answer."

For banks and nonfinancial institutions, the question requires a bottom-line answer. Smart cards will cost $1 and magnetic strip cards right now cost only 10 cents.

Smart cards and biometry could replace PINs, but punching an identification number into a terminal is cheap and effective, Mr. Elias said. Plus, retrofitting ATMs could cost up to $5,000 per terminal.

Instead of replacing ATMs, home banking will simply warm the public to the idea that ATMs will be more than simply cash dispensers. "It was the early 70s when the first announcement came out that America would be a cashless society by the year 2000," Mr. Elias said. "I don't think we're going to see cash go away any time soon."

"When consumers need cash, they will still go to the ATM to get it," he said. "If anything, it will make human-machine interface more mainstream. Branch banks in the future will disappear, and banks will be online entities that you can access from home."

Customers will still want to reload their wallets in remote locations, whether with paper or with e-cash. And they will expect to be able to manage their accounts from any location.

Greenlink Technologies is working with several companies developing interactive kiosks to integrate ATM technology, Mr. Elias said, as are the larger ATM makers such as NCR and Hewlett Packard.

"The idea of everyone sitting at their house and doing 100% of their banking is not going to happen in my lifetime," Mr. Elias said. "Eventually cash will go electronic, but it's not going to be any time in the near future."

>Sources:

• Tom Dittrich can be reached at Home Financial Network, (203) 341-7403, fax (203) 341-7442, e-mail tdittrich@homeatm.com, URL http://www.homeatm.com.

• Kenneth Clemmer can be reached at Forrester Research Inc., phone (617) 520-5833, fax (617) 868-0577, URL http://www.forrester.com.

• Lyle Elias, president of Greenlink Technologies, can be reached at phone (800) 920-8502, fax (817) 284-0699, URL www.grnlink.com.