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You want to take it outside? How to decide if ATM outsourcing is right for your FI

While regulatory changes and technological upgrades batter the bottom line, market forces lead to lower transaction volumes and fee income.

February 16, 2012

“We could have bought new machines instead of going through integrated services ... but we wouldn’t have had all the services, such as the back office reporting and a number of things fraud related … We’re trying to hedge our bets. We don’t know what’s going to happen in the next couple of years with PCI, the payment industry and all that ... I don’t think we’ll ever go back to where we own all of our machines.”

— Lonnie Scarborough, executive VP of retail banking, Community Trust Bank, Monroe, La.

For some FIs, self-service outsourcing makes all the sense in the world. But how can you be sure it’s right for your institution? The Self-Service Outsourcing Guide can help FIs who want to approach this question in a thorough, thoughtful way. The following is an excerpt.

It’s understandable if ATM operators feel like they’re caught between the proverbial rock and a hard place. While a stream of regulatory changes and technological upgrades batter the bottom line, market forces lead to lower transaction volumes and reduced fee income.

To combat these forces, financial institutions and credit unions are turning to new functionalities, such as mobile banking, automated deposits and billpay, to attract new customers and retain existing customers and members. However, that leads to greater complexity and management challenges in integrating branch, mobile and ATM channels for a seamless customer experience.

One industry insider compared managing all the constant upgrades and requirements in an ATM portfolio to “changing the engines on a 747 while it’s flying at 35,000 feet.” That portfolio must maintain high levels of uptime while implementing upgrades and enhancements in both behind-the-scenes and customer-facing aspects of the operation.

To manage these challenges, more and more ATM deployers are turning to trusted outsourcing partners for ATM management. Financial institutions and credit unions today are exploring more outsourcing opportunities to have a skilled ATM services provider handle some of the more time-consuming ATM procedures, such as transaction processing, remote management, cash optimization, service and regulatory compliance.

For instance, ATM operators in the United States must comply with regulations under the Americans with Disabilities Act (ADA) that were updated in 2010 and will take effect March 15, 2012. The complexity of the requirements, and the potential for legal problems if they are not met, means many operators will seek expert advice on these issues.

This guide explores some of the problems financial institutions face today, as well as how ATM outsourcing can come to the rescue. FIs need to understand which aspects of an ATM portfolio can be outsourced, and they should have the tools to determine which company is best suited to meet their needs.

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Outsourcing alliances can combine the strengths of various organizations into a value proposition that is greater than the sum of the parts.

Ultimately, the decision to choose an outsourcing partner should be based on trust and shared values. The FI should pick an outsourcer that sees itself not just as a services provider, but also as a strategic partner. The FI’s goals should become the outsourcer’s goals. Instead of sitting across the table from one another, the two should be sitting on the same side.

The U.S. market is currently experiencing significant economic upheaval that experts say is unlikely to let up any time soon. But even before the recession began, Witt said, FIs were feeling the pressure to cut costs and increase revenue. Financial instititutions and credit unions are doing every­thing they can to maximize ROI.

“All of a sudden, the industry is on its ear, and we have these legacy systems and old-school ways of doing business that haven’t changed in 20 years,” he said. “So in comes outsourcing as a way of doing a couple of things differently as well as reducing expenses. This approach gives [FIs] a faster path toward new functionality, increasing fee income or reducing their operating expense.”

For more information on this topic, visit our outsourcing research center.

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Diebold Nixdorf

As a global technology leader and innovative services provider, Diebold Nixdorf delivers the solutions that enable financial institutions to improve efficiencies, protect assets and better serve consumers.

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