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3 upcoming upgrades that could increase FIs' costs

October 20, 2013 by Rebecca Hellmann — Marketing and Sales Coordinator, Welch ATM

In today's self-service culture, ATMs and mobile banking have become key aspects of customer satisfaction and retention. However, the fast pace of technological change coupled with regular mandates and regulation updates have begun to make maintaining these channels both costly and time consuming.

For mobile banking, the yearly launch of new and updated cellular phones can be daunting. Fortunately, the multitude of available phone models is not as important to mobile applications as the two major operating systems — Apple iOS and Android.

However, these seem to upgrade every 6 to 12 months, the most recent update being Apple's release of iOS 7. In most cases it is possible to wait a generation before upgrading a mobile banking application, but it is essential for financial institutions to recognize and understand the capabilities of each OS upgrade in order to determine what they will be required to do to keep up to date.

The ATM is a little more complicated as it is directly affected by government mandates and payment card industry standards and these changes seem to be coming back-to-back.

Besides the ADA requirements that some financial institutions are still struggling to meet, there are three major ATM changes that could increase ATM equipment and operations costs over the next few years.

Windows 7 update

Microsoft is ending support of Windows XP in 2014. As PCI standards require current patches and support on ATM terminals, many FIs will need to upgrade their ATM fleet to Windows 7 in order to maintain their PCI compliance.

While it is possible to continue operating on Windows XP, the drawbacks to doing so include excessive support costs from Microsoft, increased maintenance costs and a greater potential for security breaches.

Additionally, some processors are requiring an upgrade to Windows 7 in order to support the new EMV smart chip cards.

EMV

EMV is not a government or security mandate, but rather a card network standard meant to add another layer of security to card payments through the communication of encrypted data by means of an embedded computer chip in the card.

Compliance with EMV is required only to avoid the liability shifts that will be implemented by MasterCard and Visa, which take effect in October of 2016 and 2017, respectively.

However, as the majority of Europe, Africa, Latin America and the Middle East as well as the Asia-Pacific countries, Canada and Mexico have already switched to EMV, studies have shown that global card fraud is shifting to the U.S. as it is quickly becoming the least secure payments channel.

A recent Nilson Report found that the U.S. accounted for more than $5 billion (47.3 percent) of more than $11 billion in global losses in 2012. That is up 14.6 percent from 2011.

The question for most financial institutions is quickly changing from "Should we upgrade to EMV?" to "What is our strategy for upgrading to EMV?"

Updated US currency

The United States Treasury, in response to complaints about the inability of vision-impaired citizens to differentiate between bill denominations, has issued a plan to redesign U.S. currency to be more tactilely recognizable.

This new design is set to be implemented sometime after the updated $100 bill is fully released into circulation. What many may not realize is that a more "tactile" currency will most likely cause issues with currency counters, vending machines, self-checkout terminals and ATMs.

With this in mind, financial institutions should plan to update equipment as manufacturers introduce new models that address the currency redesign.

It may seem as if the payments industry is making ATM operation more costly than a customer service and marketing channel needs to be. However, financial institutions that keep abreast of update timelines can mitigate costs by planning ahead for equipment purchases and servicing.

It is also possible to reduce or even eliminate upgrade costs for ATMs and mobile apps by partnering with service providers who include updates and compliance guarantees in their contracts.

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