4 ways FIs are fighting ATM upgrade fatigue
by Daryl Cornell, CEO, Triton Systems
In less than 24 months, banks face yet another ATM upgrade and replacement cycle when Windows 7 goes end-of-life, to be replaced by Windows 10.
This comes on the heels of a Windows 7 upgrade from Windows XP, which in some cases is still being completed. It also follows required ATM upgrades for PCI, ADA and EMV — all in the last decade. Can you blame the banks for feeling confused, angry and abused when it comes to their ATMs?
By banks' own estimates, nearly 80 percent of 175,000 financial institution ATMs in the U.S. will have to be either replaced or upgraded with a new core to support Windows 10.
Neither is an inexpensive proposition — all in exchange for benefits that are being described in terms such as "modest," "incremental" and "nonexistent."
So what is a bank to do? How to respond to the mounting cost and aggravation of managing an ATM fleet that requires seemingly constant upgrade and replacement?
Banks have said that in light of steadily mounting costs, they are evaluating their approach to ATMs even more critically this year than ever before.
Options being considered include:
1) Suck it up and write a huge check
This is the "business-as-usual" approach that some of the larger banks will take. Wedded to OEM software, often deeply embedded in bank operations, these FIs face a difficult proposition in divorcing an ATM vendor without a major systems overhaul.
ATM manufacturers have relied on this "planned obsolescence" for decades, supporting ATM hardware for only a handful of years before declaring end of life and billing banks for new gear.
The combination of short OEM product life cycles and Microsoft's increasingly aggressive software upgrade mandates has forced banks onto what has become a very expensive hamster wheel. The number of banks fleeing "upgrade hell" will certainly be the lead ATM industry story over the next few years.
2) Outsource ATMs to a third party
Many banks have already cried foul on ATM vendor abuse and have thrown in their lot with one of the many other third-party ATM outsource partners. These independent ATM deployers offer both bank branding and entrée into their national (and, in some cases, even international) surcharge-free networks.
By moving to an outsource model, banks may elect to retain ATM branding, while greatly expanding customer access to cash. The decision to designate ATM fleet operation as "noncore" allows banks to focus on value-add customer services, while often reducing the cost and headaches associated with managing a private ATM fleet.
3) Eliminate the fleet and rebate fees
Originally a tactic used by smaller banks with geographically diverse customer bases, the idea of eliminating ATM fixed costs and replacing them with variable use costs is gaining traction.
By rebating customer ATM fees (often capped at six to eight transactions or a fixed dollar amount per month), banks are able to offer customers free access to any ATM in the world. This powerful combination of free global customer ATM access and the elimination of the headaches of managing an ATM fleet or outsourcing partner has proven to be a winner for many banks.
4) Move to lower-cost ATM models
While some banks are installing six-figure advanced function ATMs as part of their branch transformation efforts, others are moving in the opposite direction. As check and cash deposits at the ATM become less important, the days of installing walls of expensive, full-function ATMs at every branch are over.
Many banks are electing to move to a mix of multifunction ATMs combined with much more cost-effective and reliable cash-dispensing ATMs.
Running Windows CE, these through-the-wall and stand-alone ATMs are cheaper, more secure, free from expensive hardware and software licensing contracts, and supported by OEMs for a decade or more, rather than just a few years.
Some OEMs even offer a "future-proofing" option, locking in guaranteed firmware, software and even hardware upgrades for a modest annual fee. Look for more and more banks to reject the overpriced, quickly outdated ATM solution in favor of more cost-efficient options.
Banks across the U.S. are engaged in these conversations right now as the budget cycle for 2019 ramps up.
ATM programs are not funded in a vacuum, but compete for scarce bank capital with branch automation and other infrastructure projects. In this year's process, sacred cows are being slaughtered and the old ways of looking at ATMs are being challenged.
Without question, the FI ATM landscape will look drastically different by 2020.
Companies: Triton Systems
atm Atom Posts for the atmAToM blog are contributed by a collective of writers from Triton Systems and ATMGurus seasoned ATM pros who thought they might like to share a few things they've learned during the last 30 years in the ATM industry. www