News

Adoption of open standards helps our industry

Level Four's Jorge Fernandez argues that ISOs need to jump on the Windows ATM bandwagon.

April 10, 2006

Jorge Fernandez is the president and CEO of Level Four Americas LLC and is a regular contributor to ATMmarketplace. He has more than 20 years of experience in the EFT industry. For the last 15 years, Fernandez has focused on the development of international markets.

Imagine if you could only buy software for your PC from the manufacturer of the hardware. Companies like Dell, IBM, Gateway, Toshiba, Panasonic, Sony and others would have their own versions of spreadsheet, presentation, e-mail and word-processing software. In such a world, the personal computing business would not have grown as fast as it has over the last decade or so. File sharing would be cumbersome, and productivity would no doubt have suffered along the way.

Jorge Fernandez of Level Four Software

Thanks to Microsoft, we live in a world with a true open platform of software products that can be loaded in a common platform, regardless of who you purchased your PC from. This open architecture not only makes it easier and faster to work, but it also helped make the hardware a commodity. This contributes to keeping costs down, as the end customer is free to choose from a variety of vendors for the best price. Regardless of their hardware decision, the software products are guaranteed to work the same.

While I am not here to sing the praises of Microsoft, I do believe the strategy of creating open-platform systems is good for the industry, especially the ATM Industry. (Read also, In the ATM paradigm, software rules.)

Slow to change, fast to catch up

It may seem hard to believe, but the ATM industry has been one of the last to adopt an open systems approach. While the physical ATM may have experienced lots of changes over the years, the core systems that make these machines work has remained virtually unchanged for decades.

Until now, deployers have depended on vendors they work with for everything from hardware and software to services. Since ATM applications remained static for decades, mainly supporting basic customer transactions such as withdrawals and account inquiries, this dependency was often overlooked, in the interest of working with "turnkey providers."

To large deployers, having to purchase everything from one or two vendors was not only a nuisance, but it also created large operational issues. Vendors had to support separate terminal drivers at their hosts and depend on their vendors for each and every software modification. If a large bank, for instance, supported two vendors, it had to wait until both vendors completed and tested their applications on their respective platforms before they could do a full rollout. The banks also were at the mercy of the vendors, when it came to pricing for software upgrades.

The emergence of off-premise ATMs and their respective vendors did not help matters. Virtually all of these vendors had very proprietary systems, most of them using assembler-based applications. While this seemed like a throw back in time, the strategy of supporting low-level languages helped reduce the cost of the hardware, which was an absolute requirement for off-premise deployment.

All of this is now changing at a very fast pace. The old world of proprietary systems came to a halt when IBM announced that it would stop supporting the OS/2 operating system. (Read also, IBM bids OS/2 farewell.) This void was quickly filled by Microsoft, and to the chagrin of many in our industry, Windows is now becoming the new standard, at least in the Americas. In Europe, talk of using Linux as the ATM's operating system, together with a Java application, is gaining momentum.

Deployers realize promise of ATM channel

Deployers also finally understand the promise of the ATM as a truly efficient and cost-effective delivery channel. The adoption of open-standards software is enabling deployers to use their ATM networks effectively to deliver new and innovative products without the proprietary ties of the legacy software era.

What's Important With XFS, Microsoft propelled the ATM industry into the 21st century. Proprietary software on the FI and ISO sides of the fence has stunted the ATM industry. Deployers who don't adopt open standards will be left out in the cold.

Microsoft intelligently saw this coming and made the first attempt at creating an open standard called WOSA/XFS (Windows Open Systems Architecture).

The idea was that deployers could have a single application developed for their ATMs and then run that application across any vendor's Windows machine compliant with WOSA/XFS. That ultimately would make ATM hardware a commodity and allow deployers to better negotiate terms, while also keeping the application consistent across the network. It also had the additional benefit of reducing host-terminal-driver requirements by reducing the need to support different terminal drivers and vendor-specific communication interfaces.

WOSA/XFS eventually became simply XFS, and it defined the way applications would run inside the ATM, with the standard being maintained by the CEN committee in Belgium.

The emergence of these new standards has created a niche for software companies that develop open-standards-based ATM applications, and deployers have increasingly started to realize the value in looking at their hardware and software requirements separately.

ISOs need to buy in

While FIs are moving into the open systems arena, the off-premise market seems somewhat behind. I, for one, think this market has the most to gain from an open platform approach.

ISOs and independent deployers have demonstrated time and time again that they are very efficient in marketing new and innovative solutions to the retail market. As the traditional business of off-premise ATMs becomes more and more saturated, and as transaction volumes at the average machine continue to see an aggressive rate of decline, deployers must look for ways to make ATMs more profitable. What better way to do that than to offer new services to their clients?

Using assembler-based software applications makes it very difficult to add new functionality. An open platform, coupled with more flexible software architecture, makes it easier.

In the US, processors and terminal drivers have the best opportunity, since they already work with ISOs and have the capability and infrastructure to develop and offer new products and services at the ATM. From that perspective, processors could control the development and testing without depending on external vendors. They could negotiate deals with external providers, offering the bundled product to their distribution network, the ISOs.

I am not saying this is easy. There are more than 250,000 off-premise ATMs in the U.S. alone that don't support open systems. Like banks, the cost of an upgrade to these low-cost ATMs could be off-set by the additional revenue received from additional ATM services.

The ATM industry is now coming to terms with fast-paced changes, with the adoption of open standards such as XFS and IFX and the proliferation of new operating systems such as MS-Windows, Java and Linux. The off-premise ATM market must, like FIs, look at these emerging technologies as a way to combat the downward spiral. Open systems offer true vendor independence, help reduce costs and allow for maximum flexibility in adopting new services.