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Advanced ATM apps: More than a mirage

The interest in advanced ATM applications hasn't dried up, if the recent Tranax distributors' conference is any indication. Tranax presented three demonstrations of advanced applications to its distributors: stamp sales, movie ticketing and a live prepaid cell phone top-up.

August 17, 2002

FREMONT, Calif. -- The most arresting graphic in a presentation at the recent Tranaxdistributors' conference here was a sand dune with possible ATM applications -- money transfer, stamp sales, cell phone top-ups -- appearing and then disappearing like a mirage.

After pointing out the declining number of ATM transactions per terminal and noting that advanced functionality has yet to make any real inroads in the retail ATM business, Scott Kleinman, Tranax's director of marketing, said, "There's no other way out of the desert. We've got to keep walking."

Tranax demonstrated three advanced applications for the 75 distributors in attendance at the conference: stamp sales, movie ticketing and cell phone top-up. The phone top-up was "live," as evidenced by the charges on Kleinman's ATM card.

Perhaps the most intriguing was the ticketing application, which Kleinman said could be offered on either a Mini-Bank 3000 or a Kiosk ATM. Customers select the date, time and number of tickets desired for a movie; then the machine prints the ticket or tickets. The machine could also dispense gift certificates, prepaid concession vouchers and other items. Ultimately customers could order tickets online at home, then collect them at the machine when they arrive at the theater.

The business model is not driven by interchange. Rather, Kleinman said, distributors could earn higher margins on the hardware as well as recurring service revenues.

However, Kleinman cautioned, "It's not a shrink wrapped, out-of-the-box solution."

Part of the fun of any ATM distributors' conference is socializing with other people whose idea of a good time is poking around inside an ATM. Here, Neil Clark of ATM Express, Inc. looks over a Mini-Bank 2500.

The ATM software must be modified to interact with the software of the ticketing host. Kleinman said that Tranax is already working with one of the major providers of ticketing software; only a handful serve the ticketing industry.

Despite the challenges, Tranax expects to have a beta site in less than 30 days. The company also expects to launch a phone top-up pilot in the same time frame, Kleinman said, and hopes to expand it to 100 or so sites in October.

For phone top-ups and other advanced applications, Tranax will use what it calls a VAP (or Value Added Processing) server, which will route transactions to the appropriate providers. In addition to facilitating new applications, Kleinman said the server may offer more down-to-earth economic benefits as well. By aggregating demand from Tranax ATMs at the server, deployers should be able to get more attractive rates from value-added vendors such as phone card providers, he said.

In addition to the emphasis on advanced functionality, here are some of the other interesting items seen and heard at the conference:

Playing by the rules: The keynote speaker was Kirk Hanson, executive director of Santa Clara University's Markkula Center for Applied Ethics, whose address was entitled "Business Ethics and Success." In keeping with the theme, Core Data Resources CEO Campbell Burgess spoke on "Compliance With Emerging Security Requirements."

Making his alma mater proud: Hanson, formerly a senior lecturer in business administration at Stanford University, recognized the achievements of Kleinman, a Stanford grad. As Kleinman helped set up for Hanson's presentation, he joked, "We're delighted to see Scott finally got a job. He learned how to work the PowerPoint at Stanford."

Cracking down on compliance: Burgess encouraged all of the ISOs in attendance to step up their plans to comply with requirements for Triple DES encryption and for unique key per ATM. "If you haven't already addressed these issues in your contracts, I suggest you do so in all your agreements going forward," he said. "No new machine should be installed without being fully compliant with these requirements."

In ATMs we trust: It's counterproductive to question the stricter security requirements, Burgess said. In the wake of a recent high-profile fraud case in which PINs were obtained at non-bank ATMs, he said that government regulators and EFT networks are closely examining relationships between sponsor banks and ISOs. "Has DES ever been cracked?" he said, referring to the current method of encrypting PINs. "That's not the point. The point is to make sure it never, ever happens. If issuers or consumers don't trust the system, then the system could fall apart."

Now the good news: Core Data is currently participating with Tranax in a program in which keys are inserted into ATMs by Tranax personnel at the factory and serial numbers conveyed to Core Data. The key is activated when the ATM installer binds the serial number to the processor ID number during installation. Attendees got a demo of how the process works during the Tranax facility tour. Tidel is also participating in the program.

And better news: Core Data is working on what Burgess called the next step: software that will communicate with an ATM's EPP (or Encrypting PIN Pad) to automatically generate keys when an ATM goes online. "Our goal is to take key management out of the hands of the ISO so it's strictly between the processor and the manufacturer," he said.

ATM SOS: In a demonstration of the WebRMS (Remote Management System), Drew Chen, Web product development manager, showed how quickly an instant error alert could be sent via a cell phone. Less than a minute after Chen opened the door of one of the ATMs on site, the ATM dialed into his cell to inform him of the problem.

Bogus black list: Several distributors tossed around the idea of creating a list of unscrupulous sub-ISOs to keep bad reps away from merchants. While a concern over liability issues seemed to be a stumbling block, the real deal killer was the industry's competitive nature. "I'd put all of my best guys on the list so you wouldn't call them," one wag said (likely only half in jest).

Hello, my name is: Bill Dunn, Tranax's director of sales, struggled gamely to get through the introduction of folks from Hyosung Computer, Tranax's business partner, who were in attendance. The apparently common Korean surname Kang surfaced several times; Dunn referred to the group as "the Kang gang."

And the winners are: Tranax honored some of its top distributors at a dinner that ended the first day of activities. The highest volume distributor was Billings, Mont.-based ATM Express, Inc. Most improved distributor, based on sales over the past six months, was Covina, Calif.-based National Link Incorporated. The highest volume distributor of the Mini-Bank 2000 series was the Canadian Entrepreneur Expansion.