Confessions of an ATM Soothsayer

ATM expansion was fed by a rise in surcharges in the 1990s. Plant an ATM anywhere and they will come, reasoned the operators. That expansion, however, has resulted in a decline in transactions per unit. With multifunction units costing as much as $40,000 and simple machines amounting to less than $5,000, providers must carefully plan deployment strategies. Location is now deemed the best predictor of an ATM's success.

Because of these developments, I predict a general, tectonic movement of rich-featured ATMs into the branch location and other high-traffic areas such as airports and malls. According to Celent Communications, the number of advanced-function ATMs will reach 80,000 by 2005.

These units will provide tremendous functionality and offerings, including check imaging, check cashing and cash recycling. ATMs also will allow bank customers to custom-design their transaction experience with features that include communicating in the correct language, dispensing a pre-specified amount of cash, or automatically providing account information.

Such features will help offset the ATM's cost and will enable customers to complete their business without standing in a teller's line.

Currently, the market is experiencing some pullback from small-traffic locations as ATMs compete with point-of-sale locations, debit cards and smart cards. Still, I see a trend toward planting stripped-down ATMs at remote, off-premise locations – a perfect solution for customers who simply want to grab their cash and go.

The non-banker banker

This year's Tour de France proved surprisingly difficult for Lance Armstrong. Financial institutions, too, have been blind-sided by a new, unforeseen competitor – the large retailer.

Wal-Mart Financial Services, for example, has started offering check cashing, wire transfers and money orders. ATM services are offered in 1,200 Wal-Mart stores across the nation.

This is America's largest employer. With convenient locations and hours. A well-developed, CRM-based, back-end operation. And a large customer base paired with rich marketing intelligence – the perfect recipe for new product and service offerings.

Another example is Vcom – a financial kiosk in 7-Eleven stores that merges 24-hour ATM capabilities with other services. With the kiosk operating in about 1,000 7-Eleven stores – and with the company operating a total of about 5,800 stores in the United States – the Dallas-based convenience store chain is positioned to leverage this market.

My crystal ball reveals a bright future for financial institutions that align with the top national and regional retailers. These banks and credit unions will dominate the industry by associating with a trusted and established household brand.

This town ain't big enough for the both of us

While community banks hold only a small slice of the nation's banking assets, they play an important role in the financial industry. Community banks specialize in relationship banking, providing small business loans and one-on-one customer service to rural and small metro areas.

But banking is one of the world's most competitive industries. Large national banks such as Wells Fargo & Co. and Bank One Corp. continue to grow larger through mergers and acquisitions. According to the American Bankers Association, the number of commercial banks declined by one third while the average asset size nearly doubled during the last decade. Moreover, the nation's 50 largest bank holding companies possess about 68 percent of all commercial bank assets, compared to 55 percent in 1990.

Smaller banks with fewer than 25 branches will have to compete by trumpeting their primary strength – one-on-one customer service. At the same time, the Tier-3 bank must introduce new, technology-based services that mirror or even exceed a large bank's offerings. Future, advanced-function ATMs – teamed with the all-important personalization software – will even the playing field. Such technology will enable customers to receive personal investment information, loan payment and CD alerts. And small-but-nimble banks can capitalize on their size by launching new ATM technologies before their larger, more bureaucratic neighbors.

Three engineers, led by Don Wetzel, patented the first ATM in 1973. At that time, ATM machines could only conduct simple banking transactions. "I never dreamed the ATM would have such a significant impact on people's lives," Wetzel said.

The soothsayer replies by quoting entertainer Al Jolson who, at the dawn of moviemaking, offered his first spoken words on film, "Wait a minute, wait a minute, you ain't heard nothing yet."

J. Kent Schrock is director of financial systems marketing, Americas, for Fujitsu Transaction Solutions Inc. Headquartered in Frisco, Texas, Fujitsu Transaction Solutions is a wholly owned subsidiary of Fujitsu Limited.