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NCR downplays the politics in DC

At an ATM Channel Planning Seminar in the nation's Capitol, NCR encouraged attendees to forget the vendors and consider the issues.

June 27, 2002

Though Washington, D.C. is a place where one is expected to have clear allegiances, NCR downplayed the "ours is better than theirs" approach at its ATM Channel Planning Seminar earlier this week in the Capitol. NCR billed the event as a chance to share information about the issues affecting all deployers, no matter what kinds of ATMs are in their networks.

Among the issues covered at the two-day event, which was attended by more than 100 representatives of 46 financial institutions, two retailers and four ISOs among others, were Triple DES, check truncation, the move from OS/2 to Windows and the Americans with Disabilities Act (ADA).

The company may have been too successful at remaining vendor neutral, said Brad Lozier, vice president for NCR's Financial Solutions Division, the Americas. In his wrap-up, he said, "I think we could have interjected more about what NCR is doing to help you address these issues."

Lozier encouraged those in attendance to speak with their account managers and also to visit BAI's Retail Delivery Show in November, which he called "probably the single best place to understand what the differences are" between vendors.

Here are some of the things that caught this editor's eye and ear:

Statement boomlet: In a presentation based on Dove Consulting's 2002 ATM Deployer Study, Anthony Hayes, director of Dove's Financial Services Group, said that one-third of all financial institutions offer mini-statements at the ATM, generally charging customers 50 cents or so for them. "You're selling customers their own data," he said, with minimal infrastructure changes required and no inventory issues.

Up with charges: About 40 percent of large banks and large ISOs plan to increase their surcharges in the next two years, Hayes said. Because transaction drops have been negligible when surcharges were increased in the past, he predicts "continued experimentation in an upward direction." The scary part: "There is no way to know in advance where the magic threshold is," he said.

You take your money out: Advanced ATM functionality has yet to gain any traction in the marketplace, Hayes said. In both Dove's 2002 study and its previous study in 1999, 77 percent of all ATM transactions were cash withdrawals. Deposits and balance inquiries both saw small increases in those three years, rising from 8 percent to 9 percent and from 10 percent to 11 percent, respectively.

Low ball: Many attendees wondered if a decimal point and some zeros were missing when Hayes said that the average rent reported for off-premise ATM locations was $187 a month. He believes that this was because contracts written several years ago were part of the survey, as well as contracts based upon a larger corporate banking relationship. Hayes expects the figure to rise dramatically as the older contracts come up for renewal.

Are we there yet?: Janet Blizard of the Department of Justice's Civil Rights Division said that the proposed revisions to the Americans with Disabilities Act (ADA) relating to ATMs won't become law for at least another year. The Access Board introduced a draft of suggested revisions to the ADA Accessibility Guidelines (ADAAG) in April and is expected to release its final version in August. The DOJ hopes to publish a rule based on the ADAAG by the beginning of 2003, then will accept public comment -- a process that often takes several months -- before sending it to the Office of Management and Budget for another review before (whew) it becomes legal.

Feedback, please: Blizard told the crowd that the DOJ has "identified what we think most of the questions are, but we're still looking for most of the answers." Among the remaining issues to be addressed by the DOJ: the timeframe for compliance and whether any existing ATMs will be grandfathered. "People shouldn't make the mistake of assuming the rule is a done deal and there is nothing they can do," Blizard said. "Keep track of when the rules are published and, if you have comments, say something now. It's enormously frustrating for us to get comments after a rule is published."

Advanced and audible: After telling the crowd how "weird" it was to be asked to interpret a rule that doesn't yet exist, Blizard opined that it's likely that deployers will have to provide audio for advanced transactions such as ticket sales. She didn't believe, however, that the ADA would require audio to be provided in multiple languages, even if that option was available for standard transactions.

Uncertain times: Jonathan Velline, senior vice president of ATM Banking and Market Area Analysis for Wells Fargo, said that the uncertainty surrounding the ADA "makes it hard to innovate." For instance, he said, Wells is considering offering a Chinese language option but hesitates to do so until it's clear whether audio will be required and to what extent. In many languages the spoken dialect can differ dramatically from the written word, which would be an issue in an audio-enabled world.

Get it in writing: Blizard also offered the opinion that ISOs -- most of whom do not own ATMs -- and actual ATM owners will share responsibility for compliance. A wise deployer will address the issue "at the front end of the process," Blizard said, when contracts are being signed.

The bigger picture: The advocacy community's push for audio ATMs is about more than just ATM usage, said Nessa Feddis, senior federal counsel for the American Bankers Association. "ATMs are so visible and have become so basic that they represent a way to put disabled people into the public consciousness," she said, reminding others to consider the needs of the disabled. Like curb cuts, which are used by parents pushing strollers and others in addition to wheelchair users, audio ATMs' benefits will extend beyond the intended audience, Feddis said. People who are illiterate or dyslexic may also use them, for example.

My generation: Of the ATMs in the U.S. today, NCR believes that the largest number, about 90,000, are fourth generation machines such as NCR's 5600 series and Diebold's i series. An additional 20,000 are third-generation models such as NCR's 5000 series and Diebold's 1000 MDS, and 70,000 are fifth-generation units such as NCR's Personas and Diebold's ix. Because of the aging installed base, Phil Kasper, assistant vice president of marketing and product management for NCR's Self-Service Solutions Division, the Americas, said that deployers will face hard choices as they decide whether to upgrade existing ATMs or purchase new ones to meet mandates such as ADA and Triple DES.

New OS in town: According to Kasper, NCR thinks that 10 percent of ATMs in the U.S. will ship with a Windows-based operating system rather than OS/2 in 2002. NCR expects that to grow to 50 percent in 2003 and 100 percent in 2004. "We realize that may be a little optimistic," he said.

Parlez-vous programming?: NCR estimates that 35 percent of ATMs in Europe will ship with a Windows-based platform rather than OS/2 in 2002. This is largely due to the fact, Kasper said, that European banks have long had IT staffs developing custom ATM applications in house. "In Europe, ATMs run off an IBM mainframe instead of a Tandem Himalaya server," he said, "so it's common for (banks) there to write their own software." As the U.S. migrates to Windows, Kasper said, "We're going to have to be much better systems integrators."

Just wondering: After Lead Wey, Microsoft's product manager for ATM Solutions, informed the crowd that Microsoft research has shown that Windows XP is more than 30 times more reliable than Windows 95 and Windows 98 and more than 10 times more reliable than Windows NT, one of the attendees asked how it compared to OS/2. "We don't have any benchmarks with OS/2," Wey said.

Different than the desktop: Wey told the crowd that XP for ATMs is a "lockdown" version that differs from the desktop, as it doesn't run a lot of different applications that can lead to corruption. "If you run only very specific applications, you drastically reduce the opportunity for failure," he said.

On the clock: After listening to Wey's presentation, Velline, of Wells Fargo, which has more than 2,000 ATMs on a Windows platform, urged vendors to address service issues. Service techs are still more familiar with OS/2, Velline said, which sometimes means longer service calls on Windows-based machines. Kasper said that NCR was training its techs to become "more software literate." NCR is somewhat ahead of the pack, he added, since its retail systems have been Windows-based for several years, and many of its techs serve both the retail and financial worlds.

Don't rush us: After several bankers in the crowd expressed concern over the frequent OS updates and service packs that Microsoft is known for, Wey said that Microsoft guarantees support for its software for seven years. Kasper said that NCR is working with Microsoft to "get the longest lifecycle available" for ATM deployers.

No big stick: John Schettino, a vice president at MasterCard International, told attendees that, "We're not here with a big stick trying to beat Triple DES down your throat. We're here to work with you and make a cooperative effort" at achieving compliance by MasterCard's "sunset date" of April 1, 2005. MasterCard knows that there will be variances, Schettino said. He has received 30 requests for variances so far and has denied only two. Those who were denied were seeking extensions until 2009 and 2012. Most asking for variances want an additional 6 months to one year beyond April 2005.

Moving the keys: Schettino said that electronic key management is "a given," although the acceptable methods of doing so are not. "I think we all agree that a paper transfer of keys is archaic," he said.

Can I get a hearing: Louise Roseman, director of the Division of Reserve Bank Operations and Payment Systems at the Federal Reserve Board, said that the Fed is hopeful that the Check Truncation Act, which would permit the use of substitute checks in place of originals, will get a hearing from both the House and Senate this year. "That would put us in a better position for next year," she said. Roseman said that Congressional representatives like concepts that offer consumer benefits (see next item).

How it might work: If the Act becomes law, check deposits could be scanned at the ATM, then digital images of the checks transmitted to an operations center where checks can be cleared. In theory, this would mean that deposits would not have to be removed each day from the ATM, making deposit taking a much less expensive proposition for banks. Customers would benefit from later deposit cut-off times and from the psychological reassurance of receiving an image of the check on an ATM receipt.

More the merrier: Roseman said that the Act would clear the way for third parties, such as brokerages or ISOs, to collect checks for banks of first deposit. The main requirement would be the bank's willingness to assume the risk.

Still not clear: A few issues must still be addressed before the Act is passed, Roseman said, including whether the party that creates a digital image of a check would bear any liability if the image was not completely legible after transmission.

The ATM stands alone: Jerry Silva, the Tower Group's senior analyst for Retail Banking, in trying to answer why CRM (customer relationship management) hasn't yet come to the ATM, said that most channel integration vendors come from other specialties such as branch automation or online banking. In addition, he said, the ATM's closed proprietary architecture isn't friendly to channel integration efforts.

That's a lot of timber: After noting that his mission was to show the forest to an audience more used to looking at trees, Silva said that "the depth and breadth of delivery channels" is what will differentiate banks and help them form stronger relationships with their customers.

Survey said: When NCR asked attendees what technology and regulatory changes would be of critical importance for financial institutions' ATM delivery channels, 78 percent of the audience selected the new Triple DES encryption standards for heightened PIN security.  ADA mandates for voice activation at the ATM ran a close second with 76 percent of the audience's "highly important" vote.