News

Network is 'missing link' in achieving ATM future

Kent Phillips of Transaction Network Services says that while ATMs themselves are equipped to handle advanced ATM applications, the infrastructure is not. The ATM industry must begin focusing on network connections if it hopes to make the ATM future happen, Phillips says.

August 12, 2003

The ATM market has changed dramatically during the last 30 years, and the industry has lofty plans for the ATMs of the future. Technology has played a key role in transforming the role of the ATM from simply an on-premise extension of the bank to a key component in banks' growth and service strategies.

To support the increased capabilities and reap the forecasted financial benefits of the full-service ATM, the industry must continue its transition to a new, more robust infrastructure. The next evolution of the ATM business demands an increased concentration on what has been the missing link -- the network architecture.

Kent Phillips

The technology powering the ATM is comprised of three parts: the ATM itself, the processing host and the network connection between the two. As the ATM market has continued to evolve, so has the supporting technology -- yet the concentration has largely been on the network edges, the ATM and the processor, rather than on an overall networking strategy.

There is a lot of buzz about the ATM capabilities of the future -- and while the ATMs and processors are equipped to handle these enhanced applications, the infrastructure is not.

ATM manufacturers and processing hosts have made sure that the end points have adequate horsepower to support full-service ATMs. To create the middle piece -- the network connection --  ATM owners have traditionally looked to the most cost-effective technology, using pricing and accessibility as the key criteria for deployment.

This criteria alone is not enough to meet the increasing connectivity demands required by the future ATM. Without a sound end-to-end connectivity solution, the network edges become constrained in their capability.

The industry is now looking to complete the missing link and migrate to an infrastructure that fulfills a new set of criteria: ubiquitous coverage, ample bandwidth, speed, security, performance and reliability. In some cases, this requires a solution that maximizes the benefits and overcomes the obstacles associated with the Internet or DSL; in other instances, it requires an alternative to frame relay.

Telecom to date

When ATMs were introduced in the 1970s/'80s, they were tied directly to the bank and used for cash withdrawals. To enable the ATM to communicate directly with the host bank, ATM operators looked to the cheapest, most readily available networking infrastructure: dedicated communications lines (leased or private lines).

With an end-to-end, "always on" connection, leased lines supported non-data intensive applications with secure access and predictable costs. The infrastructure enabled banks to cost effectively transmit ATM transactions to the bank and back, securely and in real-time.

Leased lines adequately met the networking requirements of ATMs until the number of ATMs multiplied and became more dispersed. Since dedicated lines are sensitive to distance, infrastructure costs skyrocketed as ATMs moved further from the host.

With the advent of surcharging in the mid-'90s, the number of off-premise ATMs doubled. The explosion of off-premise machines and the expansion of geographic reach forced ATM owners to look for a less expensive networking solution to continue the rapid expansion.

ATM deployers again turned to the cost effective networking technology of the day: dial-up networking. With a dial-up connection, ATMs use a modem to connect to the host processor through the public telephone network. In contrast to a dedicated line, the dial-up connection is not always on -- which slightly lengthens transaction times.

However, operators only pay for network usage time, which dramatically reduced communications expenses and allowed them to continue the proliferation of off-premise machines.

Spurred by the declining number of transactions per machine, off-premise operators are now looking to add new transactions to their ATMs -- such as check cashing, person-to-person (P2P) money transfers and cell-phone recharges -- to create new revenue streams. Banks are expanding their ATMs' functionality, integrating the machines with their other electronic consumer interfaces, to offer the ATM consumer a personalized experience.

As ATM functionality continues to expand, so do the networking requirements. With the increase in data being transferred, and the disparity of the application service providers that enable these new transaction sets, operators recognize the limitations of the existing leased-line and/or dial-up networks.

What's next?

As operators once again start looking to new technology to migrate their existing infrastructure, the Internet comes into play as a cost-effective mode of connectivity. The Internet is appealing because of its pervasive reach and low operational costs. However, ATM deployers are concerned with the security and performance issues associated with this technology.

Leveraging the Internet as a mode of connectivity would mean that banks' proprietary transaction data is vulnerable to the security threats that are inherent with the open, flexible architecture. Also, the Internet does not offer the guarantee of data delivery or the service management levels that are critical to transaction processing.

Wireless and wireline service providers have created a lot of buzz around alternative connectivity solutions, including wireless and Digital Subscriber Line (DSL). However, the wireless industry is in the midst of a technology transition, migrating from CDPD to a new, faster technology (GSM/GPRS). On the wireline front, DSL is emerging once again as a stable and viable connectivity option. However, it is not widely available.

Recognizing the limitations of wireless, DSL and Internet connectivity, operators are left with a mature technology that offers a dedicated connection for mission-critical support: frame relay. It provides a secure end-to-end connection with ample bandwidth and offers ubiquitous coverage. However, the implementation and ongoing management of a frame relay network can be overwhelming for all but the largest ATM deployers. For current owners, migrating from current, legacy network technology to frame relay may exhaust their IT resource pool.

Networking is moving to the forefront of ATM deployers' technology strategies as they seek to create the infrastructure that will support the ATM of the future. As the landscape changes, so do the network requirements and the case for new connectivity moves beyond merely the most cost-effective technology to a complete, end-to-end solution that is fast, secure, dedicated and reliable.

To enable the ATM of the future, operators need a solution that offers it all: the cost, flexibility and reach of an Internet-like infrastructure, but with the enhanced security and performance more akin to a frame relay network. Whether this demands a solution that harnesses the power and access of the Internet, one that makes new technologies (like DSL and GPRS) more easily accessible, or one that provides alternatives to frame relay, TNS is a valuable networking partner that can help operators identify the most appropriate networking option and shoulder the burden of network deployment.

The author, Kent Phillips, is director of business development at Transaction Network Services, Inc.

Transaction Network Services is a leading provider of fast, cost-effective data communications services for transaction-oriented applications. Since its inception in 1990, TNS has designed and implemented one of the fastest, most reliable and lowest cost networks for the transport of transaction-oriented data. TNS' proprietary network technologies have been deployed in the United States and internationally, and TNS' network has become a preferred network servicing the trading community, card processing and dial-up ATM markets.