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Opening Windows at the ATM

Thanks largely to a marketing juggernaut by Microsoft, Windows has been the dominant operating system on desktop PCs for nearly a decade. Yet the door into the ATM world has remained largely closed to Windows.

May 7, 2002

Thanks largely to a marketing juggernaut by Microsoft, Windows has been the dominant operating system on desktop PCs for nearly a decade. Yet the door into the ATM world has remained largely closed to Windows.

While ATMs running advanced applications at industry trade shows are often driven by Windows NT or another Microsoft operating system, the overwhelming majority of machines in the "real world" run on OS/2, an operating system jointly developed by IBM and Microsoft and introduced in December of 1987.

Tim Zajkowski, Diebold's director of system software engineering, estimated that less than 1 percent of the 323,000 ATMs in the U.S. are currently running Windows NT or any other Windows operating system.

Steve Hensley, executive vice president of sales and marketing for software developer KAL, believes that estimate may be too generous. "You can practically count them on your hands. You don't need to take your shoes off to count them," he said.

All in the timing

IBM teamed with Microsoft to create a replacement for DOS (Disk Operating System), which essentially became obsolete following the introduction of the Intel 80286 processor in the mid-1980s. When it was introduced in '87, OS/2 was state-of-the-art technology; it was the first operating system that provided intrinsic multi-tasking.

IBM and Microsoft worked together on OS/2 until 1990, with Microsoft designing the graphical interface. The two companies ended their partnership when Microsoft decided to shift its focus to Windows after version 3.0 began gaining popularity with users.

When ATM manufacturers began introducing PC-based machines in the early '90s, OS/2 was still "the only realistic choice" for the industrial-strength requirements of an ATM environment, Zajkowski said. It was more robust and more stable than early versions of Windows.

"It was a matter of timing," agreed Mike Bengtson, Mosaic Software's vice president of product strategy, self-service. "(ATM manufacturers) selected OS/2 by default."

Because many of today's installed base of machines were purchased by banks in the mid-1990s when manufacturers "were cranking out huge numbers of ATMs" based on OS/2, said KAL's Hensley, "banks got locked into OS/2."

Dave Gasper, president of the Gasper Corporation, believes manufacturers shied away from Windows until later in the decade because of simple economics. Microsoft charges a higher licensing fee for Windows than IBM does for OS/2. And to properly support Windows-based applications, an ATM requires expensive extras such as a Pentium-level processor, increased memory and a higher-resolution screen.

"Everyone was talking about all the great transactions you could do on ATMs, but no one was actually doing any of them," Gasper said. "So you were adding to the cost of the machines by offering functionality that there was no real need for."

KAL's Hensley thinks it was more likely that manufacturers resisted switching to Windows-based systems because the move reduced deployers' dependence on ATM vendors and their proprietary software. "They would have been leveling their own playing field, which wouldn't have made good business sense."

"By going to an open system, vendors had to give up what had essentially been a totally captive market," agreed Bill Waugh, president of software developer Wincor AutoTell.

Works well with others

Part of the attraction of a Windows-based system, Waugh said, is its "guaranteed compatibility" with standard software development tools. "With Windows, you know it's going to work with any of the third-party products out there."

Using Windows-friendly tools like HTML (HyperText Markup Language) and XML (Extensible Markup Language) gives ATM deployers the option of creating their own custom ATM applications in-house or with the help of third-party developers like KAL and Phoenix Interactive.

"It puts more self-sufficiency or autonomy in the banks' hands, and reduces their reliance on the more traditional equipment vendors," said Scott Anderson, an executive account manager for Phoenix Interactive.

While it's technically possible to create custom OS/2 implementations that allow for the use of such tools, it's a complicated and expensive process. And the number of developers interested in doing so is dwindling.

"Trying to find development talent working with OS/2 today is akin to finding COBOL programmers to do fixes for Y2K," said Mosaic Software's Bengtson.

Early adopters

Interest in NT and other Microsoft systems such as Windows 2000 and Windows XP has intensified in the past 18 months, along with some ATM deployers' desire to offer more advanced ATM functionality.

A few large financial institutions, most notably Bank of America and Wells Fargo, have begun rolling out NT-based machines. In the past year, BofA has installed 75 of what it calls "advanced technology ATMs" in Dallas/Fort Worth, Atlanta, Charlotte, N.C. and Florida. Wells Fargo, which made a splash running full-motion video movie trailers and tickers of MSNBC news headlines on its first NT-based machines last fall, now has 580 units in California and Arizona.

Both banks are using the NT platform primarily to offer their customers an enhanced and more personalized interface. At BofA, for example, customers can pre-select language, receipt and Fast Cash preferences. "We're really excited about this technology, and we believe our customers are as well," said Bank of America spokesman Brad Russell.

Consumers who have become accustomed to a more sophisticated interface on their home PCs are likely to appreciate it elsewhere as well, agreed Phoenix Interactive's Anderson. "They'll expect their interaction with the ATM to be a lot more robust and dynamic," he said.

While both Bank of America and Wells Fargo have hinted that more advanced functionality is coming, they have yet to unveil any new features.

A few nonbank deployers also have begun implementing Windows. Retailer 7-Eleven has installed 94 NT-powered kiosks it calls Vcoms in Texas and Florida. Unlike BofA and Wells Fargo, 7-Eleven is already offering non-traditional transactions such as check cashing, money orders and wire transfer.

It's easier for nonbanks to incorporate NT or other Windows-based platforms because they don't have an existing network of legacy machines, said Wincor AutoTell's Waugh. And in cases such as 7-Eleven, they are forging ahead with a decidedly different business model.

"Banks' implementation of NT will be dictated by the speed they implement a business model that would use the ATM to dispense more than cash," Waugh said. "Right now, there's no business case for moving away from what works for them today."

"The early adopters will help make the business case for the additional value Windows can bring to an ATM," opined Diebold's Zajkowski. "Some creativity will be required to move away from the standard transaction sets that all networks are offering today."

Money talks

Some financial institutions considering a switch may be swayed by the idea of maximizing their software development dollars. New applications created in a Windows environment can be migrated across all Windows-based delivery channels – from the PC, to the wireless handheld device, to the ATM. That capability doesn't exist with OS/2.

"Banks don't want to have to rebuild the same transaction three or four times across each channel," Phoenix Interactive's Anderson said. "With Windows, you can create one application that talks to all of the different devices."

Using a WOSA (Windows Open System Architecture) platform also allows ATM owners to become more vendor independent, using the same applications on machines produced by different manufacturers. Minor tweaks are still necessary, since not all machines utilize the same device drivers, but applications don't have to be rebuilt from scratch with proprietary software.

Anderson said that vendor independence was at least part of the reason that National Australia Group, a Phoenix Interactive client, switched to NT. Bank of New Zealand, a National Australia Group subsidiary, is already converting its 400 ATMs to NT, a process that should be complete by the end of November. National Australia Bank and the group's European operating units, Clydesdale Bank, Yorkshire Bank, Northern Bank and National Irish Bank, will follow next year.

The National Australia Group network is a mix of NCR and Diebold machines running on two switching platforms, eFunds Connex and ACI Base24. Phoenix Interactive is touting its software installation as the first to provide true multi-vendor support.

"The new software environment enables us to really break down long-standing barriers associated with ATMs and as a result deliver increased services to our customers," said Jeremy Dean, Bank of New Zealand's general manager of Direct Retailing and Channel.

"Already we are seeing the potential it gives us to cost-effectively provide innovative functions such as multi-currency dispensing at international departure points."

The move toward NT also may be speeded by regulatory changes in the ATM world. The federal government is expected this year to release new stricter guidelines under the Americans with Disabilities Act (ADA) that will require ATMs to have audio capabilities. Like other advanced functionality, voice guidance is easier to implement in a Windows-based environment.

"I don't think it will be a technical issue at all. I think there will be regulatory or card association rules that will cause the vendors to say at some point that it isn't worth their return on investment to try to continue to make their products work in OS/2," said Mosaic Software's Bengston. "If someone wanted to introduce these new technologies on OS/2 they could, but they'd be on their own; the vendors aren't going to support it."

Walk softly?

The single most compelling reason to switch, however, may be concern over future OS/2 developments. IBM discontinued support for OS/2 Warp 3 in December of 2000 and plans to discontinue support for Warp 4 in December of 2004. 

Chris Klein, Mosaic Software's executive vice president of marketing, said vendors are telling their customers that they don't plan to sell new machines with OS/2 after 2003. They are switching to a more dramatic "stick" approach, he believes, because they didn't generate enough interest in Windows with a "carrot" approach – offering advanced functionality.

"They're really starting to push Windows now because at some point the support from IBM is going to go away," Klein said.

Wincor AutoTell's Waugh believes the "stick" may start to yield results in the next year or so. "I think it will become increasingly tough for the decision makers at financial institutions to justify making OS/2 decisions," he said.

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