News

Teaching an old dog new tricks

November 17, 2004

The ATM isn't what it used to be, but there may be some new opportunities for continued growth.

That was the consensus of industry insiders at a town hall meeting at Thomson Media's October ATM & Debit Forum in Baltimore. As the more mature of the two products spotlighted at the annual event, the ATM is experiencing declining usage.

According to several forum speakers, growth in debit volumes exceeds 20 percent a year while annual growth in ATM volumes has slowed to 2 to 3 percent.

"I think you'll continue to see ATMs be an important tool in a retail delivery network," said Betty Cowell, director of deposit and access products and senior vice president at Wachovia.

New users, transactions

Many financial institutions, including Wachovia, are adding new capabilities to their aging ATM fleets during the upgrades necessary to comply with Triple DES and other regulatory requirements, said Cowell.

While willingness to use debit for point-of-sale purchases has reduced consumers' need to visit ATMs for cash, some may be willing to conduct new transactions, such as ticket purchases, at ATMs, Cowell said.

Younger consumers will use both ATMs and debit more than their older counterparts, opined Cindy Ballard, executive vice president of communications and public affairs for the Pulse EFT Association. In addition, banks' focus on wooing unbanked consumers will bring new users who may be willing to consider new transactions.

"I think we're trained to just get our cash and go," Ballard said. But, she added, there are "a lot of opportunities for the old workhorse."

Check 21, please

Check 21 will likely impact both ATM and debit volumes, panelists agreed.

Many banks are considering the addition of imaging capabilities to their ATMs, Cowell said. Consumers may be willing to use debit for more payments when they realize the float - the period between when checks are written and funds actually debited from their accounts - will be reduced because of speedier, image-enabled processing, Ballard said.

However, it will take time for these benefits to be realized, said Brian Egan, vice president of the Federal Reserve's Retail Payments office.

Egan believes that many banks will concentrate imaging efforts on their commercial clients first. Indeed, Cowell said that 50 of Wachovia's commercial clients want to test remote deposit capture.

Egan and Cowell agreed that substituting check images for paper will be a trickier task with consumers. Wachovia identified some 2 million of its customers who were still receiving original checks with their monthly statements and sent them information on converting to images. Nearly half of them decided to switch, Cowell said.

"I think financial institutions will need to communicate with their customers, and with their own staffs, over longer periods of time than expected," Cowell said.

Egan said that banks will need to be creative when it comes to using new technologies to drive down costs.

"When you have multiple payment systems doing the same thing, it costs a lot of money," Egan said. "Could ACH (automated clearinghouse) be merged into other payments? Financial institutions need to be more single- or dual-minded rather than triple- or quadruple-minded."

But Cowell expressed concern with the growing use of ACH as a channel for POS transactions. "(ACH) was not built to handle those types of volumes," she said.