News

Third-party or manufacturer service?

October 11, 2005

The days of the basic cash dispenser are over - at least in the financial institution (FI) space.

Triple DES may have been the catalyst for ATM replacements and upgrades, but FIs have taken the opportunity for advancement and run. As a result, consumers have grown to expect excellence.

Consumers demand secure, 24/7 availability. They also assume that when their debit or ATM cards go in, cash comes out.

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As ATMs have become more dynamic, servicing and maintaining them has become more technical. FIs are leaning on third parties and manufacturers for ATM service and maintenance out of necessity, to ensure their ATMs stay up and running.

"The reliability and functionality of our ATMs often determine how customers judge the quality of our customer service," said Mike Ford, technology leader for Richmond, Va.-based First Market Bank - an FI with more than $1 billion in assets, 34 branches and 45 ATMs.

"With customer service being of paramount importance in our industry, it is crucial that our ATM service provider have the knowledge and tools to prevent problems from occurring," as well as the ability to quickly fix problems when they do crop up.

That reliance, however, is costly for banks and credit unions, and one reason why third-party service providers have secured a competitive edge in the marketplace.

"Our ultimate goal is always to drive expense from the ATM program for our customers," said Robert Malik, senior vice president of Westmont, Ill.-based Efmark Premium Armored, a third-party independent.

When less isn't more

Most independents come in with service quotes that are 15 percent to 20 percent less than those quoted by ATM manufacturers such as NCR Corp. and Diebold Inc. - dominant players in the FI ATM space. But manufacturers have countered third-party cost comparisons by touting superior expertise and a better understanding of their own proprietary hardware and software.

"When you have a third-party company out there that says it maintains NCR products but it doesn't have a license for those products, it doesn't buy the manuals and it doesn't use certified NCR parts, then, yes, they probably can do it cheaper," said Andy Orent, vice president of NCR's Financial Solutions division for the Americas.

But the tug between independents and manufacturers has left FIs confused and in the middle.

"ATM technology continues to broaden and become more complex," First Market's Ford said. "Relying on in-house technical staff for ATM support is not a realistic option. ATM specialists are needed not only to support current configurations effectively, but to provide guidance in planning for the future."

In an effort to compromise, NCR launched its Authorized Sales and Service Provider program less than a year ago. Through the program, NCR is allowing a select handful of third-party independents, including Efmark, access to NCR-authorized parts, diagnostic software tools, documentation and training programs, as well as other intellectual property.

"ATM technology is becoming more and more complex, so ATM service providers have to be well-trained and have the best tools to do the job right," Malik said.