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Web ATMs: Is it time to go online?

It's a time of 'technology transition,' where technologies created 20 and 30 years ago are mature and in need of a major overhaul, says George Albright of consulting firm Speer & Associates. Albright asks whether now is the right time to adopt new technology and take ATMs to the next stage.

August 26, 2002

Most of today's banking customers have access to PCs at home or work, are familiar with the Internet and often frequent their banks' Web sites. Compared to these relatively sophisticated channels, ATMs are beginning to look a bit dated, many still having monochrome screens and limited text messages.

George Albright

While for many consumers such niceties as color displays, touch screens and talking terminals are merely impediments to obtaining cash as quickly as possible, for others the ATM has a much greater potential as a true financial services delivery channel. It is to these individuals that the ATM hardware and software vendors are targeting a new generation of terminals and programs that take advantage of Internet-supported technology.

Traditionally, financial institutions have looked at their ATM programs as a complement to branch services, providing a way to serve more clients without incurring the expense of tellers. Whether deployed in branches or in remote locations, bank-owned ATMs provide a convenience to customers that demand anytime/anywhere access to withdraw, transfer or deposit cash, make account changes or merely check on their funds.

As such, banks have labored mightily to expand their ATM functionality, adding numerous features and providing incentives for customers to utilize an increasing array of value-added transactions. Larger non-traditional deployers such as E*Trade, American Express and Amicus have also been aggressively positioning their ATMs as a full-service banking channel, providing a broad range of information, account access and functionality for customers, in addition to cash withdrawals for all cardholders.

This migration of ATM utilization has been slow to take hold. Cash withdrawals still constitute the preponderance  of ATM usage, and this will likely continue even in the face of the growing trend toward alternatives to cash in the payment environment.

It will take a strong effort on the part of ATM deployers to educate and incent cardholders to take full advantage of the newly-developed functionality. It will also take a coordinated effort to integrate terminal technology with marketing, operational and branch sales/service support to motivate employees and customers in changing ATM usage behavior now ingrained over the past 30 years.

Driving Web development

Here, then, is the potential utility of Web-enabled ATMs. If the flexibility represented by an ATM operating over the Internet, with instantaneous customer personalization, payment options, pricing alternatives and similar customized feature/functionality can be combined with speed, flexibility and lower cost of operational support, the Web ATM may prove to be a key ingredient in realizing the long term potential of the lowly "banker in a box."

First and foremost, the ATM vendors must provide the tools to successful Internet ATM utilization. In late 2001 NCR took a major step in this direction with its announcement that it is migrating its ATMs to the Microsoft Windows XP platform. Recognizing that consumers are attuned to the visual stimulation of cable TV, game consoles and all forms of electronic media, NCR believes that the graphical and digital enhancements of Windows XP will provide the level of functionality needed to address more sophisticated consumer perceptions. Other ATM vendors are pursuing similar paths.

OK, assuming that the vendors provide the technology, the processors can support the transactions and branch or third parties can efficiently service the terminals, what advantages might Web-enabled ATMs present to the most important participant of all -- the consumer?

The consumer wins

From the ATM user perspective, much of the Web-enabled ATM functionality will be similar, albeit personally targeted to each individual at the time of the transaction. Certainly the ability to access a home banking service is good news.

Customers will also be able to transfer money, but now to third party accounts as well as their own. In addition to paying bills, reordering checks, managing investments and purchasing tickets, cardholders might be able to send an e-mail message or get online help from a customer representative. Cardless ATMs represent a potential new delivery channel to certain consumer segments and financial service providers.

The good news for ATM deployers is that many of these  services represent potential new fee income opportunities as well as benefiting consumers.

Interesting concepts, right?  But behind these concepts are several concerns for bankers and ATM deployers.

A few concerns

First, ATMs require the card issuer to provide client authentication, information and authorization. The fact that an ATM can offer Internet-based applications requires the same language and protocols used by home banking Internet-based service uses.

Secondly, ATMs then will be able to authenticate a client not only by the traditional card and PIN, but also by user ID, PIN validation or other recognition devices. A card may not be required to access the financial services gateway of a bank.

The traditional messaging application utilized by ATMs to communicate with the host will require replacement for the new generation of operational languages similar to the way that HTML or XML languages interact with PCs. Touch screens, alphanumeric keyboards and pointing devices (joysticks, track-pads or track balls) might be necessary to allow customers to have appropriate interaction and "navigation" at the ATM.

Sounds like a substantial amount of work and a major investment. Nevertheless, ATM software companies are working to provide new Web-enabling programs to ATMs. Communications firms are providing high-speed Internet access to Web-based ATMs capable of both wired or wireless connectivity.

It's a time of "technology transition," where technologies created 20 and 30 years ago are mature and in need of a major overhaul. Today, the ATM industry faces a new wave of change. Will Internet-based technology reshape the industry? Is this the right time to adopt new technology and take ATMs to the next stage?

Just remember how quickly personal and portable computers and handheld devices evolved and are modifying our lives. It may be time for the ATM to rejoin today's technology and again become "leading edge." Will your ATM program be ready?

Since 1980, Speer & Associates, Inc. (S&A) has been preparing financial institutions worldwide for the challenges of a rapidly changing and increasingly electronic financial services world. Headquartered in Atlanta, S&A is a recognized consulting leader possessing competencies in all vital aspects of the financial services environment.

George Albright is chairman of S&A with responsibility for the overall direction of S&A's business activities and consulting engagements worldwide. A founding partner of S&A, he has assisted clients in developing e-commerce business marketing strategies supported by technological innovation and service enhancements and developed ATM, POS and card business strategies for financial institutions on a shared and proprietary basis. His accomplishments include the formation and operation of major regional and national EFT networks, support of several e-commerce joint ventures and assisting international card associations with strategic business planning.