Cashing out from ATM

The idea behind development of Automated Teller Machines was to replace teller operations in a bank branch completely by electronic devices. To a large extent, this idea has been successfully implemented. According to one study conducted by Financial Management Solutions Inc., the average monthly branch teller transaction rates in USA have fallen from 11,700 in 1992 to about 6,400 as of May 2013. But is this all an ATM is capable of?

Unfortunately, modernization in ATM technology is limited by decentralization of channel software. The growth rate of innovations in ATMs has been comparatively low as compared to e-banking and mobile banking. All these channels have been working in different silos. The ATM infrastructure still awaits to be rolled out on a ubiquitous ecosystem where it can seamlessly access data from other channels and co-run operations smoothly.

To an extent, the blame can be attributed to the low scale of investments made by banks in ATM technology. Hardware costs only around 18% of the total ATM deployment expenditure over an average lifetime of eight years. Remaining 82% of cost is incurred in improving services offerings, software deployments, customisation and other aspects. Lately, when Microsoft removed its support from Windows XP operating system, banks in developing countries were faced with security risks because a greater number of their ATMs were not upgraded to higher OS versions.

In order to entice bank CXOs to spur up the investments, ATMs need to replace not only teller operations but the entire branch completely. Typically, the cost to open an ATM is around 10% of the cost for a new branch. This would enable banks to reinvest savings into brand-enhancing measures, including advertising, marketing and technology.

The ownership model of ATM also makes a huge difference to bottom line. Brown label ATM, allows the banks to focus on their core business, as the hardware and its lease is owned by third party vendors, and the cash management & network connectivity is owned by the bank, eventually reducing the operational cost of the ATM's. The introduction of white label ATMs in the developing countries would propel the ATM markets in the years ahead. As an example, Tata Communications Payment Solutions Limited has launched a white label ATM - "Indicash", to provide better banking services to the customers. The growing use of solar powered ATM machines is reducing the cost of ATMs, leading to minimal operational cost. The reach of third party operated ATMs can be far wider than bank operated ones, thereby serving the purpose of financial inclusion as well.

However, converting an ATM into a self-serving kiosk for all banking needs would require a complete revamp of ATM service offerings. Nonetheless, some banks, such as First Hawaiian Bank, have already begun to introduce video teller machines, image-enabled ATMs, and biometric entry systems, bringing the digital appeal of self-service to the basic branch experience. Işbank has rolled out the largest biometric ATM network in EMEA, with 3,500 biometric ATMs with finger vein scanners. Ziraat Bank is also a biometrics pioneer, having rolled out 1,500 biometric ATMs. Other than biometric, Near Field Communication (NFC) is also being looked upon as an alternate route for accessing ATMs. NFC readers can accept signals from NFC-equipped cards and smart devices

The next-gen ATMs are being equipped with all the necessary tools for performing conventional and unconventional transactions such as payment of bills, filing of tax returns, purchase of theatre tickets, setting up deposits accounts, account transfers, instant issuance of payment cards or even to buy and sell gold. The last two business cases i.e. dispensing of physical cards and gold can be made inside ATM premises itself. In case of any dissatisfaction or lack of understanding, customers can request support from bank consultants through video-conferencing, which also serves as a good medium for discussing loan caveats.

Mobile banking services are being utilized for upgrading the convenience of using ATMs. Using a smartphone, the end-user can pre-stage transactions by selecting the amount needed and the account from which it will be withdrawn. At the ATM, consumers authenticate themselves by scanning a unique quick response (QR) code that signals the ATM to dispense cash via an encrypted connection to the cloud. Person-to-person fund transfers are also made possible through the new smartphone application which can generate an eight-digit code that is then authenticated via the cloud. This code can then be sent to another user to make a one-time withdrawal in the amount pre-determined by the account owner. This feature is very nifty for transferring funds from mobile wallets.

Anything valuable comes with its set of security threats and ATMs have been no exception. Card cloning and skimming attacks (where devices are attached to the ATM to capture the security details of legitimate users’ cards) have been increasing over past few years. To add to the problems, key parts of the ATM itself are often taken away for reverse engineering to understand how they work. The next gen ATMs would need to be armed with Denial of Attack mechanisms.

Even though mobile and internet are digitizing the currency, the days of ATM will continue as long as physical cash is being printed by central banks. According to new report by Allied Market Research titled "Global ATM Market - Size, Industry Analysis, Trends, Opportunities, Growth and Forecast, 2013-2020", the global ATM market would reach $21.9 billion by 2020, registering a CAGR of 7.6% during the forecast period 2014-2020. With advancement in ATM’s service offerings, there remains a large scope for banks to cash out from these cash carrying machines.