By Eben Esterhuyse and Mark McMurtrie
The ATM is now more than 40 years old, with the first transaction being made at a branch of Barclays Bank in Enfield, London, on June 27, 1967. Since that time, ATMs have gone from being an exciting new technology to a tried-and-trusted part of banking infrastructure.
Aside from cash dispensing and balance checking, ATMs now have the ability to accept checks and deposits, provide comprehensive statements and even top-up prepaid mobile accounts.
This expansion has accompanied a rise of self-service within the banking industry: taking staff away from low-value customer service activities and putting them into more consultative roles within the business.
Employees now have greater expertise and the ability to cross-sell products within the bank's portfolio, while ATMs offer a quicker, more efficient route for customers to get their money.
However, this shift in strategy by banks means that the future of the ATM is at a crossroads: Does the organization view the ATM as simply a fulfillment channel, or a route to offer more comprehensive services? This decision forms a big part of the overall customer strategy that the bank is to follow.
Does it concentrate on driving out costs from the ATM channel, reducing its total cost of ownership (TCO) and being as efficient as possible when it comes to managing this channel?
Or should the bank look to roll out even more new services via the ATM, connecting to customers in new ways and building more value into each interaction that a customer can have with the bank? Is this evolution or revolution?
Reducing TCO for the ATM channel means looking at issues of reliability and security, as well as improving the remote management of machines across the bank's network.
One of the biggest costs is the on-site visits that have to be made in order to keep the ATM up to date and functional.Replacing these maintenance visits wherever possible with remote management or fixes would remove a significant level of overhead. This also would improve the user experience as there would be fewer outages of service.
To reduce TCO over time also includes rolling out advanced depository items. Some financial institutions have rolled out cash depositors as they allow fewer visits to the ATM to pick up a check that needs to be cleared within a certain time period.
This can cut the number of times that an organization has to visit the ATM from a depository perspective. If you can reduce the number of visits down to once a month per machine, across the entire ATM estate this can provide a substantial reduction in costs.
Another area where ATM networks are being optimized for lower TCO is through electronic journaling. By focusing on incidents where disputed transactions have occurred, the bank can reduce the opportunity for these events to take place. The electronic journal can help the bank to sort out the transaction far faster than a manual process and at a lower overall cost.
The process of reducing TCO also extends beyond hardware to the payments processing system that supports the ATM network.
Most banks still are using legacy systems that require specialist knowledge and skills to maintain and run effectively. This invariably means that staff resources are one of the biggest overheads that an organization has to consider.
Rather than continue to support a legacy system that has high ongoing costs, the bank can move to a newer platform based on open systems that are not proprietary or closed to users.
This approach has two benefits: Firstly, a new software platform can deliver much higher performance. Secondly, open systems are based on current operating systems and programming languages, which means the pool of talent that the bank can draw on is much wider.
The costs of hiring staff to support the systems are lower, as there are more candidates with the necessary skills required, and the wider availability of resources means that the organization can get its projects completed faster.
This approach can improve the quality of support for the bank's ATM network, while also reducing its staff expenses. By changing the software running the ATM, organizations can streamline their costs while reducing the windows of downtime that can impact user satisfaction.
The alternative business strategy that banks are looking at is offering more services through the ATM. Instead of just using the channel to dispense cash, the ATM can become a platform for offering a wide range of features to customers.
This approach is aimed at increasing the level of business that each customer conducts via the ATM channel, as well as the overall number of transactions that a user may carry out.
Increasing the functionality of the ATM means taking a more holistic approach to the channel and how it works within the bank's overall approach to dealing with customers. The ATM can become a point for self-service and fulfillment of standard transactions such as cash withdrawal and providing statements, taking these activities away from the branch staff.
This means that they can concentrate on more customer-focused activity, providing better advice on banking products and opportunities to cross-sell. This not only is better for customers as they receive a higher level of service when they require it, but also means staff will be engaged in more meaningful, fulfilling activities.
Integrating the ATM software into the bank's customer relationship management systems also offers the opportunity to target customers more efficiently. The ATM can provide a platform for advertising of specific products to customers while they access their accounts.
By linking into existing customer relationship management systems, the bank can make sure that its advertising is more effective in reaching an audience that is predisposed to be interested.
This also can be used to target the customers of other banks with offers that might be reason enough to shift their accounts over when they withdraw cash through one of the bank's ATMs.
Another opportunity to improve service through the ATM channel is with greater personalization, allowing customers to access their most popular requests via shortcuts.
These can be set up through an online banking system where the user creates their favorites, and then accessed whenever a user visits the ATM.
The software will present their favorites to them, cutting down on the amount of time required by each customer at the ATM. This degree of customization relies on the bank being able to manage all its channels for customer interaction from a single point.
An example of this is where users want to take out a standard amount of cash without a receipt whenever they go to the ATM. This can be presented to the user as part of the first screen following the input of their PIN, rather than requiring them to select "cash," the amount and then whether they would like to have a receipt provided.
By creating this shortcut and giving customers greater control over how they can interact with the ATM, it can shorten queuing and the average amount of time each user spends at the machine.
Dynamic currency conversion (DCC) is another new opportunity for ATM operators to improve the level of services that are available via the ATM channel. DCC is the conversion of currency from the local currency through to the customer's home currency. By displaying this information, customers can get up-to-date information on how much their foreign exchange transaction will be worth.
While DCC at the retail POS level has been in place for the past few years, providing this service at the ATM is a far better opportunity to add value and provide higher levels of information to the customer.
Users also benefit from access to foreign currency whenever they may require it, while the ATM operator can profit from taking the transaction fee from the foreign exchange. Adding new services and features at the ATM level depends on the skills that are available to the bank: With a legacy network, implementing a new feature can require extensive investment and resources in order to complete work that may not necessarily deliver huge amounts of value back to the bank.
New teller machines can support a far wider level of interaction with users, so the infrastructure behind the individual ATM has to be as flexible as possible to take advantage of this additional functionality.
Taking the open systems route means that new features can be delivered far quicker to the business, and at a much lower cost of development. This means that the bank can look at providing a wider level of features than it could otherwise, and capitalize on opportunities that would otherwise be too expensive to consider.
Overall, there is a fundamental split in how banks are approaching the ATM channel: Does the bank remove as much cost as possible and keep the ATM as a simple fulfillment system for customers, or make the ATM a strategic part of how the bank interacts with customers and provide greater levels of self-service?
What will link these two strategies in the future is the fact that both will rely on a more open software platform for development in order to be successful, based on skills that are more widely available in the market.
Whichever strategy a bank chooses, as current legacy networks become more expensive to support and skills required die out within the developer and information technology communities, the ATM channel will have to evolve to continue providing value to the business.
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