hanks to CDMA technology, a growing track record of reliability and the promise of lower costs, wireless ATMs are finally coming of age.

"I think there will be a major shift from dial-up to wireless in the upcoming year," said Kent Phillips, Vice President of Sales Self-service Solutions at Reston, Va.-based Transaction Network Services Inc. "The product has really taken off in this year alone. We've deployed in excess of 1,000 [wireless] ATMs," and the company expects thousands more in 2006.

Code division multiple access, more commonly known as CDMA, is a more robust and reliable standard than CDPD (cellular digital packet data) and is used by a number of cellular providers, including Verizon, Sprint and Alltel.

Phillips said TNS' upsurge in wireless deployments in 2005 likely eclipses the total number of wireless ATM locations the company deployed over a six- to seven-year period when CDPD was the standard.

Steven Mintz, President of St. Louis-based JBM Electron-ics, noted that while wireless sales in the United States for both ATMs and POS terminals have just about doubled in the past year, the switch to wireless is only beginning to take off.

"When you start with a small base, doubling sounds huge," he said. "In reality, that means less than one-half percent of all the ATMs in the world [are wireless]. But I would submit to you that five years from now, the majority of ATMs will be on cellular."

The potential advantages of wireless ATMs have long been trumpeted: increased mobility, since there is no need for a phone line; better security; the ability to constantly monitor and manage units; faster connection times; easier installation; and potentially lower operating costs. But before CDMA and general packet radio service, a similar technology used largely in Europe, the full potential of wireless ATMs wasn't being reached.

The 'black box'

A proven track record of reliability and cost-savings is just starting to emerge, said Mintz, whose firm manufactures the "black box" add-on systems that serve as a gateway between the ATM and the wireless network. "I would say that a lot of the fear and uncertainty are gone. People who have installed it have had success that every vendor can point to. ... But it's still an industry in its infancy."

Through the black-box add-on, a literal black box within the ATM spoofs the machine into thinking it's picked up a phone line, allowing the ATM to make a wireless call through a modem located inside the box. One major advantage: A black box can be attached to any ATM, eliminating the need to replace existing machines with wireless-integrated ATMs, Mintz said.

JBM has shipped approximately 1,500 black boxes in the last quarter alone, he added, and JBM has sold around 3,000 black boxes since they first hit the market.

Long Beach, Miss.-based Triton Systems began its wireless push with CDMA in April 2004, when the company announced a partnership with Verizon Wireless. Triton's RL5000 model is configured for full CDMA wireless operation, and Triton is now beta testing the same configuration on its 9100.

"From the customer side, they really like wireless," said Anita Nobles Arguelles, Triton's Director of Marketing. "I would expect to see the majority of ATMs shift to wireless, both in the U.S. and other countries."

But Mintz said that "shift" to wireless is more likely to occur through the installation of add-on black boxes than the replacement of old ATMs with fully CDMA-integrated machines. One reason is cost. An ATM with built-in CDMA connectivity requires a number of regulatory approvals, including one from the Federal Communications Commission, one from Underwriters Laboratories Inc. for safety, one from the wireless carrier (such as Cingular or Verizon) and one from the processor.

Proven reliability

Jumping through the regulatory hoop on the processing side is becoming easier. Processors' acceptance is actually starting to propel adoption, Mintz said. Processors are certifying wireless tech on a widespread basis, which is giving it a level of prestige. But overall, a wireless-integrated ATM is still out of cost reach for many deployers.

"The whole idea of the black box is that you drop it in and it does everything magically for you," Mintz said. "If you're selling an integrated solution, you'd have to adapt software for every ATM to match that particular interface, go through additional levels of testing and do this for every different model of ATM you offer."

TNS expected all of its CDPD-driven ATMs to be phased out by the end of 2005. "The idea of a wireless ATM has had a lot of appeal for a number of years, but the technology wasn't as broad in coverage," said TNS' Phillips. "I think the footprint is broad enough and the technology [CDMA] robust enough now that people are saying, 'OK' [to going wireless]. The technology has caught up with the desire."

Phillips said wireless ATMs are now more attractive to convenience stores, small retail businesses and independent deployers that position ATMs at temporary events such as fairs and sporting events.

"The merchants or ISOs selling to the merchant market will do a lot more with wireless in the upcoming year," Phillips said. "The price-point is right. It's typically a wash, whether it's a wired line or wireless service. But the mobility and flexibility of being able to reposition the machines with wireless is a real draw. So there's a technological advance without the higher cost. And in some cases, the wireless ATM can be less expensive."

Financial institutions, however, aren't expected to reverse trends and seek more off-premise sites on their own, said Madhavi Mantha, a Senior Analyst for Boston-based financial consultancy Celent LLC.

"It just hasn't been at the top of the priority list for most financial institutions. If you talk to them about advanced functionality, a lot of the focus is on consistency of customer service, personalization, alerts and things that are going to be visible to their clients, something your customer will actually experience, notice and benefit from."

Third-party providers that deploy bank-branded ATMs, however, are likely to go wireless in significant numbers, Mintz said. That's because the monthly utility savings associated with wireless over "pop" (plain ole phone) are substantial, he added.

"A phone-line drop is anywhere from $20 to $50 a month, and there's also the installation charge," Mintz said. "If you can offer a low-cost telemetry plan that's $12 to $15 a month with moderately priced equipment, you can start seeing some compelling benefits from an ROI viewpoint. I can't stress how important that is to ISOs in particular. If you can save them $5 or $10 a month (per ATM or POS machine), that's compelling to them."

Beyond savings, wireless technology makes more sense, especially in less developed countries where intricate connectivity infrastructures don't exist, Mantha said. "In an emerging market where leased-line access is more problematic, it's much more appealing for, frankly, the reason that wireless as a whole is attractive. You only need power and you don't have to worry about a telecom structure."

One reason some so-called third-party providers have hesitated is security, Phillips said. "A lot of them like the concept but say they're afraid somebody is going to pirate the data."

To answer that question, TNS and others are transporting wireless data using either secure-socket-layer encryption or Internet protocol security, which are both accepted encryption standards used to safeguard general commercial Internet transactions. "It's more of an educational process we go through as we talk about our product," Phillips said.

The bottom line: "Cellular is now ready for prime time," Mintz said, "after a long gestation period."

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