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As Their ATM Networks Mature and Expand, Banks Are Focusing on Costs, Practicalities.

Many financial institutions have invested substantial sums to build automated teller machine (ATM) networks. In the mid-1970s, banks angled for short-term marketing gains as they installed ATMs. At that time, cost per transaction, data security and other practicalities frequently took a back seat to marketing drives.

But now, as ATM networks mature, banks are eyeing ATM assets differently. While they still hope for marketing bonuses, bankers realize that competitive ATM installations reduce their lead-edge potential, so the ATM spotlight has switched. Today, bankers are asking:

* How can I increase ATM volume on existing machines?

* What tactics might minimize backroom ATM processing and programming requirements?

* Can I simultaneously expand my network, take advantage of new technology, and protect my previous investment in ATMs?

* If I am entering a shared-network environment, how can I enhace data security?

* Are there low-cost options for moving machines off premises?

* What strategies can I follow to persuade a wider segment of my customer base to use an ATM to do their own transactions?

Vendors such as NCR Corporation are sensitized to this shift, which influences the kind of ATM products financial institutions demand. The following overview highlights ATM trends we have identified and looks at how new ATM features can help financial institutions meet growing practical concerns:

Financial institutions are striving to lure automation-shy customers and boost transaction volumes. Through improved customer lead-through, they also are trying to increase repeat usage and reduce "operator error" rates among the users of their ATMs.

Because mature ATM networks already have attracted most "early adapters," bank strategies now focus on more-reticent ATM prospects. The goal is to boost transaction volumes to the highest feasible level, spread their network expenses, and at the same time lower costs per ATM transaction.

Of course, feasible transaction-per-machine goals vary from institution to institution. For instance, a loan company may establish a monthly objective of 400 transactions per machine. Because its cost of utilizing ATMs to service repeat loan customers is much lower than in-office processing, a loan company's volumes don't have to be staggering to reap substantial savings. In contrast, though, some banks may target 3,500 to 4,000 transactions per month for in-lobby units, and 10,000 per month or higher for the through-the-wall, 24-hour-available ATM units.

Trial Incentives Also Can Help

To achieve established goals, financial institutions can employ target marketing and offer trial incentives. Banks with statewide ATM networks may concentrate promotion/advertising dollars on low-usage areas with selected themes and media aimed at older, blue-collar, less-educated or non-Enlgish-speaking populations. To encourage customers to try ATMs initially--or to experiment with non-withdrawal transactions--some banks are programming microprocessor-controlled ATMs to print "prize" notices on customer receipts. Some promotions are highly sophisticated. For example, ATMs may be programmed to print a different letter on each type of transaction receipt. To win a prize, customers must attempt several transactions to accumulate enough receipts to be able to spell a word.

In recent months, in-lobby ATMs have been gaining popularity as a means of reaching "second-tier" customers--those who prefer the security and comfort of a bank lobby to do banking business.

However, some bankers have voiced the opinion that, in order to truly be a teller replacement, the in-lobby ATM must provide four-denomination dispensing, such as twenties, tens, fives and ones, as well as accept all types of deposits and payments, while at the same time taking up no more space than a human teller would take.

Experiments with placement of in-lobby ATMs in the traditional teller counter have met with mixed results. Some banks feel that a "teller replacement" must be located exactly where the human teller was previously found to the highly successful.

Others believe that in high-volume locations, where queuing lines are used to direct teller traffic, a better placement would be near the entrance to the teller queue. This would force the customer to choose either the fast-service ATM or stand in line for the human teller, thus encouraging ATM usage by those who don't want to wait.

Machine Flexiblity Is Needed

To adequately serve this market, vendors must provide ATMs that work eqaully well for in-counter line or free-standing placement. Another plus would be an ATM capable of being easily and inexpensively relocated, either within the branch location or to new locations, as banks continue to experiment in their search for the best possible customer-service combinations.

But innovative marketing strategies and additional in-lobby ATM placements are just part of the answer in wooing new prospects. To prompt repreat usage, banks must pay attention to human factors. People come back to ATMs again and again only if user-friendly ATMs persuade them to do so. Both voice-response and CRT graphics features are powerful new persuaders.

Numerous studies indicate that people absorb information far more easily and quickly when written instructions are bolstered by visual and verbal clues. For instance, if customers hear a voice telling them to "insert your deposit envelope" while they simultaneously by CRT graphics message accompanied by CRT graphics that show an envelope being properly inserted, the odds are they'll quickly grasp what must be done.

Use of graphics also minimizes the amount of text that must be put on the CRT screen. Without a picture, the CRT message might have to spell out the location of the envelope slot and how the envelope is to be inserted. A picture supplants such extra verbiage and minimizes reading requirements. This speeds transactions for all and aids customers who have difficulty reading English.

Graphics capabilities also can be tapped to display double-size characters. This feature can make ATM transactions much easier for those individuals with visual impairments.

Using graphics capabilities to provide multi-lingual support is another option. Institutions with messages displayed in Spanish, French, or even Chinese or Arabic. Some West Coast banks now use ATMs equipped with both Chinese and standard alphanumeric character sets. The human-voice messages relayed by ATMs can be multi-lingual, too, as an additional customer service.

Voice Helps Correct Errors

But the most significant use of voice may be in the remedial mode. Here voice messages are triggered by customer errors, such as keying the wrong personal identification number (PIN) or requesting too large withdrawal. The voice explains what's wrong and how to correct the mistake.

Relying on voice messages for remedial instruction serves two purposes. First, it is non-frightening assistance for confused ATM novices. Second, it quickly alerts regular ATM users, who may not look at CRT screens after memorizing common sequences, that something's wrong and out-of-sync. This speeds recovery and transaction throughput.

Naturally, such features have marketing potential. Voice messages humanize ATMs and allow banks to personally thank customers, relay seasonal greetings, and cross-sell. When new cars go on display in dealer showrooms, banks can pull from their libraries of voice cassettes one that contains a reminder of the bank's auto loan program.

Similarly, financial institutions can use graphics to reinforce an image by employing high-quality custom logos, symbols or other artwork programmed into non-erasable microchips. However, we see enhanced customer lead-through as the major incentive for adding graphics and voice-response capabilities to ATMs, with marketing appeal becoming a nice spin-off benefits.

Network Size, Age Affect Choice

Incidentally, we see the size and age of ATM networks as major factors influencing when banks decide to embrace such new ATM technology. Let's say, for example, that a bank has a 100-plus machine network including many ATMs that are more than three years old. Though voice-response and CRT-graphics upgrade kits are available for older units, this bank probably would postpone adding new capabilities until it replaced its base of older machines. However, an institution with predominantly new units that needed to install a number of additional ATMs would be the most likely to upgrade immediately.

Banks are attempting to speed the most common transactions made by a seasoned customer base. As marketing programs succeed and lines form behind ATMs, banks are trying to solve an emerging customer-service problem--lengthy wait-time for ATM access. In this area, many small changes can make a large difference in cumulative throughput time.

Perhaps Japanese banks are the most aggressive. Because their country's money has properties that allow it to be electronically counted, customers can make cash deposits without envelopes. This means customers don't need to fill out envelopes and bank staffers don't need to later open envelopes and count their contents.

Transaction Sequence Altered

On the home front, one California bank has altered the sequence in which it presents transaction screens to customers. Since withdrawals are the most common transaction, the first screen immediately gives customers the choice of which account they wish to access for a withdrawal. Customers wanting to make other transactions simply move to the other transactions simply move to the next screen. The positive effect of eliminating one step in the withdrawal sequence is the speeding up of 70 percent of total customer transactions.

US financial institutions also are relying on specialized keys to streamline routine transactions. For instance, if a $25 withdrawal is the most common transaction, a "Fast Cash" key is pre-programmed to deliver this amount. If, over time, $50 replaces $25 as the most commonly requested withdrawal sum, the "Fast Cash" key can be re-programmed for the $50 amount.

Some institutions have taken this feature a step further, associating pre-set customer name fields and dollar amounts with customer accounts in their central computer files. In this case, when a customer requests "Fast Cash," the computer looks at the file to determine his or her regular withdrawal, say $100, and tells the ATM to deliver this amount. In addition, when the ATM asks which account should be tapped for withdrawal, it displays choices by account names--"Net Eggs", "Groceries," and other such personalized names assigned by the customer to various savings and checking accounts.

Programming ATMs to permit customers to insert a bankcard from the previous transaction is another common tactic to reduce customer wait-time at high-volume ATM locatins, while still retaining the protection afforded by the shield during less busy times.

Because computer programming and backroom ATM processing impact ATM transaction costs, banks are searching for ways to streamline support requirements. Historically, balancing ATM deposit/payment envelopes has been a time-consuming operation. When financial institutions beging sharing ATMs, the process can become even more cumbersome, as envelopes must be sorted by institution. Manual processing also requires customers to do more work. They are asked to print routine data such as name, bank (if it's a shared network), account number and deposit amount on envelopes.

New programmable ink-jet printing capabilities enable ATMs to image directly on envelopes all information needed to balance deposits, speeding processing and reducing transaction time by eliminating the need for customers to fill in data. Printing options available now include account and institution numbers, date/time, transaction type and amount.

Data Imaged on Coin Envelopes

Because ink-jet printers don't rely on impact-printing methods, data can be imaged on envelopes holding coins. Besides simplifying by-institution sorts in a shared environment, the printing option reduces the time tellers need to balance deposits in any environment, since there's no need to reference separate journal tapes.

On the computer programming side, new developments are easing the ATM support burden. One is the appearance of ATM emulation models. When a bank has a sizable on-line network linking one vendor's ATMs to its host computer, it is seldom anxious to invest more programmer hours to develop software interfaces for another vendor's products. For starters, its programming staff already may be booked 18 months ahead with pressing projects.

However, this same bank may want to take advantage of features a second vendor has to offer, perhaps a compact ATM model ideal for off-premise installations where floor space is scarce. Emulation models solve such dilemmas, permitting banks to select ATMs based on features and price, not programming overhead. For example, one currently available emulation series is plug-to-plug compatible with existing IBM 3624 and Diebold 910 networks, and so requires no host/controller changes.

Financial institutions (and retailers) are increasingly joining shared ATM networks to reduce service delivery costs. Many locations (office buildings, shopping malls, grocery stores) have enough traffic to support one ATM shared by several institutions, but they have insufficient volume to support multiple ATMs. This is one of the attractive economic incentives for establishing shared regional ATM networks.

Another is the desire of some lead area banks to recoup development expenses they've made to bring up sophisticated on-line ATM networks. By acting as ATM switches for correspondents and smaller banks, such institutions gain a new source of fee income.

Sharing Does Create Hazards

While there are many advantages in sharing ATM systems, there are also some hazards. One of these is data security. In a shared environment, a bank may not want to give the ATM switch operator--possibly another bank--its customers' PIN numbers. However, if the switch does not have these numbers, it can't verify a given customer's identity. As a result, the switch must transmit PIN and account numbers to the institutions that assigned these numbers.

When such transmissions--ATM to switch and switch to user banks--are sent in clear text over telephoen lines, potential security risks on this sensitive data mount. However, these risks now can be eliminated by using PIN block-encryption techniques. For instance, all our currently available ATM models are capable of data encryption to meet requirements of selected VISA and ANSI communication standards.

Sharing Is Changing ATM Mix

The shared-network trend also is increasing demand for ATM models that are practical and cost-effective in environments where in-the-wall units are not. This trend, combined with a move toward less-stringent branch-banking restrictions and propriertary network drives to boost ATM transaction volumes, is definitely altering the mix of ATMs being installed. We see increasing evidence of this change in requests for information and in the incoming equipment orders for these models.

This changing ATM mix brings us back to our original premise. It reflects the desire of financial institutions of more specialized machines tailored to meet the needs of different environments is a practical solution to the changing needs in the marketplace.

Like most electronic products, ATMs have been dropping in price. This also is sparking demand for more units in more varied locations. A "fully-featurized" ATM with CRT graphics and voice-response now costs about 35 percent less than a bare-bones off-line cash dispenser did when ATMs were first introduced. With lower equipment costs, banks now are able to cost-justify shorter ATM depreciation time schedules and embrace new ATM technology more quickly.
COPYRIGHT 1985 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1985 Gale, Cengage Learning. All rights reserved.

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Author:Feaganes, R.
Publication:Communications News
Date:Oct 1, 1985
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