|| The Perspective
Wednesday, 22 June 2011
In a Today show interview with Ann Curry, U.S. President Barack Obama talked about one of the reasons he thought employment numbers have been slow to rebound: self-service automation. Reactions to his comments from those that monitor and are involved in the self-service and retail industries are varied.
In the interview, President Obama said, "There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don't go to a bank teller, or you go to the airport and you're using a kiosk instead of checking in at the gate. All these things have created changes in the economy, and what we have to do, and that's what this job council is all about ... is identifying where the jobs for the future are going to be."
According to the Washington Examiner's Philip Klein, ATM Industry Association CEO Mike Lee sent in an email response that said, in part, that "President Obama should never use ATMs as an example of how technology replaces human labor because ATMs today play a critical role in providing extensive employment in the ATM and cash-in-transit industries."
Industry experts are offering their reactions to President Obama's remarks, with some saying his comments were taken out of context by the public.
"I don't think he was slighting the self-service industry in any way," said Mike Wittenstein, a customer experience consultant specializing in branding and customer service. "I think he was using it as an example of what areas businesses need to think about when training and placing their people. He was using ATMs and kiosks as an example that people can understand."
Wittenstein said he thinks there's much ado about nothing regarding the comments because people are only choosing to listen to a select portion of his comments rather than his entire argument.
"The real focus was on where to direct this new jobs program, so we're training people in time for these new jobs that are very different from the ones we used to have. It's not as simple as replacing tellers with ATMs. That's not what the world needs. We're way too complicated for that," Wittenstein said. "I think his point was that people need to be trained and prepared for the right professions, not the ones that aren't needed."
The real economic value is being created by retailers, merchants and service providers of all kinds who are creating and blending traditional service delivery formats with new online-enabled services, of which self-service is simply a big category, according to Wittenstein.
Not a new concept: Technology replaces some jobs
Francie Mendelsohn, president of Summit Research and Associates, an international consulting firm devoted to kiosks, said President Obama's comments could have been directed at any industry utilizing more or new technology.
"When I've talked about why people deploy kiosks, it's politically incorrect to say that they deploy them to eliminate jobs, but that is why they are doing it," Mendelsohn said. "And what he [Obama] was specifically talking about was the airline check-in kiosks, which were implemented almost 10 years ago after Sept. 11."
Mendelsohn pointed out that even though the concept of airport check-in kiosks had been around before Sept. 11, the amount of layoffs caused by the public's concern regarding flying at that time gave the industry momentum and saved the airlines money.
"It was a cost-saving effort, more than anything, to provide functionality without having to employ so many human beings, and yet, when you ask people, they always give other reasons. He [Obama] was basically stating the obvious," Mendelsohn said.
She said that she believed that kiosk deployment has certainly created some unemployment, but fingers can't be pointed only to the self-service industry. She cited newspapers and the U.S. Postal Service as examples of where new technology eliminates certain jobs previously held by human beings.
"It does mean some traditional jobs go away. With the economy the way it is, I think it's sort of casting about and looking for something to focus on. He could have just as easily left kiosks out and said smartphones are doing the same thing. It's technology. In time, you will see less and less people going to the kiosks to print boarding passes," Mendelsohn said.
DSA executive director's response
"There are two points I'd like to make," said David Drain, Digital Screenmedia Association (DSA) executive director. "One, self-service has freed employees from menial, repetitive tasks and allowed them to spend time on customer-related issues. Second, while some companies may have reduced labor from self-service, it has created jobs for those designing, building and supplying kiosks.
"So the president's comments sound like something from the hip that does not factor in all the benefits of the technology to consumers and companies," Drain concluded.
Monday, 09 November 2009
The current crisis has further enhanced the focus that business organizations have always placed on cutting costs and raising efficiency. This naturally also applies to banks, which are increasingly opting to automate their processes and, in their search for additional savings potential, need support from professional IT providers.
Optimized management of cash streams based on end-to-end cash cycle management makes it possible for financial institutions to reduce costs and improve transparency and security over the long term — especially if cash cycles are analyzed across banking and retail sectors.
This assumption is based on detailed reviews and process cost analyses, which have been updated continuously over recent years. Parallel to the increase in cashless payments with credit and bank cards, the trend for consumers to use cash continues unabated: In Europe, eight out of 10 transactions are handled in cash. The annual increase in euro banknotes, according to the European Central Bank, is 9 percent — EUR 677 billion now in circulation. Set against this, the volume of USD notes in circulation rose 42 percent from 2000 to 2007, and GBP notes rose by 50 percent.
The current global economic crisis has led to forecasts that actually anticipate a progressive short-term rise in the use of cash. This is indicated by the rising volume of cash in circulation and the increase in cash withdrawals from ATMs.
In absolute terms, the use of cash goes hand in hand with a high cost base. A study published by the European Payment Council quotes the cost of cash transactions in Europe at EUR 50 billion. According to Wincor's research, cash transactions showed a rate of EUR 11.9 billion for Germany — breaking down into EUR 4.2 billion in the banking sector and EUR 7.7 billion in the retail segment.
Against this backdrop, the ECB published the European Recycling Framework in 2007 to give banks more scope and flexibility in banknote processing. It allows the cash cycle to be shortened if certain requirements are met — banknotes that are accepted in banking and retail scenarios can be paid out again, provided they pass forgery and fitness tests. This framework agreement is likely to prompt other central banks to follow the example set by the central banks in the United Kingdom and Spain and to phase themselves out of the central cash provisioning process.
Whereas around 80 percent of the cash in circulation today is still managed at a central point, the plan is to reduce this figure to 50 percent in the future. This reorganization will involve a steep rise in charges for retail banks that choose to let the central bank process their cash. In Germany, the vastly diminished net of Bundesbank branches means that banks will have to expect longer journeys and considerably higher costs for transport, cash processing and interest. The European Recycling Framework disposes that FIs may now outsource their cash handling activities to a certified cash center or handle them themselves with their own staff.
But the personnel costs incurred when internal bank staff handle cash already account for the largest chunk — more than 60 percent — on the cost side, so that automating cash transactions is by far the most effective lever for cutting costs in cash cycle management.
Focus on the entire cash cycle
The cash cycle is a special part of the supply chain, in which the product, cash, has to be made available at the right time, in the right amount using a minimum of resources. On this basis, rationalization measures should start at the point where most of the costs are incurred in the cash handling process: in the branches. The object should be to relieve staff in retail stores and bank branches of routine manual cash handling work. This must focus first and foremost on manual processes, in which cash is counted, sorted and packaged according to the four-eyes rule.
A first and relatively simple step toward reducing costs is to shift personnel-intensive services away from the counter onto self-service machines. ATMs and automated teller safes with a cash recycling functionality that meet legal requirements already implement the core aspect of the European Recycling Framework. They shorten the cash cycle right at the start, a step that guarantees major cost savings. Systems that check deposited notes for authenticity and fitness before dispensing them again to customers allow banks to achieve savings of between EUR 40,000 and EUR 100,000 per branch.
In a project that Wincor Nixdorf handled with a big international bank, deploying systems with a recycling function successfully reduced the number of cash-in-transit journeys by one-third and the cost of cash procurement by 30 percent. Optimization of replenishment volumes and intervals represents another cost lever.
Comprehensive cash cycle management actually goes further than this. It analyzes the entire process chain, including cash provisioning processes across the banking and retail sectors and reductions in the cash cycle between banks and retail stores.
In a project with Shell Germany, cash taken at up to 1,300 service stations was used to pay out money to bank customers at Postbank.
Further cross-sector models and scenarios are conceivable. Cash that is accepted in a retail outlet could be used to replenish nearby ATMs, provided that cash handling is based on intelligent systems that process the cash automatically, generate an audit trail and dispense with the need to re-sort cash holdings manually.
The prime objective of a cash cycle management solution must always be to guarantee transparency, quality, security and reduced costs across the entire cash cycle. Analysis represents the first step in an end-to-end process evaluation in the development of individually optimized solutions. This is the basis for designing individual optimization concepts that, with the aid of appropriate hardware and software and a standardized portfolio of services, manage the cash cycle.
Monday, 14 September 2009
Oct.1, 2009, marks the 10th anniversary of the first talking ATM installed in the United States. From that first accessible ATM’s release in 1999, there are now tens of thousands of talking ATMs around the world.
Here I highlight the advocacy efforts, technology developments and corporate commitments that have contributed to the proliferation of talking ATMs in the United States and around the world over the past 10 years. Please check my Web site over the next two months for more updates.
Blind community advocates laid the groundwork for talking ATMs in the 1980s and early 1990s, with important policy work on federal legislation and regulations. These advocates made strides with the banking industry, as well as by serving on standard-setting committees. Banks were first contacted using structured negotiations in the mid-1990s; by 1999, all of these efforts resulted in the first installed talking ATMs in the United States.
CCB advocacy leads to Wells Fargo’s 1999 state-wide commitment
Three months before the first talking ATM was installed in the United States, Wells Fargo and the California Council of the Blind announced a historic plan to install talking ATMs throughout the state.
When the first 20 talking ATMs were installed at Wells in April 2000, Wells became the U.S. bank with the most talking ATMs in the country.
In 2002, Wells Fargo announced state-wide plans for Talking ATMs in Iowa. In 2003, the bank announced that its talking ATMs also would provide spoken instruction in Spanish. By 2009, all of Wells’ more than 7,000 ATMs are talking ATMs.
1999: First U.S. talking ATM installed in San Francisco City Hall
The first talking ATM in the United States was built by Canadian accessibility company T-Base Communications Inc. for the San Francisco Federal Credit Union. The San Francisco Chronicle reported the ATM's installation at San Francisco City Hall, part of San Francisco’s plan to make City Hall fully accessible.
Len Fowler, then a T-Base employee, flew to San Francisco with the parts and assembled the audio aspects of the Diebold Inc. machine on-site.
T-Base got the bid, because the only 12 talking ATMs in the world at that time were owned by the Royal Bank of Canada.
California Council of the Blind’s 1999 Citibank announcement
One month after San Francisco’s talking ATM was up and running, the California Council of the Blind on Nov. 9, 1999, announced that Citibank had installed five talking ATMs in California. The announcement was the result of an agreement that CCB and individual CCB members had reached with the bank. Eighteen months later, Citibank announced that it had installed the first talking ATMs in New York.
The early Citibank talking ATMs were touchscreen-only, with unique tactile input devices along the bottom of the screen. That input method, while innovative and effective at the time, proved cumbersome, and today all talking ATMs, including Citibank ATMs, have tactile keypads.
Bank of America’s 2000 multistate talking ATM commitment
Bank of America was the first bank in the country to agree to install talking ATMs in more than one state. In March 2000, B of A announced a deal with CCB to develop a plan to install talking ATMs in California and Florida and said it would work out a plan for the rest of the country the following year.
B of A, the California Council of the Blind and several blind individuals eventually signed three different settlement agreements, ultimately calling for the installation of talking ATMs at every U.S. B of A location. The bank is now very close to meeting that goal, with more than 12,000 talking ATMs installed across the country.
Lainey Feingold is managing partner with the Law Office of Lainey Ford.
Monday, 31 August 2009
It's been more than a week since federal authorities captured the man behind the United States' largest financial data-security hack, the Heartland Payments breach. As the week unfolded, more details emerged.
The breach has been a slap in the face for the Payment Card Industry Data Security Standard, since Heartland had been given the seal of PCI certification before the cyber attack. The breach has also marred the reputations of Visa and MasterCard, and left consumers once again questioning the security of retail ATMs.
Court records revealed a direct link between the cyber breach and the Citi ATM compromise at 7-Eleven, which came to light several months ago.
More than 130 million debit and credit cards were reportedly compromised, and the 28-year-old mastermind, Albert Gonzales, behind the scheme is accused of also playing roles in the TJX Cos. and Hannaford Brothers Co. compromises.
The former Secret Service informant allegedly was able to break into networks at retailers and major financial institutions to steal card numbers and PINs.
Mainstream news reports hit with force last week, with financial advice coming from all angles and directions. Among the top precautions consumers were advised to take: Avoid retail ATMs all together, since they are incorrectly labeled as being less secure than bank-owned ATMs; don't use debit; and avoid online purchases.
In reality, the payments industry is actually very safe, and consumers are often given poor advice. But the ATM industry has done little to put itself out in front in a way that gets the truth out to the public.
The ATM Industry Association has spearheaded a few initiatives through its best practices, but much of the onus falls on the banks and credit unions, since they have direct relationships with their customers and members. ISOs also could do more positive PR.
ISOs should educate the merchants they place ATMs with, telling them to talk with their customers about the safety of retail ATMs. And getting the word out to the mainstream media is critical. It can be challenging, but the industry needs to do a better job of putting itself out in front of the cameras and having its voice heard.
ATMIA could be a great organization to lead the PR pack.
"The ATM industry as a whole is very secure," says Mike Lee, chief executive of ATMIA. "Following the mass migration to Windows XP ATMs, we have been working on new ATM software security best practices due out in mid-September. Crime will migrate increasingly to cyber space because the prize — breaking into data storage systems containing sensitive customer data — brings a big pay-off and the risks of detection may be lower than in other crimes and in other operating environments."
But most consumers don't know or care about XP ATMs and the difference between an ATM-skimming attack and a cyber hack. Most also don't understand that retail ATMs, in many ways, are more secure than their FI counterparts, since FI ATMs are unattended after-hours and get higher transaction volumes — thus making them prime targets for skimmers.
"The percentage of transactions at ATMs that are fraudulent is miniscule relative to fraudulent transactions to credit cards," says Sam Ditzion, chief executive of Tremont Capital Group, a strategic planning and acquisition advisory firm that specializes in the ATM industry.
And what about the notions that debit is less secure than credit and online transactions are bad? Neither claim is founded.
Yes. Debit is vulnerable, but the consumer never pays the price, unless the suspicious charge or withdrawal is not reported to the FI. Even then, the vast majority of suspicious transactions and breaches are captured by the bank or credit union before the customer or member even notices. And the FI always absorbs the cost.
The same is true of online transactions. Advising consumers to stop buying goods online is ridiculous. More, not fewer, transactions will occur online over the coming months and years. Online purchases are convenient and secure. And if a card is compromised, again, the FI bears the loss.
"I have never heard of an example in which a victim of skimming fraud did not get a complete refund from their bank very quickly," Ditzion said. "So sure, consumers need to be vigilant and review their statements, but if you see that your account got compromised, your bank will credit your account."
Lee told me last week that this breach may be the nudge the United States needs to make a move toward EMV (the Europay, MasterCard, Visa standard) — which could be a good thing.
"We have seen a fraud migration toward non-EMV compliant markets," Lee said. "There is no bullet-proof vest that prevents all attacks by criminals on our things of value, whether cash, cards or online payments."
Monday, 03 August 2009
When it comes to sales, tried and true rules have been tested and proven. Below is a list of the top five mistakes I see salespeople across industries and professions commonly make. By addressing these issues with your sales force, you can dramatically improve your sales, in ATMs and anything else.
No. 1: Not listening
Salespeople often talk themselves right out of a sale because they are talking and not listening. Salespeople should spend a short amount of time talking about themselves, your company and the solution that your product provides. In fact, a salesperson should talk no more than 40 percent of the time when working with a prospect. The prospect, on the other hand, should talk more than 60 percent of the time about his business, his customers and his challenges.
The salesperson must ask questions that demonstrate she really cares about the potential client's specific needs. If your salesperson is actively engaged in listening, she will have a much higher understanding of the prospect and the prospect's needs.
To be actively listening, your salesperson has to listen to the words, as well as the physical gestures, the voice tone and context. Salespeople with excellent listening skills are able to easily identify a client's real needs and the solutions to fill those needs. The best salespeople are great listeners. When we think of a terrible salesperson, we often think of the stereotypical used-car salesman, who just can't stop talking. So, suggest to your salespeople that they stop talking and start listening.
No. 2: Failing to prospect for new customers
Many salespeople underestimate the importance of prospecting. They need to know that constant prospecting will produce a consistent flow of customers to your business. Even when business is great, salespeople need to prospect for new customers. Inconsistent prospecting is one of the most common mistakes salespeople make. Salespeople must devote a certain percentage of their work week to prospecting for new, qualified customers.
The best way to find new customers is by scheduling a specific portion of your calendar to prospecting only. If done right, the pipeline will be full of new prospects, and thus reduce the common peaks and valleys that occur in sales.
No. 3: Not asking for the order
People want to work with people (and businesses) who genuinely want their business. The easiest way to demonstrate that your company wants the prospect's business is to just ask for it.
A salesperson's presentation should be designed to get a commitment from the client. After investing time, qualifying the customer, explaining and demonstrating how your company's product or service will solve the prospect's problem, it's time to ask the prospect to make a purchase. The salesperson's job is not done until he has confidently asked for, and earned, the order.
I'm surprised at how often a salesperson will do everything well in her presentation and then sheepishly ask for the order. And some salespeople never ask for the order at all.
An "ask" can be the nudge your customer or potential customer needs to make the final positive buying decision. Your salesperson has an obligation to ask for business. The salesperson does not have to be pushy, but should respectfully and with great confidence ask for an order.
Not asking for a buy shows some lack of confidence. The customer won't know if the salesperson is apprehensive about the price, the product, the service or her company. Your salesperson has to ask for the order at the end of his presentation to earn the client's confidence.
No. 4: Failing to follow up
Just because a prospect decides not to buy today does not mean he won't be a buyer in the future. If the prospect is an interested, qualified, potential customer, then someone will sell that prospect, eventually. Your salesperson has done the work, so it should be your salesperson that earns the business, when it comes.
Your company and salesperson have to be the supplier this customer thinks of when he's ready to invest. The way you earn this business is to have a consistent and persistent follow-up program. Most salespeople don't consistently follow up. But following up is a critical step in the selling process.
Your salesperson already has a relationship with this potential customer; build on that relationship. Only the salesperson can convert this missed opportunity into a future sale. Following up should be an integral part of all of our corporate-sales strategies. Customers and prospects are already interested, why would we let them go? The chances of closing a warmed-up lead is much higher than chasing down a new or cold lead. Timely follow up will lead to more sales with fewer leads.
No. 5: Wasting time
Salespeople often waste time in three ways. First, they often chase down non-producing prospects. Some prospects will never buy or invest. To earn any money, some prospects will dissect every one of your profit centers and drain whatever profit you deserve and keep the profit as their own. These "profit parasites," as I call them, need to be encouraged to take their business to your competitor. These non-productive prospects will be happy to take your profit and waste your time.
The second time waster: Not walking away from the "wrong" client. Some potential clients are the extremely high maintenance with very low profit potential. Sales professionals know the "wrong clients" will add a lot of stress on support staff and co-workers. This added stress from these clients can have a negative effect on future sales. The "wrong clients" tie up phone lines, fill up mailboxes and slow down progress.
The third time waster is ineffective time management. A salesperson's main asset is time. When salespeople measure every minute as a profit or a loss, they will see new opportunities. We need to stop spending our time on non-profit-producing activities. The wildly successful and the poorest salespeople have exactly the same amount of time; obviously only one is using her time effectively.
Have your salespeople invest in one of the many time-management programs and use it properly. When salespeople really see how much of their work time is needlessly spent on non-profit-driven activities, they can adjust their schedules and sell much more.
In conclusion, we can teach our salespeople time management and listening skills. Our sales team members also can learn to look out for and steer clear of "profit parasites" and the "wrong customers." Salespeople who can't or won't confidently ask for the order may need to be retrained, remotivated or removed.
Profitable customers think they buy logically, but most of them actually buy emotionally, and a sale is a transfer of emotion. Your salespeople need confidence to seamlessly transfer that emotion to customers so customers can confidently buy products.
Damien Fitzgerald owns DTD Marketing, a marketing and consulting firm that focuses on the ATM field.
Monday, 06 July 2009
Banking machine applications that involve paper transport include check processing, billing and currency handling. All this equipment, particularly ATMs, requires precise movement and paper capture at high speeds and volumes, and the machines must retain these capabilities under hostile climatic conditions. Extreme heat and humidity, as well as extreme cold and dry conditions, create changes in electrostatic levels and friction in paper-transport equipment, which can cause jams and double-feeds. For the engineers who select rollers, belts, and pads for ATMs, consistent conductivity and levels of friction are vital considerations in both original and replacement parts.
High-performance urethane is ideal for these applications. It has clear advantages over traditional materials like rubber or silicone for rollers, wheels, belts, and pads. Urethane provides excellent shock and vibration dampening, abrasion and wear resistance, great durability and high mechanical strength.
More important to ATM manufacturers and replacement-part suppliers, it offers customizable levels of conductivity and of coefficient of friction, both of which greatly increase equipment reliability and performance and eliminate the need for overly tight tolerances in design.
The most commonly practiced method of making urethanes semi-conductive is by “doping”: adding select amounts of conductive materials to the mix during part manufacture. While this does adjust the electrostatic properties of the part, each additive comes with its own drawbacks.
Adding carbon controls conductivity, but late in the life of the part, the carbon can stain the paper it is transferring. High-voltage vacuum coating fiber offers a limited two-dimensional (surface) conductivity control, but it is expensive. Conductive metal dispersion using powdered metal in blends from 10 percent to 80 percent controls electrostatic properties fairly well, but it is difficult to achieve uniform distribution of the powder during parts manufacture, since the metal tends to settle.
Urethane belt manufactured by MPC. The urethane can be customized for electrostatic properties, coefficient of friction, and hardness to suit all paper-handling tasks.
Ammonium salt additives address static, but their conductive properties vary considerably with humidity — and at high humidity, they make the surface of the part sticky.
The molecular method
The best way to customize conductivity is to modify the urethane structure at the molecular level, making the material itself semiconductive instead of relying on additives.
Urethane parts customized in this way have a volume resistivity of 5E5 to 5E10 at a hardness of 5 Shore A -80 Shore D for solid urethanes, and 20 Shore 00 to 90 Shore A for foam. The same method can be used to create parts that are completely antistatic. Combined with a customized and constant coefficient of friction, the electrostatic properties of these parts ensure precise movement of paper at high speeds, eliminating double-feeds, feed failures, or jamming, which errors in conveying checks or currency and require costly machine service.
Getting a grip on paper transport
Urethane gear manufactured by MPC. The urethane can be customized for electrostatic properties, coefficient of friction, and hardness to suit all paper-handling tasks.
Customization of urethane can be useful above the molecular level, where controlling the grip of a belt or a roller is critical — especially for high-speed paper transport systems such as ATMs. Chemically modifying the urethane molecules during manufacture can increase the part’s coefficient of friction, making it greater than rubber or silicone parts of similar hardness.
The proper coefficient of friction enables a part to grab one piece of paper at a time, move it a precise distance, and let go at the exact right moment, throughout the long life of the part. Such chemically based performance is achieved through decades of experience and fine-tuning of the formulations and manufacturing processes.
Semiconductive urethane parts for paper-transport tasks create the best balance of precision static control, coefficient of friction, abrasion resistance and toughness to ensure long-lasting, jam-free performance in ATM equipment. The result for the ATM manufacturer and service supplier is increased equipment accuracy and precision, reduced downtime and need for service calls and replacement parts and greater customer satisfaction.
Monday, 29 June 2009
Consumers could be forgiven for thinking that the ATM is the most archaic and least-invested in banking channel, particularly as financial institutions worldwide increasingly appear to be focusing on more modern points of customer interaction, such as Internet and mobile banking.
However, those within the ATM industry are only too aware of the costly renewal that the ATM channel has undergone due to the migration to the Windows-based operating system. The forced migration from IBM's OS/2 has resulted in Windows becoming the global ATM operating system of choice, almost by default. When the Windows migration was first implemented, a raft of services were highly anticipated. But banks, for the most part, have chosen to focus on upgrading the operating system and communications infrastructure rather than the software driving the functionality at the ATM.
Far from the stagnant channel that customers perceive the ATM to be, banks' IT departments have been working overtime in recent years to bring significant changes to back-office technology. In many countries, the cessation of support of IBM's OS/2 platform for ATMs was just one catalyst for the required investment. The mandated introduction of EMV smart cards in many countries also has resulted in widespread systems updates and expenditure on new software and hardware capable of the necessary encryption processing.
While implementing these required updates, there has been an obvious business case for banks to review their strategies, and most institutions have made moves toward adopting a multivendor approach to their ATM networks. In this regard, the migration towards a modern, open standards-based infrastructure has given ATM deployers more control over their networks and provides a good canvas to rethink their software strategies to unlock the value from their recent infrastructure investment.
The popularity of accessing cash at the ATM seems to have only increased due to the current economic climate. With consumers tightening their purse strings and the increased focus on budgeting, a U.K. survey conducted by Level Four in December 2008 found that the majority of consumers feel most in control of their budgets when relying on cash from ATMs.
With the popularity of the ATM showing few signs of waning and the investment to update legacy systems and modernize the ATM operating system in place, the question remains, isn't it time for banks to consider the benefits of new software architectures to reduce the functionality gap at the ATM?
The business case
In the current economic environment and with consumer confidence in the banking sector still shaky, banks are looking to increase customer service, ensure customer retention and maximize ROI. The ATM is a key platform through which banks can support these objectives.
Research suggests that by 2008, more than 60 percent of banks in the United States and Western Europe had migrated to the Windows operating system and this number is steadily increasing. Through the move to Windows and open standards, ATM deployers have already made the foundation investment required to support advanced ATM functionality. While technology investment is being reviewed across the financial sector, banks should capitalize on the previous investment in ATM infrastructures to bring the benefits of sophisticated high-bandwidth networks and high-specification hardware and software to the end-user through more advanced functionality.
Coupled with the technology drivers supporting the development of more advanced ATM services, banks across the world are currently facing a growing pressure to deliver faster, cheaper and more secure banking channels to their ever-demanding customers. Facing procurement pressure to adopt an open standards-based Windows operating system to reduce costs and increase vendor choice, as well as customer pressure to improve services, banks are rightly beginning to view software as the key differentiator in an increasingly competitive marketplace. With the challenge of customer retention a big focus for 2009 and beyond, ATM deployers are now considering the customer services benefits that a modern ATM network can bring — effectively a retrospective business case for the "forced" investment in hardware and communications infrastructure.
What are banks already developing?
As the number of channels a bank offers its customers continues to increase and diversify, ATM deployers are seeking ways to ensure the ATM doesn't lose its foothold in the market. One key way to do this is by supplementing the vital cash dispensing capabilities with additional value-added services. In order to recoup their recent investment in hardware and infrastructure, ATM deployers must harness the revenue potential of their upgraded ATM networks as an important route towards a multichannel banking strategy, fulfilling present and future consumer requirements.
A new technology that is being integrated into the functionality of the ATM in some countries is contactless payment top-up. As contactless technology gathers momentum, particularly in the transportation sector, there is an opportunity for ATM deployers to enhance the ATM to support this new functionality.
Cash machines are a natural choice for contactless card top-up and balance services, particularly in the countries where contactless adoption is becoming more widespread. Mass transit top-up functionality at the ATM is live in France and Spain, for example, and provides a revenue generating opportunity for the banks, as well as increased customer convenience through a wider range of terminals to top-up the cards. The ATM is an obvious channel to exploit owing to the established network of terminals already in place, which offer customers convenient, familiar and secure transactions.
ATM deployers worldwide that take advantage of contactless functionality will benefit by driving increased traffic to those cash machines that are fitted with contactless readers, making this a potential competitive differentiator for banks who wish to increase interchange revenues.
Cell phone top-up in the U.K. is another example of advanced ATM functionality already in practice that illustrates the value of improving ATM services to banks and customers. Making use of the national VocaLink network, a great majority of U.K. ATMs provide the facility to top-up cell phones that are on a pay-as-you-go model, directly debiting customers' accounts as they pay at the ATM terminal.
These examples reveal the potential of the ATM to become an enhanced self-service device, supporting the wider lifestyle needs of customers such as travel payment and cell phone billing.
Using the ATM beyond its central role as a cash machine leverages much of the core functionality already built in to the terminal. Indeed, the growing sophistication of deposit automation technology is close to making the "bank branch in a box" a reality. Enabling the movement of money between accounts, bill payments and person-to-person money transfers are all future opportunities for the ATM to better support the wider bank branch activities. Providing such services at the ATM would not only be cost effective to the bank, by reducing customer reliance on the branch, but also be beneficial to customers, enabling them to access services from multiple locations on a 24/7 basis.
The benefits that can be achieved through maximizing the increasingly sophisticated software platforms on the ATM are regionally diverse. While there are many examples of innovation at the ATM in North America and Western Europe, there is also a strong incentive for countries with less advanced economic infrastructures to utilize the ATM as an opportunity to better serve unbanked populations or enable international money transfers for migrant workers. In remote regions where access to branch banking is limited, the ATM becomes an even more powerful tool through which financial services can be delivered. Beyond the convenience and customer retention advantages sought by economically developed markets, in less advanced regions the ATM can be a financial lifeline.
Crystal ball gazing
Banks are currently deploying some of the aforementioned innovations in different locations around the world, made possible by the upgrades to ATM infrastructures that have already taken place largely due to the Windows migration and subsequent back-office renovations. As ATM software technology continues to develop and hardware manufacturers continue to innovate in deposit automation and contactless functionality, there is potential to integrate even more sophisticated additional services into the ATM.
The ATM of the future will focus on personalization. Using a modern software platform, banks will be able to offer a dynamic experience to cardholders based on who they are as individuals — for example, targeting promotional material at specific age ranges or offering loan agreements based on personal credit ratings. ATM deployers will benefit from the ability to exercise greater control over the services that are available to customers. For example, services will be tailored to customers depending on their location, the time of day that they are visiting the ATM and even their past ATM habits such as a certain cash withdrawal amount.
Banks will inevitably start to consider the ATM as a vital delivery channel to allow cardholders to download additional applications on their smart cards. Banks' ATM networks provide a trusted and secure point of customer interaction through which multiple payment types, identity and loyalty applications can be downloaded onto smart cards as more banks roll out multi-application cards. Banks have been trying for several years, through the introduction of such services as mobile phone top-up, to showcase the ATM as more than a simple "cash and dash" machine. Providing a platform on which new applications can be quickly and conveniently added to existing smart cards will reinforce this message and help position the ATM as the cornerstone of a multi-channel banking strategy.
Cash is (still) king
Now that much infrastructure investment has been made in the ATM channel, banks need to consider how they can maximize ROI by implementing new and innovative services in order to bring revenue and customer benefits. Moving away from the legacy software applications in favor of software based on modern architectures and open standards provides banks with significant cost advantages and ATM deployers with a path to recoup the investment in infrastructure made over the last few years.
Despite the obvious benefits that modern ATM architecture brings to functionality, it is vital that banks do not neglect the main focus of the channel — dispensing cash. Banks must ensure that any additional services provided at the ATM are not rolled out to the detriment of efficient and reliable cash delivery. ATM deployers must consider the strategic placement of additional ATM services, for example, avoiding peak periods in busy trains stations, or particularly well-visited terminals. Consumers also should expect to see more kiosk-type devices, which offer a wide range of banking services, but potentially without the ability to dispense cash.
However, while the need to maintain the core cash capabilities of the ATM is clear, deployers must focus on exploiting existing investment in this channel. Few banks are currently taking advantage of the increasingly sophisticated infrastructure behind the ATM. With an increased need to provide exceptional customer service while maximizing ROI, banks should look to advanced ATM functionality as a key differentiator. Advanced ATM software can help unlock the value and potential of the network and provide an additional revenue stream through the banks most frequent customer touchpoint.
Martin Macmillan is the business development director of Level Four Software in the United Kingdom.
Tuesday, 24 March 2009
The following commentary appears in the ATM Future Trends Report 2009: A comprehensive look at the ATM industry over the next five years, published by ATM Marketplace.
In global banking and financial circles, retail banking has proven to be a relatively stable factor in the partially volatile banking sector. At least in the short term, we expect further growth in this area of banking, which in recent years has experienced a renaissance worldwide.
This outlook is based on our belief that the basic trends in the retail banking sector will remain the same for many players during the present economic crisis. Most retail banks, for instance, will continue to face fierce competition. To grow their business, they aim to expand their customer base. At the same time, they plan to invest in optimizing processes to reduce costs.
Despite these robust conditions in the medium term, we acknowledge that retail banking could be impacted in the short term by the unfavorable situation in the financial sector and by a possible weakening of the overall economy. That said, we expect growing competition to lead to additional opportunities for Wincor Nixdorf in the medium term. Subsequently, we will continue to make significant investments in research and development in order to expand our portfolio of IT-based innovative solutions for retail banks. Here are a few market trends as we see them.
Self-service and automation continue to advance
More and more processes are being automated or transferred to self-service systems such as ATMs. While banking customers benefit from faster service, standardized processes help banks streamline their operations. One example from the United States is the automated processing of checks through self-service systems. The technology reduces not only the amount of time customers spend waiting at the counter, but also the enormous transaction costs, ranging from about 39 cents to $1.70 per check. A factor further driving automation is the huge costs for banks of cash handling.
Branches remain highly valuable
Despite the growing importance of other sales channels, the branch remains the “personal face” of the retail bank to its customers and its most important contact and sales channel. Particularly in established markets such as Germany, Europe and North America, banks are modernizing their branch networks and creating additional services via self-service systems, for example. The goal is to retain existing customers and win new ones. In numerous emerging markets, retail banks are expanding their footprint through branches and self-service offerings.
The mix of various sales channels is becoming more important
Increasingly, customers are deciding for themselves which channel to use to contact their bank. Adapting to this behavior will become a key success factor for banks. Many of them already use customized software to combine their sales channels and unify applications across all channels and various devices. With this software, banks benefit from features such as improved information from the individual channels and the capability to use this information across channels.
Intensifying customer contacts, also through ATMs
Market studies show that banks in a number of countries risk losing direct contact with their customers. In the United States, for instance, only one third of all retail bank customers seek personal advice from their bank. In the United Kingdom the figure is even lower: just one tenth. In Germany, our home market, around 85 percent of all standard transactions, such as cash withdrawals, are now processed at self-service terminals. Since self-service systems, and in particular ATMs, have become the most heavily used channel to contact banks, it makes sense to use these systems to communicate individually with customers.
The first step in this process is to gather information about the users of the various sales channels and process this information consistently and individually on a common software platform such as PCE. With these solutions, banks have access to individual customer data to create targeted advertising campaigns. As such, self-service systems — designed primarily to automate processes — can be used by banks as highly effective communication tools to promote their own products such as loans and insurance. Also, independent ATM deployers can use them to generate additional revenue through third-party advertising.
Searching for new means and possibilities
These examples show that there is plenty of activity happening around self-service systems like ATMs — activity that is totally independent of the current financial and economic crisis. At the same time, they illustrate how companies in the ATM space have the potential to drive change through innovation and help customers deal with the many challenges they face. In these difficult times, we view it as both an opportunity and an obligation to explore new paths for the success of our customers. Mutual trust grows in these times of special challenges.
Eckard Heidloff began his career in 1983 at Nixdorf Computer AG. He was named president and CEO of Wincor Nixdorf AG in January 2007.
Tuesday, 24 February 2009
Automated deposit, ATM services outsourcing, branch optimization: these are all relatively new concepts that are on the minds of financial institutions everywhere. David Bucci, senior vice president for Diebold Inc., shares his thoughts on how they'll shape the future of ATM services.
Wednesday, 07 January 2009
As deployers and vendors look to maximize the value of self-service in the coming year, it helps to take a look back at what did (and didn't) work in 2008. As editor of SelfService.org, I've compiled some of the stories that rocked the industry last year. Here is Part II of that list.
Click here to view Part I.
#5: Hackers smash Citibank ATM-server, steal $750,000.
February was a black month for Citibank as two Brooklyn men allegedly made hundreds of fraudulent withdrawals from New York City ATMs. They reportedly pocketed at least $750,000 in cash. The significance of the thefts? Experts say this ATM crime spree is the first to be publicly linked to the breach of a major U.S. bank's systems.
#4: NCR debuts SelfServ kiosk, ATM lines.
In January, NCR announced the release of the SelfServ ATM, its first new line of ATM in a decade. The SelfServ ATM features, among other things, the ability to accept bulk check deposits. It also comes equipped with so-called self-healing technology – technology that enables the ATM to recover from some malfunctions via a remotely-managed reboot.
The SelfServ 60 kiosk was unveiled in October at KioskCom Self Service Expo. It integrates Intel vPro technology, including the next-generation Intel Core 2 Duo processor and Mobile Intel GM45 Express chipset, enabling it to run more advanced and engaging applications than its predecessor, the EasyPoint 42 kiosk.
#3: EyeSite kiosks help health care industry 'see' the light.
It was early in 2008 when EyeSite kiosks first broke into the national scene. Developed by startup SoloHealth, the EyeSite kiosk provides the user with a self-service eye exam. Though not a substitute for a professional eye exam, the kiosks do give the user a general idea of the quality of his vision and spotlights the dangers of conditions such as cataracts, glaucoma and macular degeneration. The EyeSite kiosk was developed via a partnership with Netkey and KIOSK Information Systems.
#2: Redbox and Universal Studios go head-to-head.
In August, representatives of Universal Studios showed up unexpectedly at the headquarters of redbox with an ultimatum: Sign a revenue sharing agreement limiting the types of DVDs that could be stocked in redbox kiosks, as well as the amount charged for them, or Universal would cut off sales of its DVDs by commercial distributors. Redbox refused to sign the agreement and in November, filed a lawsuit against Universal, alleging that the distribution company was improperly interfering with a business relationship.
The lawsuit highlights the dramatic effect DVD kiosks are having in entertainment industry. The lack of overhead means DVD kiosks are able to offer DVD rentals for $1 a day – a dramatically cheaper price than that charged by brick-and-mortar stores.
#1: Recession strikes the world economy.
There's no denying that the economic downturn that struck in the last financial quarter of 2008 will have a significant impact on the self-service industry. The jury is still out: Will companies turn to self-service in an effort to cut labor costs, or will they shy away, fearing the initial costs of new deployments?
"We're on the eve of, probably, the greatest financial crisis of our time. In retrospect, I don't think we've ever seen anything like this since World War II," said V. Miller Newton, president of the Self-Service & Kiosk Association, while at KioskCom Self Service Expo in October. "Companies are definitely hunkering down. They're gonna cut costs … they're gonna be budget conscious … but I believe self-service is a critical component and a must-have in this economic downturn."
Tuesday, 15 July 2008
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It wasn't until 1997 when cash-recycling ATMs, developed in the 1970s in Japan and Korea, made their way to Europe. They began cropping up, primarily, in France, the Netherlands, Switzerland, Germany and Italy.
Yet up until recently, only 10 percent of all ATMs in those countries accepted automated deposits, and only about half were able to recirculate money after the notes and coins had been checked for quality and forgery.
New branch concepts and steadily increasing cost pressure soon gave a boost to automated deposits, which were originally described as superfluous and impractical.
Studies show that 96 percent of all deposits in Europe are made via self-service. And contrary to popular belief, business customers are not the only ones to use deposit technology. In large cities, such as Berlin, it is predominantly private customers who make self-service deposits.
It's not surprising that recycling systems have a higher growth rate than conventional ATMs in Europe, even though the latter are far higher in number. But it is becoming increasingly obvious that both cash systems complement each other usefully.
Cash-recycling systems are fail-safe, and the emergence of cassette technology, which results in higher recycling volumes and shorter transaction times, has also aided cash-recycling acceptance rates.
New cassette-based and drum-based systems are making their ways into the market. Sales for cassette-based systems are up, but the same is true of drum-based systems, and for good reason. With the same required space, the drum can accommodate more denominations, and experts see the ability to handle up to five denominations as a necessity for branches interested in cash recycling. Five cassettes are virtually compulsory, since everything depends on greater flexibility where the number of denominations paid in and out is concerned.
Furthermore, networked devices make it easier to comply with money-laundering regulations because they automatically reject invalid deposits. Previously, breaches were only noticed during post-processing.
Rigorous fight against costs
Even more important are the quantifiable advantages financial institutions of all sizes are now experiencing with cash recycling. Consistency pays off, in terms of higher self-service quotas for deposit and dispensing transactions, and in terms of cost.
Dresdner Bank was the first major bank to completely change over to recycling technology. The bank now saves around €2 million annually.
On average, the intervals for cash replenishment and removal at ATMs increase by a factor of between three and four. With cash-recycling ATMs, instead of twice a week, cash-in-transit companies or employees only need to go to each location every other week.
The cutback results in savings of €600 per month. In ideal locations, where there is a high degree of correspondence between money paid in and money paid out, it is even possible to reach intervals of five weeks and more.
Around 80 percent of a bank's ATM savings, once cash-recycling is implemented, can be traced back to the automation of cash handling. This not only eliminates the need for post-processing in the form of sorting, checking and the effort of searching for discrepancies, it also significantly reduces staff time at the teller terminal or cash desk.
One savings bank with a balance-sheet total of €1 billion was able to reduce two-full tellers. In relation to night safes, another financial institution saved €16,000 annually on each installation.
Payback period of 2-3 years
Investments in recycling technology pay off after two or three years — faster than some decision-makers in banks ever thought possible.
After 10 years, the technology is no longer in its infancy. Retail Banking Research expect cash-recycling at self-service terminals in Europe to grow 30 percent in 2008. According to current estimates, that rate of growth will increase by 170 percent by 2010 and 215 percent by 2017.
The positive trend can be attributed to several factors. New branch structures, whatever they may look like in detail, envision the shift of routine transactions to self-service terminals. The move affects coin acceptance and cash-recycling systems, and a coin function or a coin sidecar, already have been introduced in the market.
The European Central Bank also has provided a secure basis with its recycling framework.
"It significantly broadens the maneuvering room for banks and savings banks in terms of shaping their cash processes," said Niels Riedel, a banknote expert at ECB.
In addition, financial institutions are increasingly putting their faith in recycling technology.
Most systems rank with a 96 percent to 97 percent level of reliability. And integration of recycling systems into cash management helps optimize processes.
In light of ongoing cost pressures, this will be reason enough for combined deposit/dispensing machines to gain ground and replace basic cash dispensers. The high investment costs pale in comparison to the rewards.
Multifunctionality also is playing a role, with more and more demands from domestic and international markets. Similar to basic cash dispensing ATMs, recycling systems are being equipped with passbook processing and check-deposit functionalities in order to completely automate cash processes.
Single-purpose or multifunctional — the general conditions on site play an important role in this decision.
Tuesday, 17 June 2008
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These days, it seems there are few establishments in which consumers can't pay with plastic.
Yet while credit and debit cards are increasingly popular, the volume and value of cash in circulation is on the rise as well. In today's retail environment, cash remains a popular form of payment and consumers expect to be able to use cash in transactions — particularly at kiosks.
This is not surprising, given the benefits of cash. Both kiosk users and deployers appreciate the ease and cost of cash transactions: low-cost for the deployer, free for the consumer and typically fast and hassle-free. Cash requires no infrastructure to function as a means of payment. In the process of automating, can one afford to ignore cash?
Users and deployers appreciate the offline nature of cash. Unlike credit or debit cards, electronic check or ACH transactions, cash transactions are settled immediately. Cash also is anonymous, exchangeable for cash without leaving a "link" between transactions and has a high rate of acceptability.
For the consumer or merchant concerned about security and safety, cash presents a low fraud risk. Easily and quickly verifiable, cash protects from the threat of loss due to counterfeit bills. Cash is maintained and regulated by the state and losses due to fraud are quite low.
The informal, or unregulated, economy is cash driven. By some estimates, informal trade is as much as 30 percent of our GDP. If cash as a means of exchange is taken away, access to these customers dries up. In a unautomated environment where cash in an option as a means of exchange, cash consumers are prospective customers. Removing cash as a payment option may mean losing these customers.
Despite the growing popularity of alternative modes of payment, cash remains key to retail and should be included in any payment automation plan. Consumers expect that this traditional payment option will be available, and a certain segment of the population — including those without banks — always will prefer cash. To reap the full benefit of automation, be sure that cash is in the mix.
Tuesday, 10 June 2008
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My paternal grandmother used to open a novel at the back page in order to read the ending of the story first. So I will give you the ending of this article upfront and then work my way back, unveiling in the process the secret of cash’s enduring popularity.
Here is the conclusion: There is virtually zero chance that cash will be withdrawn from society within the next generation. That is, in the next 25 years. And in all likelihood, there could easily be another hundred years of cash.
This conclusion is only remarkable because there is a widespread perception in financial services that cash’s days are numbered. People talk vaguely about the cashless society. Some folk seem to believe that plastic and digital forms of money are set to replace cash.
Upon analysis of the true nature of cash and on what is driving global demand for cash, however, this conventional wisdom turns out to be based on a myth. It is a fantasy which has been promoted largely by the card-issuing sector because it has a vested interest in the demise of cash.
But the cashless society is about as real a possibility as the paperless office. At this stage, it belongs in the realms of science fiction.
As head of the ATM Industry Association, which represents a broad spectrum of the ATM marketplace in about 50 countries, last year I sought out a futures analysis of cash. After all, cash remains the lifeblood of the approximately 1.7 million ATMs worldwide, since about 70 percent of all ATM transactions are cash withdrawals.
But I half expected to read evidence that the cash industry had about 10 to 20 years of life left in it. I soon found that the story of cash, like all good stories, has a twist to it, an amazing element of surprise.
During my months of research, I was astounded to discover that all the indicators showed that cash appears to have a bright and unlimited future. The conditions keeping it in production are much stronger than all the growth inhibitors and threats to its existence.
A cash tour
It is true that overall global market share for cash as a form of payment declined in the latter part of the 20th century — because of the advent of the credit card, POS terminals, Internet banking and new options such as prepaid cards and mobile banking. Yet the value and volume of cash continues to climb throughout the developed and developing worlds.
One source told me that the estimated annual demand for new banknotes is 1 billion. The Bank of England, European Central Bank and U.S. Federal Reserve System all report that U.K. sterling, the euro and U.S. dollar currency in circulation continue to increase.
The United Kingdom’s payments association, APACS, reports that 91 percent of payments in Britain worth less than £10 are made in cash, that’s compared to 5 percent made by debit and 2 percent by credit. In fact, Visa estimates that $1.3 trillion per year is spent on small ticket items.
According to De La Rue Currency, annually conducts a payments survey, says cash remains the preferred means of payment for 58 percent of the U.K., particularly where small-value payments are concerned. And cash accounts for two-thirds of all personal payments by volume in the U.K. In 2006 alone, £36.3 billion in cash was spent in supermarkets. Even for payments exceeding £50, Britons are more likely to use cash than credit. And nearly 2 million Britons are still paid in cash on a weekly basis, according to APACS.
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By the end of 2004, the value of notes in circulation in the U.K. exceeded £36 billion, a 45 percent increase from 1999.
One of the most pervasive myths about cash is that its usage is declining in advanced economies.
But that false view assumes that cash is for less-advanced, developing countries. Let us take Europe as an example. This continent has done more than any other region of the world to encourage the decline of cash.
The European Commission and European Payments Council are promoting non-cash payments through the creation of a cashless payment system called the Single Euro Payment Area. And in France, authorities have limited use of cash by law, e.g., saying that transactions exceeding €3,000 may not be conducted in cash and wages may not be paid in cash.
Yet Europeans continue to draw more and more cash every year.
The European Union has set a benchmark of between 200-230 non-cash transactions per inhabitant per year, while Spain, Italy and Poland see fewer than 100 non-cash transactions annually. Across 17 European countries, the average person makes a modest 49 card transactions per year. And he European Payments Council estimates there were about 360 billion cash transactions in 2003, compared to 60 billion non-cash transaction that same year.
Euros in circulation also are growing at a rapid pace. Europe’s volume of cash has grown about 20 percent per year since the euro’s introduction in 2002; by 2006, 1.3 billion euros were in the market. In the euro zone, volumes of low-denomination notes have been increasing at a 5 percent per annum — a rate higher than inflation.
Advanced countries like the United States, Japan and the U.K. maintain resilient cash usage. The Bank for International Settlements reported in September 1999 said notes and coins as a share of gross domestic product rose from 1990 to 1997 in Japan, Germany, Canada, the United States, the United Kingdom, Italy and Australia.
And according to the U.S. Treasury, paper currency continues to climb in America, from $380 for every American in 1975, to $2,578 in banknotes per American by 2005. In addition, an extra $35 billion in coins is rolling around, clearly supporting a deluge of circulating cash in the world’s greatest economy. The value of U.S. dollars in circulation increased 400 percent between 1980 and 2005, from $160 billion to $700 billion.
Japan, the world’s second-largest economy, is cash-dominated. Only 36 non-cash transactions are made per person per year, compared to 288 per capita in the United States — and 119 those are conducted in the form of checks.
In so-called “transitional” countries, such as the former Soviet Union, cash dominates in volume and value.
And in Australia, cash remains the payment method of choice for small retail transactions and money transfers between individuals. In fact, the ratio of currency to GDP is increasing in Australia, up to 4 percent in 2004 from 3.5 percent in previous decades. Cash payments make up 40 percent of value for all retail payments in Australia; and in food and convenience stores, cash accounts for about 56 percent of all sales.
In South Africa, the Reserve Bank reports annual increases of 10 percent in the demand for cash. Two-thirds of all transactions are still conducted in cash, with R55 billion worth of banknotes in circulation and up to R3 billion in cash exchanging hands every day. About 91 percent of South Africans use cash to pay for groceries, while 4 percent use debit, 3 percent use credit and 1 percent use store-value cards.
The increased global demand for cash is good news for the ATM industry, because the cash machine remains cash’s primary distribution channel. In the U.K., 87 cash withdrawals at ATMs are made every second. In 2006, U.K. consumers withdrew £180 billion in cash from ATMs, with average withdrawal value being £65.
According to World Payments Report 2006, the aggregate number and value of ATM cash withdrawals grew at an annual rate of 5.9 percent and 7.1 percent, respectively, from 2000 to 2004.
Scan Coin, a global leader in cash processing, reports that cash handling is increasing by between 2 percent and 10 percent in most industrialized nations, and the percentages are much higher I less-advanced countries.
And cash-recycling technology is expected to improve future cash efficiencies.
England’s Retail Banking Research says cash-recycling at self-service terminals in Europe is expected to grow 30 percent in 2008. According to current estimates, that rate of growth will increase by 170 percent by 2010 and 215 percent by 2017.
Manufacturing the myth
So what’s driving the cashless society myth?
Futures thinking tends to overestimate technological change and to underestimate the role people, culture and society. The simple truth is that most visionaries of the cashless society don’t understand the history of cash.
The use of coin stretches back to Lydia in the 7th century B.C. And paper-currency’s origin can be traced to China’s Tang Dynasty circa 618 A.D.
How many other technologies can claim to have survived that kind of span?
It’s the simplicity of cash that has resulted in its longevity. Cash produces instant results virtually anywhere on earth. That is an immense strength.
Cash is not a technology that easily reaches exhaustion because of resource depletion. And cash has a strong resistance to substitution.
In 1979, Michael E. Porter of Harvard Business School developed a theory of five forces that shape the competitive environment for businesses and products. One force that threatened businesses was product substitution, which would make it more likely for customers to switch to product alternatives, especially when prices increase.
Porter outlined components of product substitution, including a buyer’s propensity to substitute, the price of substitutes, switching costs, and the perceived level of product differentiation. Given that cash has proved to be an inter-epochal technology, how has it fared against the threat of substitution?
The check was first product designed to substitute cash, and it was extensively used for the first time in Holland in the early 1500s. But in five centuries, the paper check has failed to replace cash.
And then there is the credit card, which came out of a New York restaurant in the 1950s. The credit card has been a remarkable piece of technology, but it may be comparatively short-lived, because of its inherent risk. And the economic downswing isn’t expected to help credit’s cause. In fact, in China, the world’s future superpower, credit is not regarded as real money — real money in Chinese culture is cash in the bank.
The credit card, too, then, like the cheque, has failed to topple cash.
Whether we talk about mobile payments, Internet payments or gift cards, the more each one is likely to absorb some market share of some payment technology. The payments landscape is multichannel, and somewhat cannibalistic. But no one payment device, whether an electronic funds transfer, a mobile phone or a prepaid card, that can substitute for cash.
- Fee-free for consumers
- Carries certainty of acceptance as legal tender
- Free of credit risk
- A public asset regulated by the central bank
- Anonymous and cannot be tracked
- Easy to access and use
- Interchangeable with other cash
Cash also is fast.
Source: 2006 Study by Central Banks of Belgium and the Netherlands
Such speed is important in retailing. McDonald’s has reported that shaving six seconds off transaction times brings about a 1 percent increase in sales. Global remittances also are driving the use of cash.
The World Bank estimates that the total amount of remittances sent home in 2005 to developing countries by workers abroad reached $173 billion. That estimate is now estimated to be closer to $310 billion.
The good thing about remittances is that they help bridge the divide between the wealthy and poor. Levels of poverty have declined in countries that receive remittances on a large scale. Recipients use the money they’re sent to improve their children’s education and to provide living accommodation.
Remittances are often received in cash, sometimes via ATMs.
Tourism also is driving the use of cash. In 2003, tourism represented 6 percent of the world’s export of goods and services. And tourists prefer to use local currency when they travel abroad.
An estimated 70 percent of Chinese tourists prefer cash on their travels.
And if remittance and tourism aren’t convincing enough, the future existence of cash is virtually guaranteed by the growing role of the informal sector — defined as economic trade not registered for taxation.
The informal sector, which excludes organized crime, is growing in developed, developing and transitional countries. In the EU, 48 million workers are part of the informal sector. In India, informal-sector trade provides more than 90 percent of employment with some 360 million workers. In South Africa, 25 percent of the labour force works in the informal economy, responsible for 10 percent of all retail sales.
And in Russia, the informal sector makes up 14 percent of the country’s total employment. This table shows the significant role of informal trade in the global economy.
Figure: Average size of Informal Economy around the world measured as a percentage of GDP
The global average size of informal trade is about 30 percent of GDP.
Which government is seriously going to try to eradicate that level of trade from within its boundaries and thus risk pushing up its unemployment rate and poverty levels?
Mike Lee is the chief executive officer of ATMIA.
Monday, 21 April 2008
Criminals are constantly "upgrading" - enhancing their strategies and weapons for attacks on ATMs, among other channels. Companies wanting to thwart criminal attacks need to upgrade, too, with ingenious mechanical and electronic means of defense.
Security is booming. The segment is chalking up double-digit growth rates, mainly in the banking sector. However, this isn't surprising when we consider that no other industry is exposed to such refined and brutal attacks by criminals, and that no other depends so greatly for its success on the trust of its customers and the security of their assets.
In addition, those in charge at financial institutions face considerable personal consequences if they neglect bank security.
Today's branches tend to have only insignificant amounts of cash easily accessible in conventional teller cash drawers. For this reason, more and more attacks are directed at electronic and mechanical equipment at banks and savings banks.
The culprits are brutal, mobile and use increasingly refined tactics. At risk are primarily ATMs, IT systems, transport routes and data networks. Also critical is the dramatic rise in theft of cards and PIN data, which can be used for withdrawing money abroad.
The situation will not ease in the near future: More and more machines are being installed, and increasingly at off-premise and highly frequented locations. Moreover, storage volumes keep growing. State-of-the-art systems can hold 12,000 banknotes, and even that amount is on the rise.
Luckily, preventive measures are having an impact. But it is a race in which the criminal community has a head start, at least for now.
The trend toward manipulating ATMs, mainly by skimming PIN and card data, remains unbroken, despite refined protective measures.
For a long time, Germany was a target for most fraudsters. Credit cards normally used abroad for self-service transactions traditionally promised far greater gain for criminals. Losses from such attacks in Germany are only around one-tenth of the 95 million euros lost every year in the United Kingdom to card fraud.
Anti-skimming: mechanical and electronic protection
But Europe's push to EMV appears to be motivating criminals to train their sights more strongly on the Federal Republic of Germany. Industry estimates now suggest that ATMs play a role in about 15 percent of all cases of identity theft. Up to now, banks have shouldered the losses. Now the losses are too great for the banks to continue to bear the financial load.
A customer's PIN can be stolen using a commercially available mini-camera hidden in a fire alarm, light box or brochure rack. The card data can be read using a skimming device, with the captured data and PIN mailed or sent by mobile phone to another country, where the information is used to plunder a cardholder's account.
Such crime sprees can easily cause losses in the high six-digit range.
Several offerings can protect cardholders at the ATM, however.
Some institutions prefer mechanical defenses. Common anti-skimming card throats prevent skimming devices from being attached to ATMs. These new throats are designed so that they cannot be broken or cut out of the machine.
Those types of throats are popular in Germany. In other countries, financial institutions tend to rely more heavily on intelligent sensors located inside the card slot that do not alter the appearance of the ATM. These sensors monitor signs of manipulation and sound the alarm if anything has been altered.
ATM video surveillance
New criminal tricks have also helped bring about a revival in the cash-out camera, which complements surveillance with portrait and room cameras.
The tiny cash-out camera, positioned at the height of the output slot, has two functions. First, it records attempts by customers to defraud the bank by removing only part of a bundle of notes (causing the rest to be deposited in the reject tray). Second, it is an effective antidote to cash trapping, also known as reversal fraud.
With cash trapping, the output slot is obstructed so that customers making cash withdrawals cannot take their money. The trapped cash is then removed later by the criminal. Now with integrated image-recognition software, FIs are alerted as soon as an obstruction mechanism has been mounted on the ATM. The ATM is then shut down by the FI or operator.
But what about other types of scams, such as those that involve a group of fraudsters who work to distract an ATM user?
The remedy to that type of fraud is a security area around the ATM, one that is constantly monitored by a camera. If someone enters the zone, a warning appears on the ATM's screen. The customer can then assess the situation and decide whether to break off the transaction or complete it.
What about fraud that moves beyond the physical? Standard operating systems are gaining a growing foothold in network operations, meaning that ATM networks have become gateways that are easy to open, thus allowing criminals access to sensitive customer data. The result is a huge increase in the risk of unauthorized access.
Wincor Nixdorf, for instance, has developed virtual private networks that securely protect branches and host systems against data interception and internal misuse. Because it works on the principle that anything that is not explicitly permitted is forbidden, an attack, no matter how ingenious, cannot unfold.
A further step toward enhancing the security of transactions is the Secure Cash Out Procedure, which prevents cash from being withdrawn if there is an internal attack or if a trojan is infiltrated from the outside. Cash is dispensed only if data has been exchanged between the bank's host system and the cash-out application and the transaction has been approved.
Ink staining on the rise
FIs' and off-premise operators' ATMs in Germany and other countries are introducing ink staining (also called maculation) at the ATM. For a long time, this approach met with a lukewarm response; but an upswing in ATM violence has brought about a change of heart and provided the impetus for refinements in maculation technology.
The staining process can be triggered not only in response to blast waves or a change in location, but also if and when criminals weld open the rear panel of the ATM. Admittedly, the greatest protective effect offered by maculation is deterrence.
Stolen cash amounts are declining, and the number of attacks on branches and ATMs is stagnating in some areas. But theft activities are simply shifting to another stage. Cash-in-transit operators are targets more often than they were in the past. To combat that type of crime, locating systems based on mobile communications complements security mechanisms in cassettes, attaché cases and cash boxes.
Using GSM mobile phone technology, which has been introduced in more than 130 countries, a security center can precisely track criminals. If the microphone is activated remotely, security forces can even hear what the thieves are saying.
RFID chips: total control
Contactless radio frequency identification tags are expected to offer a new dimension of security. According to the latest RFID Report by consulting firm Eurospace, RFID technology will be used in marketing and distribution, as well as in tracking transports and vehicles.
The capabilities that RFID chips offer for logistics are being examined for the banking industry, since FIs and insurers want to pinpoint the location of the cash being transported. Errors in replenishment processes and the transportation of cash cassettes can practically be eliminated.
Wincor Nixdorf estimates that up to 2 percent of replenishment operations for cash cassettes are carried out incorrectly: The cash volume in the cassettes is recorded incorrectly, the cassettes are mixed up or the cash simply disappears en route.
Centrally monitoring the ATM network
Financial institutions should take proactive measures to protect their overall networks. To that end, they need to understand risk factors and revealing fraud patterns. For example, a certain number of aborted transactions may indicate that preparations for manipulation are under way.
Thieves, driven by their high level of criminal energy, are always a step ahead, however quickly the forces of law try to keep up with them.
Monday, 21 January 2008
For the last several months, I’ve been collecting and reviewing news reports about the world’s migration toward EMV compliance — the smart-chip-card standard that Europay International, MasterCard Worldwide, Visa International collaborated in 1999 to create.
EMV isn’t new, but it continues to garner its fair share of media attention, and a number of software-testing vendors in the ATM space have taken an interest. So, I like to keep an eye on how the migration is developing, all the while wondering if and when the United States will make a move.
Snap: If you’re a retailer or banker, don’t sigh. The United States doesn’t appear to be making any movement, and Visa and MasterCard aren’t expected to put any pressure on card issuers and retailers anytime soon.
Canada’s migration to EMV has reportedly progressed smoothly. A number of factors, including experience gained from the United Kingdom’s migration and the fact that Canada has one electronic funds transfer network, Interac Association, have contributed to Canada’s success, says Ian Kerr, chief executive of England-based Level Four Software Ltd.
Level Four is working with banks in the United Kingdom, Canada and other parts of the world as those countries make the move to EMV. Other companies, such as Canada-based Phoenix Interactive Design Inc. and United States-based ACI Worldwide Inc. also are working with financial institutions throughout the world to help reach EMV compliance.
And as more domestic migrations occur, they begin to move at an accelerated adoption pace, simply because the industry is learning as it moves along.
“In the U.K., the testing piece was the last thing we did,” Kerr said. “We learned from that experience, and it's a lesson we’ve been able to use when we move toward EMV in other countries, like Canada. Now we test earlier.”
In fact, Canada’s success thus far bodes well for meeting the compliance deadline of 2012. Unlike the U.K., where the 2006 deadline was missed by banks and retailers alike, Canada appears to be on target.
Mexico’s EMV compliance deadline was the end of 2007. I guess we’ll soon hear how that country fared.
So where does that leave the United States? Well, somewhere in the middle, literally.
Contactless and EMV
We see more of a push in the United States for contactless payments. MasterCard this week announced that First Hawaiian Bank ($12.5 billion in assets) is issuing its PayPass debit card, which Giesecke & Devrient is providing.
G&D specializes in smart cards. To date, it says it has supplied more than 10 million contactless payment cards to U.S. banks, and 2008 is expected to be a year of contactless growth in the United States.
MasterCard Worldwide also sees opportunity for its PayPass cards, which now total 20 million, along with 80,000 merchant-acceptance locations, in 20 countries.
In 2005, the Smart Card Alliance recognized Chase Bank USA for its innovation in the contactless space for the issuance of its “blink” credit card. Chase was recognized because its “blink” introduction marked one of the first innovative moves in the U.S. payment card space in more than a decade.
“We expect a huge change in smart cards used in payment applications between 2004 and 2010 and that will be driven by take-up of contactless payment cards in the United States ,” said Karthik Nagarajan, senior analyst for Frost & Sullivan, in “Americas Smart Card Market Analysis,” 2005.
There’s no question that fraud spurred the push for EMV adoption in countries throughout the world. Credit fraud has long been a problem in the United Kingdom. After the introduction of chip and PIN in 2004, the U.K. reported a 25 percent drop in card fraud within two years. The replacement of the easy-to-copy mag-stripe is to thank, according to the U.K. payments association APACS.
And while some recent industry reports have questioned how effective the smart chip will continue to be at curbing fraud, there’s little question that it’s more secure than the mag-stripe.
The same can’t be said for near-field communication, on which basic contactless cards are based. Radio frequency identification, which is typically used, has been challenged by a number of industry experts who claim it can easily be intercepted. While some argue that RFID transmissions can be encrypted like any other type of communications frequency, the mere openness of it all has left many skeptics unsatisfied that the technology is safe.
And though the technology that governs RFID and smart chips is, on a basic level, the same, the RFID chip fundamentally differs from the smart chip, which in and of itself is a mini-computer, capable of sending and receiving transmissions. The RFID, on the other hand, is very basic and dumb, only capable of receiving messages.
So, the United States is expected to continue down its road of contactless adoption, a stage that was set a few years back when Citibank introduced its “blink” card. But the move is a curious one, to say the least.
The argument against EMV migration in the States has largely fallen on the huge investment retailers and bankers would have to make. The costs associated with purchasing EMV-compliant POS systems and issuing EMV-compliant cards has made migration cost prohibitive, without having high card-fraud numbers nudging the initiative. But a move to RFID contactless puts a similar financial demand on retailers and bankers. POS systems must be replaced and cards must be reissued.
My question: Why are Visa and MasterCard allowing the United States to take a baby step when a leap makes more sense?
Tracy Kitten is the editor of ATM Marketplace.
Wednesday, 02 January 2008
It all happened on my first day at NetWorld Alliance.
I had just wrapped a new-employee orientation meeting and was making my way back to my cubicle when my cell phone buzzed. It was a text message from my older brother.
It said: “(J)Soy rod mrkm o contsta.”
I sighed. The message was obviously Spanish and my brother — an electrical engineer who works in the materials-handling business — had just spent several weeks in Mexico on an extended business trip. He arrived back in the States yesterday. No doubt he was now trying to impress me with that all-encompassing grasp of the Spanish language he picked up during the trip. My own Spanish vocabulary is somewhat limited (mostly to words describing products in the Mexican food industry) so I had no idea what it said.
I never replied, but I brought it up with my brother during a phone conversation that evening.
“I never sent you any text messages,” my brother exclaimed. “Which phone did it come from? My business phone or my personal phone?”
“The personal one,” I said. “The one with the 550- number.”
“No way,” my brother replied. “That phone is still in my suitcase. I never once took it out during the whole trip.”
Confused, he unzipped his suitcase and peered inside. Sure enough: the phone was missing. At some point during the trip — probably at the airport — some fiend had gone rummaging around in my brother’s luggage and stole his cell phone. Now the thief was sending text messages like a madman, possibly with the intent of taunting people on my brother’s contact list. There was no doubt that he’d soon be dialing all sorts of international calls — calls to Zimbabwe and Sweden and tiny little republics — all at my brother’s expense. There was only one thing to do.
Within minutes, my brother was calling up his service provider and cutting off service to the stolen phone.
There’s a happy ending to the story. The phone was cut off immediately and he wasn’t charged for the text messages. Thankfully he discovered the phone was missing before the thief was able to use it to organize resistance leaders on distant continents wanting to rebel against the high cost of paper clips. No big losses, other than the cost of the phone itself.
But the incident did give me pause.
As the self-service industry veers closer and closer to the concept of mobile banking, there’s going to have to be a fundamental shift in the way we view our personal wireless devices, such as cell phones, blackberries and PDAs. The core concept of mobile banking is that consumers will be able to use these devices to interact with ATMs, and to make wireless transactions. Taken to the next level, that could mean that the cellular phone could ultimately replace the credit card.
If that’s the case, then we’re going to have to treat our cell phones with the same care we treat our credit cards.
You wouldn’t forget and leave your Visa card lying in a stall in a public restroom. You wouldn’t let it fall between the seat and the center console of your car and you certainly wouldn’t loan it to a friend to use on a Friday night trip into town.
The same must hold true for our mobile devices. They’re not just compact wireless telephones anymore. They provide access to our e-mail accounts, our personal records — and soon — our bank accounts. They’re like tiny laptop computers that hang on our belts.
And like any other electronic device, they can be stolen.
That means the onus is on industry leaders to find new and innovative ways to block malevolent hackers from stealing cell phones and mining them for priceless personal data. It means that — as mobile banking becomes a reality — we educate consumers about how they can protect themselves against identity theft. And it means there has to be a clear channel of communication between ATM manufacturers, cell phone manufacturers, cellular service providers, financial institutions and ISOs — in short, all of the industries that are working together to make mobile banking a reality.
(J)Soy rod mrkm o contsta.