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The Perspective |
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Monday, 14 December 2009
Technology’s impact on business operations continues to transform managerial controls and measurement while providing for profitability enhancement opportunities. Technology in the retail environment has predominantly focused on point of sale systems that integrate everything from transaction accounting to inventory management. Recently, retailers and POS system companies are focusing on the integration of cash handling with the POS system.
More progressive retail operators have already replaced traditional drop safes with cash management system — which incorporates the traditional benefits of a safe, such as robbery prevention and time-delay-change funds, but also employs bill-and-coin-handling technology, as well as its own operating system. Today’s cash-management systems connect to corporate networks to facilitate data exchange and remote management.
Profitability enhancement
The cost of a CMS is very quickly recovered through the recurring savings garnered by the system itself. What initially may appear to be a “cost” quickly becomes a “profit generator” that produces annualized cash and non-cash savings. Typical systems pay for themselves within six to nine months, yet continue to produce savings indefinitely.
Retailers have found recurring cash savings in many areas. Specifically, internal theft is dramatically reduced; detection and rejection of counterfeit currency is improved; and armored car requirements are reduced. The latest and most exciting area of cash savings is now being gained through the retailer receiving “provisional credit” for funds in the CMS that have not yet been deposited at the bank.
Non-cash savings include a reduction of management time previously required to reconcile the transaction log with cash and preparation of bank deposits, as well as instant accounting and deposit preparation.
Deployment
Deploying a cash management system involves support and coordination among multiple departments, including finance, operations, information technology, security and loss prevention. And choosing the right CMS provider who can coordinate the physical and technological installation of the system can significantly expedite and smooth the process.
Each department should carefully consider features and functionality that will be required for a successful deployment and utilization of a CMS.
Below is a list, by corporate function, of features and functionality that should be considered or required.
Finance:
- Instant access to all information pertaining to cash in the safe
- Tools to access one or more stores and data, and place it in a spreadsheet
- Guaranteed deposit by CIT
- Provisional credit by the bank, with money deposited to the account, regardless of whether it’s picked up or still in the safe at the store
- Cut down on armored pickups, since credit is given by the bank
- Automated cash reconciliation – no manual counting
- Eliminate cash shrinkage by linking the safe and the POS
- Lower the cost of buying coins and notes by recycling both
- Lower the cost of coins by not buying coin rolls; use bulk bags
- Elimination of cash counting at the beginning of the shift
- Where cash rooms exist, eliminate 90 percent of the labor
- Cost of annual software maintenance (get a five-year quote)
- Cost of annual hardware maintenance (get a five-year quote)
- ROI for any investment should be less than 1 year
Operations:
- Eliminate cash shrinkage by linking the safe and POS
- Balance each transaction between the safe and the POS
- Simple computer-based training provided
- Operate in the native language of each cashier to eliminate errors and make the system easier to learn and use
- Dispense flat notes that are easy to handle instead of rolled up notes
- Auto dispense each till (no cash-room counting) at start-of-shift
- Auto bank-out of each till (no cash-room counting) to end shift
- Speed time for cashiers to clock in and be on the lane
- Quick access to cash to replenish tills with coins and notes
- Eliminate counterfeit notes while customer is present
- New notes are validated the day they come out by updating the note validators over the network — no delay waiting for updates
- Totally eliminate cash counting and get deposit guarantees from CIT
- On-site service call by next business day at a minimum
- Help-desk diagnostic tools to help solve technical issues
- Highly qualified service organization capable of analyzing the network
IT:
- Must run an industry standard operating system, such as Windows, and use XML
- Must have the ability to plug and play over the store’s Ethernet network
- Tools included for data collection over the network
- Report-writer tool for creating and changing reports
- Modern hardware architecture, easily told by integration (one power cord)
- Must interface with POS at transaction level to stay in balance
- No programming required to create a total CMS environment
- Update CMS application over the network for new releases
- Up-to-date note validators over the network when new notes are released
- System diagnostics for help desk to support store personnel
- Supplier has 24/7 help desk to support customer help desk or store directly
- Hassle-free system that will not take IT resources to manage
Security:
- Must interface with store’s alarm systems
- Must interface with store’s camera systems
- Must support a transaction log for up to 90 days so events can be analyzed and then used to search camera videos
- Eliminates chance of an entire safe getting stolen
Loss prevention:
- Balance every transaction with POS
- Automated cash reconciliation (no cash counting)
- Cashiers check in/out tills with no management assistance
- Time-delayed access to all vaults
- Additional vault for storage of change or high dollar items
- Instant access to note validators for CIT guards
- Audit trail to balance every penny of every cashier
- Audit trail for all transactions for past 90 days
- Eliminate counterfeit notes
- Updated note validators over network when new notes are released by local government
- Guaranteed deposit by CIT company
- On-site repair service by next business day
Implementing a CMS solution is a decision that will impact your company from top to bottom. Each department’s needs must be considered early in the process. When evaluating potential CMS suppliers and their systems, you should prepare a checklist that addresses all of their unique needs and use this checklist during your information gathering and quote processes.
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, 19 October 2009
The average credit union member is 49 years old and is likely to be a very loyal customer. But credit unions need to do a better job of attracting new, younger members, says Karen Morgan, executive vice president of San Francisco-based oFlows Inc. OFlows works with credit unions to help promote paperless transactions — pushing more “green” operations.
“The credit union industry needs to do a better job of explaining to members what the difference between a credit union and a bank is,” Morgan said during her opening presentation at the Credit Union Services & Products Forum in San Diego. “They need to develop campaigns that get the word out about what they have to offer, and they need to do a better job of appealing to a younger audience.”
Are credit unions actively driving traffic to their Web sites, and is the user experience on those sites enjoyable? And what about mobile banking? Are credit unions exploiting the mobile channel?
Those were some of the questions Morgan asked of the 80 or so credit unions represented Monday during the forum’s opening day. Unfortunately, a lot of credit unions have not been able to successfully appeal to a diverse membership and attract the 18- to 35-year-old age group, while not turning the 45- to 54-year-old age group away.
One misconception younger consumers have, Morgan says, is that credit unions have too few ATMs and branches. In reality, because of cooperative alliances, such as shared branching and on-us ATM transactions through co-op arrangements, credit unions actually offer more convenience than some of the nation’s largest banks. But credit unions are not getting the word out.
“Credit unions actually have the largest ATM networks in the United States,” Morgan said.
Leading credit union ATM networks, such as Co-Op Financial Services’ Co-Op Network and Credit Union 24, have large ATM networks. The Co-Op Network includes surcharge-free member access at 28,000 ATMs in the United States, and Credit Union 24’s network includes more than 100,000 ATMs nationally and internationally.
“We need to promote the fact that we have a far-reaching network,” Morgan said.
Marketing will be key for credit unions going forward, she says, as will enhanced technology.
I, too, gave a presentation yesterday about the need for credit unions to enhance their self-service channels and optimize their branches with more assisted self-service. Many conference attendees seemed reluctant to see the need for the leap.
But attracting younger members, or even unbanked consumers, will require a different approach — whether it is through stronger collaboration with retailers and ISOs for more off-premises deployments that offer advanced functions or through more mobile marketing.
Morgan says catchy marketing campaigns, such as the slogan oFlows helped one of its credit unions in Colorado develop, “ATM Fees Really Suck,” are going to garner attention among younger age groups. She also suggested that mobile campaigns, such as the ATM-locator SMS/texting campaign that some of her credit union customers promoted last year, can make a big difference.
After launching the “ATMATM” texting campaign, participating credit unions, Morgan said, immediately noticed an uptick in ATM transactions. The texting feature was quickly adopted by younger members.
Also, credit unions that launched campaigns that appealed to younger users, such as the “ATM Fees Really Suck” campaign, did notice an increase in new members between the ages of 18 and 35.
“We were able to increase assets for our credit unions as a result of these campaigns,” Morgan said.
Delivery channels need to be interactive and consistent, and technology will play an ever-increasing role — whether through self-service or the mobile channel. Morgan and I agree on that front.
More users, regardless of age and gender, prefer online banking. Making the leap to mobile banking won't be so difficult, since smart phones allow mobile browsing — the online and mobile experiences are similar if not the same.
And on the self-service front, basic transactions, such as cash deposits and cash withdrawals, can be moved to a self-service device very easily. I suggested during my presentation that even more complex transactions, such as funds transfers and bill payments also could be moved to the self-service channel — freeing tellers for more complex transactions and up-sell interactions with members.
Deposit-automation technology is the gateway to a whole host of new transactions. And the green element cannot be ignored. By removing envelopes from the transaction, credit unions improve efficiency and reduce paper. It’s something members, especially younger members, will appreciate.
No one wants to bank in an environment perceived to be outdated or boring. To stay ahead of the curve, credit unions will have to be savvy and show their members that they can be cutting edge.
Monday, 12 October 2009
Mobile banking is the next major, logical step in retail banking. And the exponentially increasing adoption rates prove its growing popularity. But how ready are financial institutions to choose a mobile-banking solution? Are they evaluating the options based on short-term knowledge of the technology, or do they truly understand the power this channel has to build and solidify customer relationships in the next two to five years? And have they truly considered what these new relationships can mean, not only to the customer experience but also to bottom-line profitability?
To truly understand, let’s take a look at a very real mobile-banking scenario: A consumer approaches an ATM to withdraw $200 from his checking account. His balance following this transaction will be $300. Because he has an auto loan from the same FI and also uses online bill payment, the FI determines that his balance will not cover his $325 car payment that is due in two days. A text alert is immediately sends a text message to his mobile phone to confirm he wants to proceed with the transaction, potentially saving him an unnecessary overdraft fee.
Never have financial institutions — or any other organizations for that matter — had a better opportunity to relate so intimately and relevantly with customers or members.
To fully grasp the impact, consider the long-term benefits of such an intimate customer relationship. Also consider the efficiency with which this relationship is delivered, when compared with other marketing efforts that can cost thousands of dollars with returns of less than 2 percent.
Today’s mobile-banking functionality represents merely a sliver of what the channel ultimately can do. For the FI, the mobile phone as a channel is really a proxy for the consumer. Wherever the phone is, the consumer also is. These days, half the world’s population is carrying a mobile phone.
So how can an FI best utilize this channel? The ones that will succeed with their mobile-banking deployment are those that use the channel for the purposes of timely, contextual and relevant messages to consumers.
How FIs capitalize on the mobile revolution
The real value in mobile banking goes far beyond simple account balance inquiries, transfers and alerts. Sure, there’s immediate payback to the FI in migrating these basic transactions away from costlier teller or call center alternatives, but the most important role mobile plays for FIs is in relationship building. It’s in integrating other delivery channels to give consumers new, value-added services and unprecedented convenience and control. It’s in providing a consumer a greater sense of security during an ATM transaction by authenticating the user. And it’s in facilitating payments as a means of avoiding a late fee or as an alternative to more expensive, less convenient options.
Channel collaboration
By leveraging existing ATM technology, FIs can capture consumer preferences and integrate that data with back-end customer relationship-management systems. Marketing offers, for example, can be timely, in context and immediate — all of which is enabled by the nature of the mobile channel. For that reason, it is possible to achieve double-digit response rates that dwarf those of traditional direct-marketing tactics.
With marketing via mobile phones, there are many more data points that can be collected, which helps FIs customize their communications. These increasingly customized communications yield more intimate relationships. And this integrated, immediate approach helps FIs bolster service and promote cross-selling opportunities to consumers who rely on mobile devices and those who are underbanked or don’t have convenient access to brick-and-mortar establishments.
Facilitating payments
Mobile banking as a channel strategy allows FIs to provide value-added services in helping consumers manage their money. Consider the wallet-management philosophy that some FIs have applied as an extension to online banking. It provides consumers with seamless access to their finances, along with intuitive, tangible and direct control of their money through tools, graphs and interactive features that help track spending and other activity. Expanding this concept to mobile banking and the ATM enables a new service once only intended for the Web that can benefit consumers in how they use other delivery channels. Adding mobile banking to wallet management enables the immediacy factor and two-way text alerts to dramatically improve the service FIs provide to their most committed customers and members.
Offering new services
Person-to-person, or P2P, payments, which enable consumers to make and receive payments with one another electronically, is just one of the new opportunities FIs can offer to strengthen the consumer relationship. In the United States alone, account-to-account transactions are a $320 billion industry. Mobile banking allows FIs to provide this service more conveniently and less expensively than existing wire-transfer methods by sending money to an individual’s phone number. By leveraging existing technology, P2P transactions are conducted on a mobile phone and a code is sent to the intended party’s phone. The person is then able to go to an ATM, enter the code and receive the cash. The phone becomes the information conduit to make this transaction happen seamlessly, while the ATM allows the cash transfer to take place in real-time.
Enhancing security
An added security layer that mobile banking offers FIs and consumers addresses a high-profile area of vulnerability: skimming. For example, the end-user approaches an ATM to take out cash; he enters his PIN and instantly receives a text message requiring him to enter a one-time six-digit code at the terminal to complete the transaction. This consumer card-control solution utilizes one channel to protect what is happening in another. Other mobile banking security tactics include proximity-based alerts, which further mitigate fraud due to skimming. This innovative security software can validate the card being used at an ATM, as well as the location or proximity of the accountholder’s mobile phone in relation to that specific ATM. If the software can’t detect this relationship, the transaction is terminated.
Developing loyalty and profitability
Mobile banking provides unprecedented opportunities to build relationships with customers. It does this by delivering timely, contextual and meaningful messages in a very personal way. Mobile banking is a catalyst for developing a new level of loyalty and intimacy for FIs with their customers and members, and for building a new level of profitability. To achieve this, however, FIs need a partner that understands, shares and drives the same vision. An FI’s mobile-banking partner must have the expertise to implement and sustain a complete mobile-banking channel strategy and support its technology. But more importantly, it must understand the full potential this offering brings to FIs and consumers alike. Mobile banking truly is the next generation in banking.
Robert Usner is senior director for global market strategy and planning for Diebold Inc.
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, 27 July 2009
Much was revealed from a survey of European banks with digital signage performed this spring by digital marketing agency John Ryan. The company compiled the findings and presented them in a webinar last month entitled "Digital Signage in Retail Financial Services: What John Ryan’s European Survey Means for Your Bank.”
The panel for the presentation consisted of Paco Underhill, Envirosell founder and CEO, Mike Hiatt, former director of Wal-Mart's "SMART" digital media network, and Bob Steele, vice chairman of John Ryan.
Although many good points were made in the hour-long presentation and Q&A, there were three key points that emerged from the research and conversation:
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A John Ryan digital signage installation at Caja Mediterráneo.
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Insight #1: Early adopters are facing real challenges in creating, localizing, and managing content.
It seems that the enthusiasm for digital signage for European bank branches is there – the survey said that 90 percent have deployed digital signage or are planning to deploy soon – but the real challenge comes after the fact. Keeping content fresh, or “feeding the monster,” as it is sometimes called, seems to be causing the most grief for deployers.
“The very promise of this medium – the ability to narrowly target fresh and relevant messaging – is far more laborious than expected,” Steele said. “Even more banks would be using digital signage for in-branch messaging if they could find an easy way to do it.”
The reasons cited for not keeping content fresh were many: lack of tools, management systems not being Web-accessible, a lack of internal workflow systems and a lack of awareness about how to manage the medium.
Few bank branches are going to have staff whose sole task is to update the digital signage content. But there are other ways of keeping it fresh without extra personnel.
Steele talked about the Japanese bank Toyota Financial Services, where kiosks were put in place that encouraged female patrons to share their views on family finances. Responses are dynamically posted on the media wall behind the kiosks. Thus, the content is always fresh and completely user-generated.
Steele also mentioned some other ways to easily update content: link to the Web so that updates automatically update screens; Use weekly sales results to determine what promotions appear in the content; Provide portals for segment managers to update templates specific to their branch or segment; Use content from external news sources, but be sure to visually render them in your brand format.
Insight #2: Relevance is the new king.
The word “relevance” seems to be taking over “content” in the digital signage cliché “Content is king,” and rightfully so.
“At Wal-Mart, when we tested more relevant content, customers responded favorably,” Mike Hiatt said. “Even the most simple use of context helps patrons understand that the content is specifically for them, and it’s not broadcast TV. Content is something they can act on.”
So what is relevance? According to Steele, it’s the result of putting marketing analytics to work in the branch for the first time. In other words, banks can now take action on improving in-branch communication based on what their customers want.
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Signage over ATMs at Caja Mediterráneo.
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He cited the example of Caja Mediterráneo, which offers its Channel CAM network in 500 European branches. However, no two branches play the same content and each branch can control what is shown locally. Messages are displayed in any one of eight different languages, depending on the location. About 70 percent of the content is public service information, such as local employment and real-estate listings. The rest is bank promotions and brand messages, and most of that is based on individual branch sales performance from the previous week.
Relevance isn’t just about the content, either. It can also come in the form of screen placement within the branch.
“When we consider relevance we also have to think about where and when content will seem most relevant to the bank customer,” Paco Underhill said. “We have recognized customers are actually more receptive to messages after they have accomplished their mission at the branch. One of the classic issues with marketing messages is to recognize that the journey from the back of the branch to the front is often one of the most important places to communicate.”
Insight #3: Digital signage represents strategy from the top down, but the tactics have to come from the floor up.
This is a two way street for the bank executives who pull the trigger on a digital signage network and the managers and employees who have to run them. Branch employees have to embrace the technology when it is installed.
“One of the issues with digital signage is getting the branches themselves to buy into the larger concept,” Underhill said. “They need to see that the screen isn’t something that is given to them from on high, but is a fundamental, essential part of their business.”
On the floor level, Underhill says that branches need to work to be a place where the bank and the customer can touch, and digital signage can help facilitate that. He says that especially in this economic climate, banks need to “Recognize the role of the branch in the financial education of its customer base. We need our customers to be more sophisticated and in tune with what the idea of money is and what the management of money is.”
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, 26 May 2009
Since the inception of Check 21 in October 2004, adoption of remote deposit capture has been steady among financial institutions that cater to business customers.
According to Celent, 75 percent of all U.S. FIs are expected to be remote capture-enabled by the end of 2008. With the rapid and widespread embrace of commercial RDC, many financial institutions are interested in exploring the new frontier of this capability: consumer remote deposit capture.
Technologies are now available that enable FIs to securely process checks sent via ordinary scanners, thus opening the doors to RDC for consumers and small business owners. On this front, Celent says that 7 percent of FIs report already having either a complete solution or a pilot program up and running; meanwhile, 15 percent report plans for a consumer RDC solution and 22 percent say they would consider such a solution.
For many FIs contemplating this offering, questions still abound. To determine whether a consumer RDC program is right for your institution, and to ensure a smooth execution, a few key steps should be followed.
Identify your customer base
To assess the potential for success with a consumer RDC program, it is important to first evaluate your existing customer base, as well as potential new customers. For customers acclimated to off-hour banking solutions such as online banking, or for those who live far from a branch, consumer RDC could be a welcome offering. Evaluating your customers can also help you analyze overall risk and define the ideal customer to target in your marketing efforts.
Qualify your customer base
Diligent "know your customer" policies are extremely important in consumer RDC programs. While advanced safeguards are incorporated in the software developed for these programs, mitigating risk lies largely in the hands of the FI. Take inventory of the risk management controls that are currently in place at your institution, and consider a risk strategy designed specifically for a consumer RDC program. First and foremost, you'll need to set criteria to determine a customer's eligibility for this offering. For example, prerequisites for access to a consumer RDC application could include good credit and a long and positive history with your institution.
Take inventory of your security and monitoring capabilities
As previously mentioned, consumer RDC software solutions should include security features that allow your FI to control the flow of remote deposits in real time and customize the security criteria. This ensures that any deposits submitted for processing that do not meet the set standards are flagged and held until cleared by an authorized employee.
The crucial element then becomes identifying designated and qualified staff to monitor and control the software. Smooth deployment depends on your employees' understanding of and adherence to all protocol related to your RDC program.
Deploy your consumer RDC program
The final element of a successful consumer RDC program is smooth integration of the application into your FI's existing system. The key to a seamless inclusion of a consumer RDC program is that the software is easily installed and integrated into other back-end processes. Furthermore, the application should be easy and straightforward for the end user to encourage adoption among your target customers.
As the most rapidly adopted technology in the history of the financial services industry, the potential is there for remote deposit capture to become a successful consumer application. As with any new technology, before considering a consumer RDC program for your institution, several factors must be taken into consideration. With a firm understanding of your institution's customer base, risk controls, employees and, last but certainly not least, the technologies and processes through which you plan to execute the program, a successful consumer RDC program launch is within reach.
Robert MacMahon is senior business development manager of payments and imaging solutions for Diebold ImageWay, the deposit automation and imaging division of Diebold Inc.
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, 17 March 2009
The following is an excerpt from 2009 ATM Future Trends Report: A comprehensive look at the ATM industry over the next five years, published by ATM Marketplace.
As ATM Marketplace unveils its latest edition of its Future Trends report, a variety of factors are accelerating and enhancing the financial services environment. Notably, consumers expect ubiquity in touchpoints and an ability to engage in a relationship with their financial institutions.
To make them available, financial institutions need to implement a merged-channel strategy that combines online, mobile and point-of-service options, such as the combined power of ATMs, kiosks, call centers and branches. Choice, speed and flexibility are now merely the price of admission, while multi-channel is the next hill to climb for those who want to maintain and acquire new customers over the next decade.
These factors are bringing rise to a number of new trends.
- Software-as-a-service (SaaS) will become more important in providing organizations with cost-effective, secure and highly available applications for online and mobile channels via hosting. SaaS enables banks to keep pace with the latest innovations and consumer needs while executing transactions at a fraction of a bank’s start-up investment.
- Online and mobile banking, supported by the expansion of broadband communication access, are becoming more than mainstream; they are becoming a mainstay. Mobile devices and applications and their always-on convenience represent the biggest opportunity to reach a permanently alerted mobile and global consumer.
- Environmental responsibilities will need to be addressed through existing technological improvements and new innovation, such as two-sided thermal printing. Near-field communications (NFC) will help merge the experiences of branch banking, online banking, mobile banking and beyond, into the retail environment as a payment device.
Industries everywhere are rising to the challenge of serving customers when, where and how they want to be served. But simply providing alternative channels is not enough; consumers expect those channels to work together. Whether buying an airline ticket or paying their bills, consumers now move through their daily lives purchasing products, services and information through a variety of channels. More often than not, they will begin a transaction on one channel and complete it using another. Increasingly, people now have flexibility and expect it in whichever channel they use, based on personal preference, the nature of the transaction and the time and location of the service they need.
Consumers will choose financial services providers that empower them to manage their lives through such options. Customers want a faster, easier and more personalized interaction with their bank. They want to bank when and where it’s convenient for them — whether at noon or midnight. Home or branch. ATM or mobile. Call-center or kiosk.
For financial institutions, this means their mobile banking experience must look and feel like their online banking experience, with applications that offer critical services on the go. Targeted product offers that are provided online must be in concert with offers delivered via the ATM channel. Consumers are moving too quickly and have too many other inputs in their lives to deal with fragmented marketing experiences that have no relationship to their needs.
The upside for financial institutions that do respond to more integrated approaches is enormous. The downside to those who do not is a future of reduced loyalty and a declining customer base. Banks that do not offer a rich merged-channel capability will fall behind the competition and risk their own relevance. We already know that the more touchpoints consumers have with their banks, the more likely they are to stay with those banks. A study carried out by Opinion Research Corporation found that 43 percent of consumers are more likely to choose a financial institution that offers multi-channel self-service. The uniformity of experiences and communications will make it easier and faster to interact with customers, whom no one can afford to lose. Institutions also can use channels to reach new customers that have been excluded from financial services through the traditional channel approach — an important opportunity in the current economic downturn to create new relationships and core-deposit growth.
As consumers turn to financial institutions for more choice in how they connect, interact and transact with a myriad of companies, the future is how banks will deliver a powerful, integrated consumer experience that builds customer loyalty.
William (Bill) Nuti is chairman and chief executive officer (CEO) of NCR Corporation.
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.
Tuesday, 03 February 2009
Self-service isn't just an 'outdoor' feature, when it comes to banks. Uwe Krause of Wincor Nixdorf explains how automated deposit can be brought inside the bank branch in a self-service - or assisted self-service - application.
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.
Cash is:
- Valuable
- Fee-free for consumers
- Tangible
- Carries certainty of acceptance as legal tender
- Settlement-immediate
- Free of credit risk
- A public asset regulated by the central bank
- Anonymous and cannot be tracked
- Easy to access and use
- Universal
- 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.
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.
Monday, 17 December 2007
Tim Burke, CEO of Electronic Art, regularly blogs about self-service on his company's Web site. The following column first appeared on that site here.
A recent NPR story talked about the use of a cell phone as an airplane boarding pass. Essentially, a message is sent to a passenger’s phone with a two-dimensional bar code, which serves as his boarding pass information. The ticket agent then scans the screen just as he would a paper boarding pass.
The use of a cell phone as a means of identification has big potential in the future. Imagine a kiosk or interactive digital sign being able to scan and recognize you by a bar code you were sent via e-mail. Or it may be able to recognize you via Bluetooth or similar technology. Imagine a kiosk that allows you to sign up for a program or service, receive a code via e-mail or SMS within moments and interact with the kiosk or purchase your product without cash or credit cards. This technology has a lot of potential uses and it is just waiting for companies to adopt it in an engaging way that provides real value to the consumer.
I recently became aware of a pay-by-phone service called MocaPay, which allows you to sign up for an account online and add cash to your account from your credit or debit card. You can then go to any merchant that accepts MocaPay and purchase with your phone. It works like this: You send an SMS to MocaPay with your PIN number, and it responds with a code number that is good for 15 minutes. You give the code to the merchant and walk away with your product. Your account is debited once you have used the code. The service doesn't cost you anything to use; the costs are charged to the merchant at a rate similar to a credit card transaction. Could this be the new Visa?
This young company is primarily targeting the early adopters who already embrace cell phones and SMS messaging. They are growing in U.S. cities with large college campuses, where this target market is ripe. They get the merchants and universities to sign up to allow this audience to purchase with their phones.
All great stuff, great ideas. Now we need customers and deployers to figure out when it's appropriate to integrate these tools for their projects. Could this be you?
Monday, 29 October 2007
Two financial institutions (FIs) sought to enhance customer service; one through self-service and the other through assisted-service. Both approaches enabled the FIs to reduce wait times for customers and free up staff time for higher value activities. For one credit union, it also saves space in compact in-store branches.
Self-service
BECU (formerly Boeing Employees’ Credit Union) in Seattle has moved to a self-service route. The largest credit union in Washington State with more than $7 billion in assets, BECU serves more than 500,000 members from 37 “tellerless” in-store branches.
These tellerless branches are half the size of a typical in-store branch, ranging from 350–400 square feet, yet fulfill all the functions of one. BECU has used self-service technology to allow it to fit more functionality into the smaller footprint it has available in many supermarkets.
Each tellerless branch consists of two workstations and an ATM, as well as a few Internet kiosks to demonstrate online banking, and a phone to reach the call center. The employees at these branches are consultants who cross-sell products, rather than tellers who process transactions. The consultants are available to service, educate and advise BECU’s members.
For example, if a member brings a deposit to the consultant, the consultant will teach the member how to use the ATM to make deposits. (If the customer doesn’t have an ATM card, the consultant drops the customer’s deposit into an “Express Box,” which is swept daily and processed in the back office.) If a member wants a balance transfer, the consultant escorts the member to the online banking kiosk, where the consultant teaches the member how to use online banking.
Consultants demonstrate the low-cost channels to members on a continuous basis, but do not directly handle transactions.
These branches represent what Celent believes to be one successful future path of in-store banking: They are designed to grow the customer base and then deepen relationships within that base.
Assisted service
First Citizens Bank in Raleigh, N.C., has 340 branches in North Carolina, Virginia, West Virginia, Tennessee and Maryland. The bank, with $16 billion in assets and 5,000 employees, has been piloting assisted service.
The new system provides an integrated assisted-service environment where customers use the ATM-like interface to “tee-up” their transaction. The teller completes the transaction by collecting the deposit or dispensing the cash. Typically, one teller alternates between two customer stations.
As part of the introduction to assisted-service, the bank created a concierge position within the branch to route customers to the appropriate area of the bank and explain assisted service. The concierge worked exclusively with assisted-service customers during the first 60 days of roll out at each branch. This was one key to the project’s success.
Initially, tellers and customers were concerned about teller job security. Customers had relationships with the tellers and did not want those tellers replaced by machines. Tellers were told that the technology helped reduce customer wait times and it allowed staff to migrate from transactional to service positions — all while maintaining First Citizens’ focus on customer service. As a result, customer feedback was positive.
Business results also were positive. Simple transactions were handled more quickly and staff was redeployed to higher value concierge positions. Now about one-fourth of all assisted-service-appropriate transactions are going through the assisted-service line. FCB’s goal is to drive this number to 60 percent.
The conclusion from both financial institutions is that self-service and assisted service can play a role at the branch. There are many ways to deploy assisted service, but to do it successfully requires people trained to assist the customers through this transition.
The author is a senior analyst for consulting firm Celent LLC's banking group and is based in the firm's San Francisco office.
Monday, 27 August 2007
Concern over high credit card fees paid by merchants is not a new issue, particularly for those in the convenience store and petroleum retail space. But now that you can use your credit or debit card to purchase a pack of chewing gum, a newspaper from a vending machine and rent a movie from a kiosk, retailers are increasingly paying attention to how credit card transaction fees can take a large bite out of the profit on small transactions.
The term “micropayment” originated with e-commerce and meant payments for items less than one cent as content providers were looking for a way to charge for page views rather than accept advertising. More recently, the term has been used to mean small transactions, typically a dollar or less.
iTunes, which charges between 99 cents and $1.29 for songs, bills customers on a weekly basis, presumably to aggregate charges and minimize interchange fees.
The brouhaha around small or micro payments has been the interchange fees, which is the fees charged by card issuers like MasterCard or Visa on each transaction. Interchange fee structures can be complicated, with a flat fee plus a percentage of the transaction based on several different factors. For small payments, the percentage is not the issue, the flat fee is.
Recently I spoke with Eric Hoersten, vice president of information technology for redbox, which rents DVDs through a kiosk for $1 per night at various grocery store and McDonalds locations throughout the U.S. He explained to me the challenge of a fee structure that does not lend itself to lower ticket items.
For example, if the fixed fee is 15 cents per transaction, it’s 15% of a $1 transaction versus .005% of a $30 transaction. And that’s not counting the percentage of the transaction, which can be an additional two to three percent. This can make charging for low cost items prohibitive.
Hoersten believes that more retailers would leverage a cashless transaction if the fees weren’t so steep. This is ironic considering that the major card providers are pushing for more of a cashless society. The move to contactless cards is one more way to make it easier to pay with cards instead of cash. Hoersten thinks that retailers want to go more cashless since handling cash has challenges of its own and in redbox’s case, they need that credit card number in case the DVD is not returned.
I asked Hoersten if he had any tips for other kiosk deployers who accept credit cards for small payments. He said that how you are classified by the card issuer is important since some categories have lower fees than others.
Other advice:
- Pay attention to the fees that are assessed
- Look at how these fees are applied
- Different types of processors can have different fees so search for one that has the best fee
- Have a comprehensive view of the situation before entering that market
- Interchange fees are “the deciding factor” for the category you’re in
He also pointed out that new technology and market conditions have lowered the cost. For example:
- New communication options exist, such as cellular or IP/internet-based connections, instead of the traditional costly and slow land line.
- Terminals and leased lines are cheaper than they used to be.
- There is a greater ability for companies to accept credit cards and set up a merchant account.
Hoersten says that the self-service industry needs to join in the fight to lobby for fees that are not as prohibitive. He holds out hope that interchange fees will go down or that card issuers will release a rate structure that is more accommodating.
“In the micropayments space,” he says, “every penny makes a big difference.”
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