May 31, 2004

The use of ATMs for deposit transactions can save banks - which handle most deposits through tellers - money. So, financial institutions are exploring new ways to bring customers to ATMs.

The challenge is more acute because smaller regional banks are seeing a decline in ATM use for deposits, although larger banks are not experiencing the same drop-off. According to Alenka Grealish, manager, banking group, for Boston-based Celent Communications, customers avoid making deposits at ATMs because they believe the machines do not provide enough security in the transaction. The consumer perception that it is easier to stand at a teller line and deposit a check is another factor in the decline in ATM usage, Grealish says.

Reversing the Trend

But banks can reverse the trend, she adds, by making deposits at ATMs more appealing to customers. Features such as an image of the deposited check or a receipt for a cash deposit can entice customers to use the machines as something other than cash dispensers, explains Grealish.

"Overall, the smart banks - the ones that are really thinking about lowering costs - are trying to make the ATM more attractive for deposit-taking," she says. "Most consumers can be swayed to use the ATM, particularly if there is an envelope-less deposit, or if they get a copy of their deposit at the bank - it kind of gives them something tangible."

First Tennessee Bank (Memphis, $25 billion in assets) hopes Grealish is right. It recently installed Diebold's (North Canton, Ohio) Opteva ATMs equipped with Alogent's (Alpharetta, Ga.) ImageWay software, which allows ATMs to capture check images and transaction data and automatically process and route the envelope-less transactions through the bank's item processing system. The bank will pilot the ImageWay platform later this year.

According to Pat Smith, First Tennessee's manager of electronic banking, ImageWay's check imaging capabilities were the driving factor in the bank's adoption of the solution. "One advantage of check imaging is that it offers opportunities to overcome geographic and transportation limitations because it is no longer necessary to ship paper," says Smith. "Check imaging technology will allow new customer touch-points in locations more convenient for customers. This can reduce the cost of taking deposits as well as provide convenient banking to new and existing customers."

Though the bank has not yet seen a decline in ATM deposits, First National sees the implementation as necessary to prepare for an environment dominated by electronic transactions, says Smith. "We have not seen a major change in ATM deposit activity, but it is logical to expect a decrease in the number of paper checks as customer acceptance of direct deposit and electronic transactions increases," she says. "Customers will always need a convenient way to deposit that occasional check they receive even when most of their transactions are electronic."

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