Storm Clouds for the ATM Channel

A boat has been defined as "a hole in the water into which its owner throws money." Lately, operating an ATM has been akin to owning a boat needing a replacement engine - during a long stretch of cloudy days.

ATM usage has been on a downward trend, according to Bill McCracken, CEO of Synergistics Research Corp. (Atlanta), who was part of a lineup of speakers from both government and industry at a Washington, D.C., conference last month sponsored by NCR Corp. (Dayton, Ohio).

Downward Mobility

Overall, the average U.S. household conducted 57 ATM transactions in 2003, compared to 64 the prior year, according to a Synergistics consumer survey. McCracken expects this decline to continue, even as the total number of ATMs grows.

Furthermore, ATMs have hit a plateau in converting new customers away from the branch. About 58 percent of consumers in the U.S. use ATMs, and that figure has remained "relatively flat over the past five to 10 years," McCracken told the audience. The remaining population consists of 25 percent who have never used ATMs and a foreboding 17 percent who are former ATM users. Most of the non-user population cites a preference for working with the branch teller instead of an ATM, the survey indicated.

Not only have ATMs stopped gaining converts, but they have also begun to lose customers to the debit card. With four out of 10 debit card users receiving cash back at the point-of-sale, debit cards have become a "channel displacement product," McCracken said, adding, "This is going to continue."

Banks can respond by adding new features to their ATMs, especially those geared toward the heaviest ATM users, consumers in the 18-to-34 age group, according to McCracken. But the general population may not be as quick to accept enhanced offerings, such as coupons, movie tickets and mobile phone minutes. "Consumers view ATMs as cash dispensers," he noted. "Not only is all of the new technology and new functionality of ATMs being ignored, but its core functionality is being eroded."

Another possible approach is to do a better job of replicating typical branch activities on the ATM. For example, most customers have a greater sense of comfort making a deposit at a branch than at an ATM. The potential to capture check images at the ATM might assuage customer reticence with visual confirmation of deposits and the check image on the receipt. Also, ATM image-capture would allow the bank to send those check images to its back office for instant presentment under Check 21, the new check processing rules that take effect in October. "Check 21 may be the shot in the arm that the industry needs," McCracken said. "Consumers may adopt deposits if they receive images of the checks."

But the ability of ATMs to recapture the public fancy is not a foregone conclusion. Plus, even as the raison d'etre of the ATM has been questioned, new regulations and compelling technology issues have made it necessary to invest further in the channel.

Compliance Issues

To begin, ATM operators will have to ensure that their facilities meet the needs of the visually impaired and the disabled, both under the Americans with Disabilities Act (ADA) and any applicable state laws. "ADA does not encourage - but certainly permits - any state to have its own code or no code," warned Marsha Mazz, from the U.S. Access Board, an independent federal agency, speaking at the conference.

According to the draft final rule from the U.S. Access Board, at least one ATM at each location has to meet accessibility guidelines, including speech output under user control, tactual input controls and sufficient space and reach. What's more, two ATMs at opposite ends of a mall would be considered separate locations, as would the walk-up ATM and the drive-through ATM at a single bank branch. (This is for the convenience of visually impaired passengers, not drivers, Mazz noted.)

A newer operating system can help support these new functions. In particular, ATMs using the OS/2 operating system are ripe for an upgrade, since OS/2 is being phased out by IBM (Armonk, N.Y.). Although IBM has recommended Linux as a replacement, most banks have taken the Windows approach, observers say.