FRAMINGHAM, Mass. – Member-relationship management considerations, along with anticipated federal access regulations and sheer popularity are all reasons for credit unions to consider Web-enabled ATMs, a new report says. "Since their introduction in 1986, automated teller machines have fundamentally changed the way that a majority of U.S. banking customers interact with their financial institutions," IDC analyst Ian Rubin writes in the report. "The volume of ATM transactions in the United States grows each year, and IDC projects that by 2002, the ATM channel will overtake the branch to become the highest-volume U.S. banking channel, with more than 13.1 billion transactions," Rubin writes in the report titled "Web-Enabled ATM's: Implications for Online Banking and Multi-Channel Delivery." Meanwhile, Internet transactions continue to grow, in fact at a faster rate than ATM use, and it's the combination of the two that make a compelling argument for considering Web-enabled ATMs, Rubin argues. "Not only has the Internet evolved as a strategic delivery channel, but Web-based technologies have begun to impact the entire banking delivery system," Rubin writes. "The availability of Web-enabled ATMs signifies a cross-pollination between online banking and the ATM, with implications on banking, customer-relationship management and customer acquisition strategies." A core strategy could be sheer compliance, Rubin stresses. "New ATM accessibility requirements under the Americans with Disabilities Act . would require increased access for the disabled and is likely to include changes to physical ATM design (including machine height, Braille translation for its menu selection, key depression sensitivity, and the force required to withdraw a card from the card slot) as well as to voice-guidance solutions," he observes. Meanwhile, new machines or retrofitted old ones also would be required to meet new card encryption standards being developed by MasterCard and VISA and expected to be in place by 2005, Rubin says. Together, that could have a big impact on the installed base of more than 275,000 ATMs in the United States, a number that some industry observers feel has been approaching its upper limits. Costs to refurbish existing machines or buy new ones vary widely and can easily run to $50,000 each. Hardware, software and telecommunications considerations also will impact the decision to deploy. One thing that will help is the breakdown of the proprietary order of things. In other words, open systems. That allows plug-and-play options, of course, and something else: competition. "The evolution of open machines that offer interchangeable software and peripherals allows compatibility between machines of different vendors," Rubin writes. "Not only does this significantly decrease the cost of fleet support, but it also allows financial institutions to be less reliant on their traditional vendor. . The incumbent vendor is no longer ensured success," he writes, adding that he knows of one large East Coast bank that allowed eight firms to bid for its Web-enabled ATM business. The bottom line: Rubin concludes that Web-enabled ATMs will be another channel for consumers, but not at the cost of eliminating others. "IDC does not anticipate that Web-enabled ATMs will have a material change on how consumers use other channels," he writes. He says it would be "unwise . to justify an investment in a Web-ATM strategy by forecasting large-scale branch closures or significant reductions in branch or call center personnel, the very rationale used to justify early Internet banking investments." Consumers clearly prefer access to many retail channels and a Web-enabled ATM strategy "has its own success path," Rubin writes. To stay on that path, he recommends that financial institutions keep a focus on brand, location and the "killer app" of cash dispensing, and then consider the cross-channel implications. Bill payments, check re-ordering and other functions could take place on a Web-enabled ATM, as well as credit card, insurance and brokerage business, he observes, and the planning process likewise needs to be cross-departmental within the enterprise. "There is a very long list of issues – from technology to politics – that make a multi-channel strategy a challenge from the outset," Rubin concludes. "Federal regulations on ATM accessibility may be the final push to get behind Web-based ATM's, and Web ATM's may be the logical place to reignite multi-channel efforts." -

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