ONTARIO, Calif. – Credit unions in the U.S. could face a price tag of $200 million over the next 18 months bringing their ATM fleets up to the standards mandated by new security policies and regulations, according to a new white paper researched by the CO-OP Network. CO-OP Network is the largest credit union-owned ATM network in the U.S. and counts roughly 50% of the nation's 20,000 credit union ATMs as participants, according to the CO-OP. That prominence keeps the CO-OP Network close to ATM developments in regard to credit unions. "The $200 million is a big number," said Jim Hanisch, vice president with the CO-OP, "but it should be put in perspective that between 10% and 15% of the ATM fleet needs to be upgraded in any given year anyway." "Every credit union ATM owner is facing both mandated changes and product upgrades that could cost from $1,000 to $35,000 (full replacement) per machine," the research paper found. "Using an average of $10,000 per machine, the credit union movement may face a $200 million upgrade opportunity over the next 18 months." The paper identified improvements in three areas as being the primary engines behind the need to upgrade ATMs: new security standards that require encrypting hardware and software, as well as new encrypting keypads in each machine and a requirement to include voice capability in machines in order to comply with upcoming regulations flowing from the American's with Disabilities Act. The new ADA regulations have not been published yet, but it is guaranteed that they are going to require a voice component, the white paper said. The industry should benefit from an increasing tendency among ATM manufacturers to build machines along a modular approach, the white paper observed. The modular approach allows credit unions to more easily tailor upgrade strategies without having to replace complete machines, the paper also noted. The paper recommended that credit union ATM deployers adopt different upgrade strategies for different machines in different locations. "[T]he upgrade strategy for an off premise cash dispenser is likely to be different than for a full function through the wall machine," the CO-OP observed. The CO-OP's paper discussed two broad approaches to ATM upgrades that credit unions could adopt as foundations of their own upgrade strategies: the strategy of using ATMs to replace tellers, provide full service, or as part of a branching effort and the strategy of using the ATMs primarily as profit centers. Credit unions that have ATMs that they want to be nearly full service outlets should consider some additional abilities that they could include in the already mandated upgrade, the white paper said. These might include the ability to deliver customized messages based on member profiles; customizing the ATM experience with member defaults like default accounts, default withdrawal amounts or common transaction types; allowing online access, loan applications or having a check imaging faculty in the ATM. The ability to image checks in particular, the white paper noted, may include upgrades to other parts of the credit union's system as well. Upgrades in this full service strategy will likely include building in a capability for faster transactions using a TCP/IP protocol, moving to a Windows operating environment and adding new check imaging software and hardware. Credit unions seeking to adopt a strategy for using ATMs as profit centers face a less expensive range of upgrade options, the paper observed. These can include building a capability for fast transactions in order to support the sale of products by third party vendors like ticket sellers, check cashers or telephone or other sorts of pre-paid card vendors, the white paper said. "Each ATM serves members and non-members alike. Since sites vary, a site based strategy should guide the investments in ATM upgrades," the paper wrote. "Multiple strategies may be used within the credit union based on ATM location. In this case, ATM product upgrades will likely be made on the basis of ATM location and desired functionality." The white paper also advised that the cut off age for deciding whether to upgrade or replace an ATM should likely be five years. -

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