ATM Issues Dominate 2019

Credit union executives had plenty of things to talk about in 2019, but ATMs were undoubtedly one of the hottest topics. ATMs, after all, have become competitive advantages, operational headaches, revenue diversifiers and fraud targets all in one for many credit unions – especially this year. Here’s what had tongues wagging in 2019, according to two industry professionals.

Counting to 10

Converting to Windows 10 has been the credit union industry’s biggest ATM challenge this year, according to Doug Falcone, CEO of the Whippany, N.J.-based ATM Consultants. Support for Windows 7 ends on Jan. 14, 2020, and credit unions that don’t migrate their ATMs to Windows 10 by then could become targets for fraud and hacking, some experts warned. That’s forced many credit union leaders into tough conversations about budgets, timelines and other ATM priorities in 2019.

“It’s a very costly endeavor,” Falcone said. “It’s not something that the credit unions want to do – they have to do it.”

Many credit unions and vendors have been procrastinating, even though more than half of the ATM hardware out there will probably need replacing in order to make the move to Windows 10, he noted.

“Manufacturers are rolling equipment out the door as quick as they can. They’re all having a bang-up year,” he said. “This is a complete product refresh cycle for them because a lot of the machines don’t have the computer speed, space on the hard drive and so on to take Windows 10 upgrades.”

New Looks, New Features

The Windows 10 efforts in 2019 also prompted many credit unions to talk about rolling out new ATM capabilities that their upgraded hardware and software make possible, noted Terry Pierce, senior project manager for ATMs at the Rancho Cucamonga, Calif.-based CO-OP Financial Services.

“You’re seeing a lot more of the features of bill mix capability, for example, and the improved user interface,” Pierce said. “Some of the old ATMs look like the green screen; now there’s more of this updated feature where it looks more like your computer rather than the green screen. So I think we’ve seen a lift in how the ATM, the user interface and the experience has improved overall.”

“Our credit unions are getting to be on par with how the bank ATMs are looking,” she added.

Many were talking about branch transformation efforts and the associated increase in sophistication for many credit union ATMs in 2019.

“A lot of our credit unions are looking into diving into the ability to integrate video tellers within their ATM technology,” Pierce noted.

Fraud, Fraud and More Fraud

Even though the proliferation of EMV cards has helped cut down on fraud, issues with skimming and cash-outs continued to pester credit unions and their ATMs in 2019, Falcone said.

“As we get better with our technology, the bad guys find out a way to work around, because they work all night long to do this,” he said. Earlier this year, two ATM industry groups even called for stiffer sentences for ATM crimes after a joint survey found that well over half of the respondents had experienced a year-over-year increase in ATM fraud.

New for many credit unions in 2019 was presenter fraud, Falcone said. That crime typically begins by using a non-credit union card to withdraw cash at a credit union ATM. When the ATM’s finger-like presenter hands over the money, the criminal then takes only some of the cash. After a few seconds, the ATM notices that cash is still sitting in the presenter.

“It will then pull that cash back in – put it into a diverter in the machine, diverter cassette – and reverse the transaction,” he explained. The result is that the criminals get away with free cash.

That has prompted more talk about ATM camera technology and placement this year, Falcone added. “We always have to have a camera at the front of the machine, but now we install cameras looking at the side of the presenter – a very close-in, wide-angle lens, which is synchronized with the transaction journal so I know exactly what hand and who is standing in front of the machine.”

The Hazy Future of ATM Revenue

Managing member engagement with ATMs was also a hot topic in 2019.

A study by the Chicago-based Yes Marketing, for example, found that competitive rates and fees were the biggest draw to new a financial services provider for 42% of the respondents; 22% said it was the variety of services available. Only 13% of the respondents said the institution’s ability to protect member information would influence them to use a financial services provider they’ve never used before, and only 10% said the same for branch and ATM proximity.

Credit unions also paid a lot of attention to the effects of increasingly intelligent ATMs and the growth of independent ATM operators on revenue, according to Falcone.

Not too long ago, he noted, most ATMs were attached to branches. In turn, people who needed cash tended to seek out financial institution branches – even if they belonged to another financial institution and using the ATM meant paying an extra fee.

“It was a revenue source. They were making money. But now because the IAD / ISO industry put all of these 120,000 machines into gas stations, convenience stores and everywhere else, [it is] more convenient than going to a bank because I’ll pick up my lottery tickets, my coffee and so on, and I’ll still pay the same $2 to $3, whatever it is today,” Falcone explained.

“The banks are no longer that convenient place to go. If I go get cash in a bank, I’m only getting my cash. So that revenue switched from the credit union [or] bank P&L to the convenience store,” he said.