Diebold Sends New ATMs to the Cloud

Diebold Inc. has found a way to decouple the brains of the automated teller machine from the body.

The North Canton, Ohio manufacturer has developed technology to centralize its ATMs' computing power, thereby improving security and cutting ATM-maintenance costs for clients.

The "virtualization" technology uses the principles of cloud computing: instead of having individual hard drives, each ATM in a fleet is operated by a remote data center. Diebold unveiled the technology Monday at the VMworld 2011 conference in Las Vegas.

"It's all managed at the data center, which takes a lot of that variability out," Paul Mercina, Diebold's director of global software and services product management, says in an interview. "It's just a much more efficient model with this type of technology."

Diebold currently does not have any customers for its new system and is soliciting early-stage clients for pilots.

Mercina says Diebold plans to retrofit its current Opteva line of ATMs by replacing the machines' hard drives with on-board devices that will chat with a centralized computer.

Diebold's customers can operate the machines remotely or rely on Diebold to do it, Mercina says.

Such technology will be increasingly important as banks seek to standardize and improve the customer experience across banking channels, analysts say.

"From mobile to social to online and certainly ATM, or branch, you can't get this kind of consistency if the 'smarts' that determine each ATM's customer experience primarily resides with each ATM," says James Van Dyke, the president of Javelin Strategy and Research in Pleasanton, Calif.

But there are challenges, he adds. For example, Diebold will have to ensure that its new ATM technology can be integrated with its customers' other mobile and online banking applications.

"This means that Diebold must not only make their ATM experience great, but also make it easy for their banking clients to make that experience consistent with that of the other channels," Van Dyke says.

The cost savings is the most obvious, and immediate, benefit for retail banks, especially since "ATM executives have been trying to reduce the cost of the channel over time," says David Alvertazzi, a senior analyst who focuses on retail banking channels at the Aite Group LLC.

Retail bankers "are confronted with the fact that they need to manage the cost and the fact that they need to improve the performance of the machine — making sure it's always up and running, having better controls of the environment in terms of security," he says

Some bankers are familiar with similar types of technology. Tellers already operate in a remote computing environment, meaning that they manage accounts through screens that connect to a retail bank's network.

But there are few immediate benefits for consumers from putting the ATM's brain in a cloud.

"If it results in better uptime [maintenance] for ATMs, better cash forecasting and management, the consumer is less likely to see an 'Out of Service' type message," says Zilvinas Bareisis, a senior analyst at Celent. "But these are marginal benefits."