A1FCU ATMs Going Triple DES, IP In One Fell Swoop

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Credit unions racing to upgrade ATMs are often killing two birds with one stone, switching to Internet Protocol (IP) for communications as they hustle to meet upcoming Triple DES standards.

One of those credit unions is American 1 FCU. The $175-million CU has converted four of a total of 10 branch-networked ATMs to communicate via IP, according to Dave Lewis, field engineer at American 1.

The CU aims to switch over the remaining six ATMs by year end 2005-a Triple DES (Data Encryption Standard) compliance deadline for many CUs.

American 1, like every other CU running ATMs, has no choice upgrading to Triple DES. MasterCard International Inc., VISA U.S.A. Inc. and associated network providers have mandated that all host and processors make machines compliant by December 2005.

Triple DES is an encryption method that aims to improve PIN security, encrypting and decrypting PIN information three times upon transmission and receipt by the host.

But American 1 wanted more than compliance to show for the trouble of upgrading. The CU also wanted to save money at the same time by eliminating third-party communications circuits and charges.

IP can do that, according to Lewis, who places, maintains and builds parts for American 1's ATM fleet.

"The biggest driver of IP for us is that we can send ATM traffic on our existing T1 LAN/WAN. We're paying close to $200 per ATM per month to our intercept processor for a telecommunications circuit. By enabling IP on our ATMs and running them on our own network, we eliminate the additional circuit and our costs go down to $25 per ATM per month."

American 1 is not alone-IP is hip in the credit union ATM industry, according to Woody Alderman, president of Atlanta-based ACG, a firm that refurbishes and sells previously deployed ATMs to community banks and more than 200 credit unions.

Up to 15% of ATMs leaving ACG are IP-capable, Alderman added. He expects the demand for IP-capable ATMs to grow.

"Credit unions and banks should be making requests for TCP/IP," Alderman continued. "The networks are happy to continue along as is, without TCP/IP. In most cases the networks are involved in selling the data lines to the customers. These sources of revenue for the networks disappear with TCP/IP."

Last month, The Credit Union Journal reported that Anheuser Busch Employees' CU (ABECU) also spent significant time and money converting to Triple DES and IP. Over the past two years, ABECU fed about $200,000 to its fleet of 38 ATMs to enable Triple DES, IP and intercept processing, according to Calvin Curdt, vice president of Information Systems.

Indeed, IP-capable ATMs aren't cheap for American 1, either. The move to IP cost $15,000 per ATM for new hardware and software, Lewis said.

Fortunately, a conversion kit fit the bill for some of American 1's ATMs, bringing down costs to $2500 for 3 of the 10 ATMs slated for conversion, he said.

In the long run, IP-capable ATMs will not only cut costs for the 43,000-member CU, but will also speed up transactions, Lewis added.

"IP is measurably faster, if you know what to look for," he said. "IP will save a couple of seconds per transaction. You wouldn't think a couple seconds per transaction would help, but it will literally get people through the ATM line faster.

"And when an ATM was serviced, it used to take a minute for the software to go back up," he continued. "With IP, it takes five seconds."

Advanced marketing is easier with IP, adding to the protocol's appeal.

American 1 performs an average of 140,000 transactions per month on its fleet of 42 ATMs. Only 10 of those ATMs will run on IP, said Lewis. The remaining 32 are ATMs installed in grocery and convenience stores and run outside of the CU's IP network.

CUJ Resources

For more info: American 1 FCU www.american1fcu.or

SCG www.atm-remarketers.com

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