BAYTOWN, Texas — While ATMs are essential to meeting membership convenience expectations, the ownership and management of the machines — along with keeping pace with regulations and system upgrades — can be taxing.
"We were looking for a better way to manage our ATMs," said Community Resource Credit Union CFO Deena Smith. "Our process was inefficient."
The $340 million credit union, supporting 35,000 members, five branches and 110 employees, currently has 19 ATM machines, 13 of which are placed in varied area locations, including Lee College and at Exxon gas stations.
Back in 2006, Community Resource CU began working with Dolphin Debit, a full-service ATM management company that owns and operates ATMs for financial institutions.
Initially, the credit union managed its branch machines through a number of vendors and Dolphin Debit managed the off-premise ATMs.
"We started with Dolphin to put ATMs out in the communities that were convenient and in high traffic areas, which was phase one," said Smith. "Phase two was when regulations required us to replace or upgrade our ATMs, which is when we moved some of our ATMs to Dolphin's control. Lastly, phase three, now our credit union no longer owns any ATMs and Dolphin Debit manages them all."
ATM Outsourcing Trend
The decision to "get out" of the ATM ownership and management business was directly tied to the time, money and effort required to ensure efficient operations.
In 2012, for example, many financial institutions incurred substantial costs to upgrade older ATMs to meet ADA requirements, explained Dolphin Debit CEO Gary Walston. "The ongoing and unpredictable costs of ATM upgrades are driving the ATM outsourcing trend."
When Smith learned that a large capital investment would be required to ensure ATMs were upgraded to Windows 7 and would meet new EMV regulations, a decision was made to seek third-party solutions.
And while a handful of vendors were considered, the longstanding relationship with Dolphin Credit won out. "To upgrade all of our branch ATMs, we were looking at investing hundreds of thousands of dollars," said Smith.
Community Resources CU's President and CEO David Frazier, explained that the writing was on the wall. "With an aging ATM fleet and the ongoing regulatory changes we decided to get out of the ATM management business. By turning everything over to Dolphin, we reduced the cost of providing ATM services to our members, while improving service across the board."
While it was publicized well in advance, the sunset of Windows XP on April 8, resulted in Microsoft no longer issuing software upgrades or security patches for Windows XP. As a result, Walston noted that financial institutions may not be PCI compliant unless their ATMs are upgraded to Windows 7, or they take compensating controls to provide for security under Windows XP. To date, the company has more than 200 credit unions in 15 states outsourcing some or part of their ATM network.
"Issues and costs associated with upgrading ATMs to Windows 7 vary widely depending on the age of the ATM," says Walston. "The primary date for EMV compliance is October 2016, but the EMV upgrade process is intertwined with the Windows 7 upgrades because most ATMs cannot support EMV if they are running Windows 7 software."
Benefits Realized
While Smith could not correlate new members with the addition of ATM in the community, she noted that the credit union has realized a steady 5% year-over-year increase since the initiative was launched. Additionally, the three employees principally responsible for card services are now freed to handle other member facing tasks.
"There was a considerable amount of time for employees staying up to date with what was happening in the environment, but also juggling all the different contacts associated with the ATM," said Smith. "We had one vendor pointing to another vendor — it was hard to pin down were there issues were and how to get it resolved."
By working with one vendor exclusively, operations are streamlined.
"One of the benefits of working with Dolphin is having a single point of contact for all of our ATMs," said Smith. "Dolphin monitors each machine remotely and is able to respond more quickly, minimizing downtime." Previously, the credit union was usually notified of issues by members experiencing problems with the machines.
From a management and oversight perspective, Smith said it's a relief not to have to handle the myriad of tasks and operations related to ATM ownership and management. Savings include capital expenditures, the coast of upgrades, the cost of maintenance, the cost of cash handling and the cost of security.
While it varies for each credit union, Walston explained that transitioning time depends mostly on the ATM vendor.
"Dolphin Debit typically converts outsourced ATMs to its platform and performs compliance upgrades within 45 to 60 days of signing a contract." Smith concurred adding that Community Resource CU started the process in October 2013 and was finished by December.
"This transition has been seamless to the member," said Smith noting that the machines are also attractively wrapped with advertising and branding. "These 19 ATMs still look and feel exactly like they did before the conversion."
