As Triple DES deadlines loom closer, credit unions realize time is limited and costs are not getting any lower. It is no longer a matter of "if" ATMs need to be upgraded, but a matter of "when"-and when is now.
Upgrading an ATM or a fleet of ATMs leaves credit unions facing several issues, especially the burden of cost. But before the costs can be estimated, ATM functionality must be analyzed and decisions must be made on the machines' ability to receive the upgrade. Third generation machines, typically 15 years or older, are not upgradeable by the manufacturer. Therefore, credit unions must decide if their ATMs are going to be upgraded, replaced with newer models or abandoned.
New models include the Triple DES upgrade, but do not come cheaply. The price of a new ATM can weigh heavily on credit unions. An alternative, although not effective, solution is not to replace the old machine. Replacing the older machine with a refurbished machine complete with Triple DES upgrade can be a wiser decision. This can save credit unions $10,000 or more per machine. Refurbished machines from reputable companies are disassembled and rebuilt "like new" with all upgrades necessary, at half the price of a new machine.
Age Really Doesn't Matter
Regardless of an ATM's age or functionality, Triple DES compliance is required by the networks. The cost of upgrades can add up if a credit union has a significant number of machines in its fleet. Currently, manufacturer prices range between $3,000 and $4,000 for the Triple DES upgrade, which includes the software upgrade, required encryption pin pad (EPP) and installation. This price increases if the processor is not at a level high enough to handle the software changes. Although this price might be acceptable for one or two machines, when dealing with more than a handful of ATMs, the numbers climb and budgets thin.
To combat the inevitable costs of upgrades, third party solutions have been developed. These solutions are manufactured to be a hook up to the machine-a quick fix. Although cheaper, it may not be the right option for saving on upgrades. The manufacturers do not recommend these third party solutions, and the solutions may not be certified on the credit union's current network. There is always a question of liability on a product manufactured by one company added to a product manufactured by another. Therefore, the manufacturers will not maintain an ATM running with a substitute solution. Furthermore, with these solutions, on going upkeep of the machine always remains a concern.
Upgrading to Triple DES, whether a credit union uses the manufacturer's upgrade or an alternative third party solution, requires specific process models and the EPP. Without the EPP, it is not a true upgrade; and further, to drive the Triple DES software, an ATM must have a minimum level processor. Both Diebold and NCR require a specific processor to run the new upgraded software. If current machines have a processor other than what is required, this too needs to be replaced, potentially doubling the cost of the manufacturers' upgrades from $3,000-$4,000 to $6,000-$8,000. However, unlike the Triple DES software and EPP, the processor can be bought from a refurbisher company. A refurbished processor can save a credit union up to $1,000 per unit. When multiplied by the number of machines in a large fleet it can mean considerable savings.
Looking beyond the software and hardware required for the Triple DES upgrade, installation costs play a role in credit union decision making, as well. Credit unions need to weigh the options of alternative solutions to upgrades and installation. If a credit union has a large fleet of ATMs, it might make sense to look into self-service upgrades. This would include purchasing the Triple DES upgrade kits with the software and EPP from the manufacturer, then seeking the guidance and advice from a company that trains technicians to upgrade and maintain ATMs.
There are companies that have the ability to train credit unions' in-house employees to install the software, EPP and processor (if needed). Employees participate in a three- to five-day program of classroom-setting learning and hands-on workshops. They learn how to install the software and hardware needed to bring the machine live with Triple DES compliance. In turn, credit unions have the convenience of upgrading ATMs on their timeframe and can complete upgrades on multiple machines quickly.
While installing the upgrades in the field, the in-house employees have direct access to technical support from the company that did the training. This alternative solution is ideal for credit unions that are dealing with upgrading a large quantity of ATMs (more than 10). They pay for the software, hardware and the training, but save significantly on installation labor, processor upgrades and possibly ongoing maintenance costs. This training can potentially save credit unions tens of thousands of dollars on installation of Triple DES upgrades and maintenance on multiple ATMs.
Cost is not the only concern credit unions need to address-time is a major factor that must be taken into consideration. The manufacturers' turn around time for Triple DES parts has leapt from 30 to almost 75 business days, pushing the time of installation almost four months out from the actual order. Resources and manpower are limited, and as the deadline draws near not only will the demand rise, but prices will also be driven up and hours to complete the work will draw short.
The Two Primary Issues
Credit unions must deal with several Triple DES-related issues, but the main two should be cost and time. Although immediate attention is not drawn to the small items that align with upgrading, they too can add up and will only continue to stare at the credit unions as the April 1, 2005 approaches. Finding alternative ways to manage the costs of the requirements will make a significant impact.
Whether it is with the manufacturer or an alternative answer, credit unions need to evaluate their current ATM situation and reach a decision on the best solution. It is urgent that final decisions be made and actions taken. April 2005 may look like a far distance away, but after analyzing the situation, coming to a decision, ordering the solution and installation, it puts the upgrade completion barely under the line. And if the deadline is not reached, fines will be assessed, ultimately raising the price of the upgrade again. Credit unions must decide now what will be the efficient method for their individual Triple DES upgrades and move forward immediately to avoid unnecessary costs and ensure they receive the most cost effective solution.
Woody Alderman is the president of ACG ATM-Remarketers, a provider of custom refurbished ATMs and kiosks. He can be reached at 770-442-9800 or woody
