Advertising using ATMs represents a viable revenue opportunity, recent consumer research indicates. But pity the bank that makes its customers wait longer in order to pitch them at the automated teller machines.

"The consumer does not want to be delayed by this," says Ken Justice, global marketing director of Canton, OH-based Diebold Inc. "Whether it's on-screen ads or advertising that is printed on the receipt, it must be done in a way that is time-sensitive."

Synergistics Research Corp., an Atlanta-based marketing research firm specializing in financial services, talked to about 1,000 consumers to gauge their interest in various types of advertising delivered through ATMs. The telephone survey of consumers 18 and older, with household incomes of $15,000 and up, was conducted last summer.

It showed that a significant number would be interested in receiving coupons for general merchandise via the machines. A smaller but still healthy number say they would be receptive to ATM-dispensed coupons offering financial services.

Younger ATM users and those in lower-income brackets were most receptive to advertising and coupon dispensing at the terminals, Synergistics' research showed. "We also see strong interest in being able to renew auto registration and drivers' licenses at ATMs, as well as purchasing event tickets and postage stamps," says Synergistics' chief operating officer and senior vice president-research, Genie Driskill.

She says that bankers recognize ATMs have come to represent a "mature market" in recent years, and they're looking for ways to increase use of the machines for services other than cash dispensing. "We've reached a point today where the ATM is basically-in fact, almost exclusively-a cash dispenser," Driskill says. "Other types of financial activities at the machines are quite limited."

Consumers make deposits, for example, less frequently at ATMs today than they did a few years ago. That's due in large part to a steady increase in the use of direct deposit of payroll checks, not because consumers trust machines less than they once did. She says the number of consumers who report that they used ATMs in the past but no longer do so regularly also has been on the rise for several years.

"We see that segment increasing," adds Driskill. "Predictably, surcharging is one of the primary reasons but so is the growth in POS debit." With debit cards in hand, consumers find it easy and convenient to obtain cash back when making purchases from merchants.

"Because we're definitely talking about a mature market, I think the future of ATMs contains a number of challenges," Driskill says, "but our research indicates there are also some opportunities- strategies that will help deployers maximize their ATM networks going forward."

She cautions bankers that adding functionality to ATMs, whether enabling customers to purchase stamps or concert tickets, requires careful targeting. Not every ATM in a bank's network is likely to garner higher consumer usage based on the addition of functions other than cash dispensing, Driskill says.

She explains that the delivery of advertising and coupons will be most effective if the "area served by that particular ATM is taken into account." It's also important that "deployers" indicate clearly which of their ATMs offer enhanced functionality and which are limited to cash dispensing, she says.

Driskill clearly is skeptical about the prospects for Web-enabled banking via ATM, although the machines' capabilities with respect to obtaining postage stamps, event tickets and the like appear to represent solid opportunities.

"Most people with PCs have Web access today," she says, "so I think the jury is still out on these personalized types of (financial services) applications for Web-enabled ATMs. There's just not much interest there. You get a better response when you make it clear what Net access via the ATM will allow the customer to do."

New revenue sources

Driskill believes banks "have gone about as far as they can go with surcharging," which continues to eat away at ATM usage rates among both young and older bank customers. "That's one reason why some of these areas-coupons and other types of advertising-are worth looking at."

Diebold's Justice, meanwhile, notes that technology is allowing advertising via ATM to become "much richer from the consumer's standpoint." Thermal receipt printing, for example, allows banks to determine which coupons to offer "on the fly," rather than having the same pre-printed coupon on all ATM receipts.

"It might be a coupon for 25 cents off a Diet Coke or a quarter- point off their next loan," Justice says, "and you can let the customer choose."

Bankers' views of new ATM technologies vary widely, he says. Some institutions are content to use their machines "solely as a way of serving their customers with only their products. But, some are beginning to see this as a revenue opportunity-or, more likely, as a way to offset costs-by offering third-party products or coupons for third-party products."

Justice emphasizes that even the richest advertising content, regardless of how impressive the technology that enables it, must be kept within time limits. "In general," he says, "you've got about a 90- second window. Anything beyond that and you begin to lose the customer."

While banks' use of thermal printing to enable real-time generation of coupons already has begun to take hold in the market, it may well be another year or more before a significant number of ATMs feature full- motion video advertisements on their screens. Deployment of these high- bandwidth capabilities will be slowed by the legacy "plumbing" of most ATMs in place today.

"These video files are big," Justice says. "And obviously, you don't want to run the same advertisement for five years. You want to be able to refresh the ad, and you want to be able to do it via communication lines rather than having to send someone out to the machine."

Most ATMs in use today run on 9,600-baud lines-far too slow for sending large video files to the machines over the network. "Consequently, you won't see mass adoption of full-motion ads on the ATM screen until banks re-do the plumbing," the Diebold executive says.

Justice is quick to add that his company anticipated "these kinds of infrastructure issues" well over a decade ago. Since 1986, he says, Diebold machines have been designed so that banks could replace or upgrade specific modules rather than having to replace the entire ATM.

"You can put a Pentium (processor) in it, or maybe upgrade to a 15- inch color screen rather than the monochrome screen," Justice says. "You're already starting to see some of the bigger banks in the United States take this step and begin upgrading their infrastructure."

Eventually, he says, consumers will not only receive full-motion video advertisements while waiting for their ATM transactions to finish, they'll see ads targeted especially at them.

"We're probably 12 to 24 months out on this one-to-one (marketing) piece," Justice notes, "but I think there will be some banks piloting these capabilities by the end of 2001, with an increasing number of roll-outs next year.

"When we get to that point," he says, "I think the consumer will absolutely love it, because you'll be offering him or her something that you already know they want."

He anticipates that midsize banks will be deliberate, but determined, in tackling the job of upgrading their ATM networks.

"You know," Justice says, "they call Missouri the 'Show Me State.' I believe all bankers are from Missouri. A few want to be first, but most want to be second. They want to see someone else do it, and they want to see a measurable impact on the business, whether it's higher customer retention, higher revenue or greater customer satisfaction."

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