Compliance with the requirement that newly installed or replaced automated teller machines support the new data encryption standard, triple DES, is changing the face of banking.
The biggest deadline still looms, however: By April 1, 2005, all ATMs will need to be using triple DES encryption of personal identification number blocks.
That deadline is foremost a measure of compliance for meeting the new encryption standards, but it also marks an opportunity for banks to make expansion plans, get closer to customers, introduce fee-based products, and further integrate services and systems.
Similar to the technology-refreshing prompted by Y2K, the triple DES compliance push lets banks the reevaluate their delivery technologies. Retail banks can capitalize on this occasion to tackle other market forces eating away at their bottom line.
The consolidation of the last decade has transformed the industry from a competitive marketplace to one best described as ultracompetitive. One trend that has emerged in just the past few years is increased competition from nontraditional providers: the mass-market retailers and convenience stores with their ATM kiosks right down the street. Banks have been losing customers to these outlets, which have captured customers in their daily activities with technological amenities.
The old game of making banking easy for the consumer is being played on a different field.
This challenge has caught many banks off guard. They must integrate new delivery technologies capable of extending service offerings and generating new revenue streams to fend off the easy access and use the new players provide. Such integration means tackling difficult issues with existing legacy systems, which many consider a hurdle for another day. That is where far too many in the industry have made their mistake. Those that continue to shy away from technology investments to support growth will find their customer base eroding at the hands of nontraditional outlets.
That leads us back to triple DES and why compliance has the potential to be a breath of fresh air in the technology infrastructures of many banking companies. We all remember the IT furor that preceded Y2K. Whether you believed the world was destined to end on the first day of 2000 unless you overhauled your systems wasn't really the crux of the message. More to the point, the date signified a wake-up call for the industry to seize substantial advances and enter the modern age from an IT standpoint.
So why - just four years later - do banks need to seize the day again? It's a valid question, especially for those that took the initiative previously and upgraded their legacy systems.
The competitive and technology landscapes have shifted dramatically since January 2000. As a result, the services offered at bank ATMs haven't kept up with those at the kiosks. That is why the triple DES effort is the perfect opportunity to bring the IT upgrade full circle - enhancing ATMs' capabilities and availability of ATM delivery combined with continuously available industry-standard operating systems.
In this battle of convenience, consumers' confidence in their service provider is critical. Customers will simply not accept ATM failures that prevent them from making deposits or withdrawing funds. Through the introduction of reliable, flexible, and scalable electronic funds transfer applications - which manage daily ATM transactions and ensure their availability - banks can quickly offer innovative revenue-generating services 24/7.
Viewing triple DES compliance as a burden would be unfortunate in the current competitive environment, because consumer preference is so often swayed by services and convenience.
While the process is under way to revamp ATMs' encryption standards, it's a logical and sound business decision to take the extra step to ensure that your network is capable of supporting new growth and generating new revenue streams.
