Federal regulations and new technology standards are causing a wave of bank automated teller machine upgrades that will result in a national fleet of Web-enabled ATMs.
These machines, which are faster than standard ATMs and can perform more functions, have been available from the top vendors for years. Banks have balked at implementing them, however, because it meant overhauling their ATM network. It is still a big and costly task, but many banks now say it is worthwhile.
"Because we're having to sink so much money into the fleet, we want to make the best decision possible to get the best return on investment," said Judith Tucker the vice president of ATM product development for Synovus Financial Corp.
Synovus, of Columbus, Ga., owns about 40 community banks and 350 ATMs. Half the fleet is compatible with the Triple DES encryption standard for PIN pads that will be needed by next year to comply with new rules from MasterCard International and Visa U.S.A.
Synovus has also decided to upgrade its machines to use Microsoft Corp.'s Windows operating system so that it will be easier to satisfy the Americans with Disabilities Act's requirement that ATMs offer voice guidance for the blind.
Most ATMs now use the OS/2 operating system, but the industry is moving away from that technology. Switching to Windows means banks will probably have better access to technical support; it also necessary for the new generation of Web-enabled features.
These include faster transactions; one-to-one marketing; remote updates of the machines through a network; check imaging; and even the potential to support e-commerce transactions initiated by consumers at the ATM and adding funds to stored-value cards such as telephone cards.
Ms. Tucker said Synovus will gradually implement some of the more advanced capabilities. Check imaging, for example, which allows the ATM to create a digital image of a paper check and then transmit the file immediately to a processing center, will not be available until the latter part of 2005. Part of the problem in this transition, Ms. Tucker said, is that there are now more choices.
"It was very simple in the beginning," she said. "If you were with a certain vendor, that was it. The software was propriety." Today the three major ATM manufacturers, Diebold Inc., NCR Corp., and Wincor-Nixdorf Inc., all sell software packages that can be used on almost any ATM. Synovus has yet to decide which software package it will use for its Web-enabled ATMs.
Banks' upgrade plans will be a boost for ATM manufacturers. A 2003 survey by MasterCard International's TowerGroup and the American Bankers Association projected that ATM spending by large U.S. banks would rise 12% this year, to about $1.8 billion.
Jerry Silva, a senior analyst at TowerGroup, of Needham, Mass., said the requirement to upgrade ATMs is spurring banks, especially larger ones, to include check imaging hardware on their machines.
Eventually the banks would have gotten around to it, Mr. Silva said, "but they would have taken their time."
Wells Fargo & Co. started its upgrade in 2000, and about 90% of its 6,200 ATMs are now Web-enabled. By early next year the entire fleet will have been converted, said Jonathan Velline, the San Francisco company's head of ATM banking.
Wells' new machines allow customers to establish personal preferences, such as the language they use and pre-set withdrawal amounts; those preferences will be replicated at any Web-enabled Wells Fargo machine.
But not every capability will be made available to consumers, such as topping off phone cards or other e-commerce functions. "We just don't see that having as a direct a tie to the customers," Mr. Velline said. Electronic commerce is "somewhat inconsistent with why they came to the bank."
Bank of America Corp. plans to widely add check imaging to its ATMs because more than 20% of its consumer deposits are made at its 16,000 teller machines, said Kirk Lindsey, a senior vice president for ATM product development at the Charlotte company. B of A has been pilot testing the feature for the past year with three machines and plans to add it to 100 ATMs in the next six months.
About 3,000 B of A ATMs are now Web-enabled, and the company hopes to complete the conversion in the next four years.
B of A has also been developing a strategy to have ATMs support one-to-one marketing, Mr. Lindsey said. He noted that FleetBoston Financial Corp., which Bank of America acquired in April, had studied this type of marketing.
"We're kind of understanding their learning as well before we see what approach we're going to take," Mr. Lindsey said.
First Horizon National Corp. of Memphis has converted about 40% of its fleet of 500 ATMs, said Mike Feehan, First Horizon's senior vice president of customer contact. The former First Tennessee National Corp. plans to implement new ATM features, but right now building the company's brand is a bigger priority for the marketing and information technology departments.
Susquehanna Bancshares Inc. of Lititz, Pa., installed the first of its 115 new Wincor-Nixdorf Web-enabled ATMs this week. Executives said they plan to incorporate technology into the machines that could support one-to-one marketing, but they are more dubious about check imaging.
Steve A. Stoner, Susquehanna's vice president of systems support, said few of its customers use its machines for deposits.
"It's a business decision," he said. "The technology is there, but is the profitability or the break-even point there for the additional investment?"
