All-Transaction Machines?

The U.S. military recently installed on bases self-service kiosks that enable military and support personnel to use smart cards in lieu of cash for purchases at military-operated concessions. The kiosks, from Dayton, Ohio-based NCR, are equipped with smart card readers that allow users to transfer funds from designated U.S. financial institutions to their smart cards.

The armed forces' enlistment of kiosks is part of a larger trend of nonbank entities providing financial services (see cover story, page 36). Among the most aggressive organizations in this arena has been 7i, the parent of 7-Eleven. After deploying about 1,000 NCR Personas series ATMs over the past 10 years or so, the company plans to add another 1,000 machines within the next five years. With Stamford, Conn.-based GE Consumer Finance ($151 billion in assets) as its financial partner, 7-Eleven's ATMs enable users to reload prepaid phone and MasterCard debit cards, cash checks, purchase money orders, pay bills, and even purchase long distance telephone services.

But, while nonbanks push the ATM-functionality envelope, banks haven't done much in the way of advanced kiosks. According to Madhavi Mantha, a senior analyst with Celent's (Boston) banking team, this largely is attributable to differences between traditional bank customers and those of nonbanks. "Most of what banks are doing is deploying self-service machines for quick transactions," she says. "They've tried other transactions and customers don't want them."

Indeed, despite the additional capabilities that ATM kiosks can offer, the devices continue to be thought of and used as cash machines. According to research by Dove Consulting (Boston), a division of Hitachi Consulting, consumers' primary use of ATMs is for cash transactions (see chart, below).

Back to Basics

As a result, if banks were to deploy more-advanced ATMs, they'd have to do so in combination with basic ATMs for cash collection and dispensing, asserts Chris Gill, an analyst with Dove Consulting's financial services practice. "Banks are looking at bank customers; the retailers are primarily targeting the unbanked," Gill says. "Banks would need to look at how they would justify the business case to add [kiosks]. It would be hard to justify these machines on fee income alone."

Still, large banks are keeping an eye on ATM technology. Wells Fargo (San Francisco) has been one of the most aggressive banks in terms of advanced ATM deployments. The bank's entire network of 6,500 ATMs—a mix of NCR Persona, Diebold (North Canton, Ohio) Opteva and Wincor Nixdorf (Austin, Texas) XE units—all operate on a TCP/IP network and offer Microsoft (Redmond, Wash.) Windows-based capabilities. In addition to traditional ATM services, the Wells Fargo machines offer a host of other bank-related transactions as well as the opportunity to purchase stamps. (Wells Fargo is the nation's sixth largest seller of stamps.)

"The 7-Eleven installation has an interesting set of products and services, but the key distinction is that they're targeting the unbanked," says Jonathan Velline, SVP of ATM banking for Wells Fargo. "We're targeting our customers."