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As banking technology and strategy evolve, ATMs can provide consumers with all the conveniences of branch banking.

Some banks are investing in ATMs because, "The government says they must, or one of the card processors says they must," according to Jonathan Velline, senior vice president of ATM banking, Wells Fargo. "It's requirement-focused investment, not customer-focused investment."


ATMs. No matter where you turn, you can't seem to get away from them - which suits consumers just fine. And banks are more than willing to accommodate customers' need for anytime, anywhere banking.

Today's automated teller machines are more than just cash dispensers. Over the past few years, the market has seen an emergence of ATMs loaded with an array of features designed to capture consumers by providing a one-stop shop for their basic banking needs - along with the odd postage stamp, movie ticket or pre-paid cell phone minutes. Though these latter features are by no means "must haves," many banks view such value-added service offerings as a way to differentiate themselves in the market.

As financial technology matures, however, banks are beginning to reevaluate the manner in which they utilize their ATMs. As a result, the ATMs of the future will provide users with a much richer banking experience than ever before.

Yet the reasons for the impending boom in advanced ATM functionality may not necessarily have their origins in the financial services industry's desire to wow the consumer. Many of the expected changes in the market will be related to forces beyond banks' control.

"Some banks are not investing [in ATMs] because of a belief that they want to provide better service to their customers, but because the government says they must or one of the card processors says they must," comments Jonathan Velline, senior vice president of ATM banking at San Francisco-based Wells Fargo ($436 billion). "It's requirement-focused investment, not customer-focused investment."

An example of an investment/upgrade decision already having been made for financial institutions includes the requirement that machines use the Triple DES encryption protocol. ATMs equipped with headsets for the visually impaired also are the result of regulation - the Americans with Disabilities Act (ADA). And, although it is still in the early stages, Check 21 will impel banks to upgrade their ATMs to include imaging technology.

"What has forced some of the advanced technology at ATMs were non-business-related issues like the ADA and the Triple DES movement," says Jerry Silva, a senior analyst with research company TowerGroup (Needham, Mass.) "We'll also see some impact on upgrades because of the sunsetting of IBM's OS/2. This used to be the de facto operating system for ATMs - now Windows is taking over."

Although these features are by no means bad for the consumer, they paint a picture of a somewhat passive attitude toward ATMs by some - though certainly not all - banks in recent years. The explosion in the number of these cash-dispensing wonders (more than 1 million ATMs worldwide, according to TowerGroup) perhaps has led some to take the machines for granted. On the consumer end, people expect to be able to access their funds in the airport or at a convenience store. For banks' parts, the machines are cash cows in terms of the fees they garner from surcharges.

"I can't say banks are taking ATMs for granted," says TowerGroup's Silva. "But what's true of ATMs is true for any channel - banks finally learned that they couldn't force customers to change just because they had a new feature."

According to Silva, consumers are not doing much more than withdrawing cash at the machines (60 percent) or viewing balance statements (15 percent) - both very basic transactions. Based on these numbers, he says, it is vital that banks look critically at how they want to spend their money on ATMs in the future.

"The ATM is a great cash delivery tool, but it can also deliver other information to clients," says Jan Estep, executive vice president, transaction services processing division, with Minneapolis-based US Bank ($198 billion in assets). "But you have to ask yourself what kinds of transactions make sense based on the technology available and what the clients demand." Estep also emphasizes that any new features should be financial services-related. So advertisements at the ATM for the latest CD rates are fine, but ads for a soft drink are not.

Jim Merrell, director of global product marketing for Canton, Ohio-based Diebold, the ATM manufacturing giant, has a somewhat similar view. "Some banks view offering non-bank services as diluting their brand while others see it as an opportunity to expand their offerings," he explains. "So it depends on the bank. But their core business is managing accounts for people. They will focus on this first."

As far as Merrell is concerned, banks are not using ATMs to their full potential. "The capability of the ATM is underutilized," he says. "It's a fairly complex processor and the potential for expanding its use is very good."

A key element in the evolution of the next generation of ATMs is the introduction of Windows. The Microsoft operating system essentially turns the ATM into a PC in a large box and by its design, Windows enables banks to do more, according to industry insiders.

"There is a huge opportunity to deploy new technology on ATMs," says Ben Ensor, a London-based senior analyst with Forrester Research. "The hard part is deciding which ones to do. But this is a lot easier with Windows than with OS/2."

And, adds TowerGroup's Silva, "It's easier to hire people who know how to write for Windows [than for OS/2]."

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