Bank One Pulls the Envelope

In a limited pilot in Indiana and Kentucky, Bank One customers will be able to deposit checks and cash, without an envelope, directly into ATMs.

Bank One, using ATMs and distributed image capture software from NCR Corporation, hopes to improve the retail banking experience, reduce fraud, and slash the cost of servicing its depositors.

NCR's "Personas"-brand ATMs accept checks one at a time. For each item, the ATM displays its image and then prompts the accountholder to key in the dollar amount. The ATM also handles cash deposits through a bunch note acceptor with capacity for a stack of seven to eight bills at a time. The customer receives receipts showing the check images, absent the routing numbers, and a count of the denomination of bills deposited. That's more information than people get at the teller line.

For Bank One, ATM deposits contain an average of 1.4 items. Accordingly, the new service is intended for retail consumers, not merchants. "If they're depositing one to five checks, it's probably a reasonable solution for them," said Dean Kontul, ATM network manager at Bank One, Chicago. "Beyond that it would probably become more time-consuming than a teller."

Bank One will keep close tabs on the impact of the new technology. For standard ATMs, withdrawals comprise about 80 percent of ATM transactions, with deposits around 15 percent. "We're pretty comfortable that wait times should not be impacted unless the mix of cash transactions to deposits changes significantly," said Kontul. "If deposits were to shift upwards of 30 or 40 percent, because the technology does make it easier for customers to make deposits with confidence, then we might have to look at capacity in some of our locations."

Higher ATM utilization is one of the goals of the program. "We're going to watch to see if we have any lift in deposit volume, as well as ATM withdrawal volume," said Kontul. "When we do a swap-out, meaning we put a machine in place of an existing machine, we want to make sure that at a minimum we maintain the same transaction volume."

As a pioneer in shedding the envelope, Bank One has had to undertake customer education initiatives, including signage at the ATM, product brochures at the local branches and user surveys. "If the pilot's successful, and if Bank One chooses to deploy on a more wide-scale basis, which are both decisions we have yet to make, then we'd look at doing more robust marketing," said Kontul.

The business case for the new ATMs comes down to more than just the savings from ordering fewer envelopes. Indeed, fraud reduction represents a significant opportunity. By getting instant indications of what's being deposited, the bank can institute more stringent risk management practices around empty-envelope fraud and suspicious items, such as deposits on closed accounts. "We'll be reviewing large-denomination deposits in the back office throughout the day," said Kontul. "In today's environment, we only see those as deposits are shipped back and forth to the vendor and the back office."

In the back office, NCR's ImageMark distributed capture system receives the image and transaction data from the Personas ATMs through the Star transaction processing network, operated by Concord EFS.

ImageMark includes image recognition software that attempts to read the courtesy amount on the check. "We're able to do that for over 70 percent of the checks," said Phil Kasper, assistant vice president, marketing, NCR Financial Solutions division. "That basically eliminates a tremendous amount of back-office labor associated with ATM deposit processing."

In an extended rollout, other potential savings would come into play, such as the ability to send less expensive, unarmed couriers to collect deposits. The ATM automatically endorses deposited checks, and then places them into a separate bin, outside of the safe. "Therefore, a regular courier can go pull the checks, not exposed to any of the cash in the machine whatsoever nor have any access to the cash in the machine, and pull those checks out," said Kasper.

Pending legislation on check clearing, known as "Check 21," also may have an impact on the business case, since images of deposited items could move directly to the paying bank for collection. "Relative to the other streams that would be affected by Check 21, ATM deposits are fairly small - that's not to say that they're inconsequential," said Bank One's Kontul. "But the over-the-counter items, and items received in bank-by-mail lockbox areas are certainly a bigger opportunity for the corporation."

However, all of these back-office savings aren't automatic. "If the customers don't use the machine, it doesn't matter how wonderful it is for the back office," said Bill Carey, manager of ATM strategy at Bank One.