SEXY ATMs

Beauty is skin deep they say. While true, it does not stop one from falling in love with attractiveness. This sentiment is pretty much how we feel for banks considering upgrading ATMs in 2007 to a new set of image-enabled (also called "envelope-less") machines. On the surface, there is very little not to love. The image-enabled ATM is smoking-hot and some would say even sultry. Forget the envelope, just put the check in and the image is rendered on the receipt. For the consumer, it delivers instant satisfaction. In fact, data from focus groups shows up to a 22% higher customer satisfaction rating with the technology. In addition, many consumers experience faster availability of deposited checks. This is all surface beauty, however. Where the image-enabled ATM is truly tongue-wagging gorgeous is on the cost savings it delivers. Considering that it takes over $4.00 dollars to process a deposit through a teller and $1.40 to process an ATM deposit in an envelope, the image-enabled ATM reduces this cost to a mere $0.20 per transaction. Banks that put an image-enabled ATM in a high-traffic area have an instantly cheap branch. By imaging and reusing currency and incorporating the electronic transfer of items, courier utilization can also be reduced. These ATMs free branch personnel to concentrate on higher-margin business by shifting the 70% of branch customers in line only to make deposits. Add to that a 10% drop in deposit fraud (related to deposits of empty envelopes or check kiting) and the image-enabled ATM appears destined to pay for itself in no time. An image-enabled ATM is not a toy, nor is it an expensive proposition, costing around $45k per machine (or approximately $12K to convert an existing ATM). All this is about as sexy as an ATM can get, but if you spend some time around the image-enable ATM strategy, the allure starts to wear thin. First, the track record is a little spotty. Reflecting slow adoption, these machines have been around since 2004, yet there are only roughly 250 such ATMs operating (mostly at the 5 largest banks). Since most ATMs are already located near branches, courier savings is also a joke. Next, since check usage is shrinking faster than date night at Taco Bell, future savings are also harder to come by. ATMs are used mostly to dispense cash and checking deposits are limited to about 10% of transaction volume. While this number can be increased by re-channeling customers and higher consumer satisfaction can be obtained, in most of the usage data we see, ATM deposits don't move much past 22% of volume. Potential savings also assume banks have a back office that is image-ready. Banks not quite in that status will have to spend additional time converting the image to an IRD, wasting some of the benefits. For banks already processing images at both the branch and customer level (which should be a much higher priority), or looking for a replacement ATM in a high-volume area, an image-enabled unit is probably worth consideration. By offering incentives, such as longer processing hours, quicker availability or giveaways to small business users (one of the heaviest and most profitable users of ATM deposits by customer segment), banks can speed customer adoption. Our advice for those banks that don't meet all of the above criteria is to move to other strategic initiatives that have more inner beauty.