Self-service banking means more than withdrawing cash. Stephen Timewell talks to bankers about the future of the ATM – its potential as a promotional device and use via mobile phone and the internet.

If the automated teller machine (ATM) represented the first revolution in retail banking, then where will the next revolutions come from and what form will they take? At NCR’s Self-Service Universe conference in Athens late last month, The Banker asked bankers and vendors about the challenges of achieving exceptional customer service and improving productivity through ATMs.

While there was general agreement that the branch was far from dead and in fact undergoing a revival, the strategy for the branch going forward is very different from that of the past. With the increased functionality of ATMs, the branch, from Singapore to Spain, is becoming much more of a sales outlet.

But what is the potential of the ATM and where is it heading? Leading retail practitioners address the following questions:

Q The functionality of the ATM is expanding rapidly. What more can it do?

A The ATM is much more than ‘cash and dash’ these days. Patrick Chew, head of delivery, consumer financial services at Singapore’s OCBC Bank, says that his bank has already achieved a 99% transaction success level but he wants more. “We want to get the mindshare of customers.”

OCBC believes the ATM can be a part of building a personal relationship with customers, not just fulfilling a transactional need. It uses its customer knowledge to make special birthday offers at the ATM.

Beth Hughes, senior manager at the UK’s Nationwide Building Society, believes the ATM can be used to highlight an opportunity for an overdraft or similar product alerts. Others suggest that limited advertising, such as flashes, is possible; and Bank of Queensland is understood to have boosted transactions substantially by the use of promotional coupons at ATMs.

Bankers, however, do not believe in customers spending a long time at the ATM, so reducing the length of queues is critical. Mr Chew claims to have reduced the time for a cash withdrawal from 30 to 10 seconds by streamlining the ATM navigation system.

But the big change the ATM now offers is not in cash withdrawal, the first retail revolution, but in accepting deposits. Jeff Lutz, NCR’s vice-president of global sales and marketing, explains that the ATM being able to accept deposits, including cheques, represents the second revolution in retail, and massive savings for banks.

Although banks did accept deposits (and cheques) in envelopes before, customers did not have confidence in the system and it was not successful. Now cash deposits can be credited and used immediately. With cheque imaging procedures now being done through the ATM, the whole cheque process has been revolutionised and is of great benefit in countries such as the US. These ‘intelligent deposits’ bring greater flexibility for customers. John Rendle, HSBC’s manager of self-service channel management, says that the new deposit systems at ATMs brought $30m in savings in 2003.

For Mr Lutz, the direct acceptance of deposits and cheques, including payroll cheques, expands the opportunities for small businesses and the unbanked. In the US, where there is a significant unbanked market, the ATM now streamlines deposit operations (and cheques) and offers the prospect of transfers and possibly even overseas remittances in the future.

Q How will the growing use of mobile technologies and the internet impact on the ATM?

A While some major countries, the US and UK in particular, have been slow in developing mobile payment technologies, others, such as Turkey and Spain for instance, have been at the cutting edge. Vincente Tos Viala from Spain’s Caja de Ahorros de Valencia, Castellon y Alicante (Bancaja), explains that the ‘Hal’ system was introduced earlier this year for person-to-person payments via mobile phones, the use of four-digit codes and the ATM. Three banks in Spain now have this system and the network of ATMs offering the service is growing fast.

At Garanti Bankasi in Turkey, the withdrawal of funds from ATMs through mobile technology is increasing and banks are moving to a stage where the ATM, internet and mobile platforms all have the same look, feel and functionality.

In Dubai, Louis Scotto, general manager of retail banking at Emirates Bank, adds that mobile phones were already used in banking and various other payment mechanisms. Also, for remittances, special transfer systems had been set up with ICICI Bank in India, for example.

Q How much will the mobile phone be used for ATM withdrawals and other functions?

A NCR once piloted the use of mobiles in Denmark to help reduce queuing in banks by issuing codes to speed up ATM transactions, but this is not expected to take off. Citibank and OCBC alert customers to changes in interest rates via mobile and on the internet. This is what Mr Chew calls “cross-pollination of channels”, where the use of different channels or cross-channel awareness can create opportunities. A promotion using an SMS message can lead to a discount offer and a boost in banking services.

Mr Lutz envisages a time soon when a mobile/Blackberry device would have a credit card imbedded in it and be used to perform a range of payment services. Nevertheless, he does not see the mobile phone taking over as a prime vehicle for transactions at the ATM. Although the phone’s uses are increasing, it will not be dramatic, he says. He does not expect the phone to be more than 10% of the market in five years’ time.

Q How do you see the role of the ATM channel in 2010 and how will it fit into the overall retail banking structure?

A Although some argue that technology will make cash obsolete and therefore the ATM irrelevant, Mr Lutz argues that, despite the new technologies, cash is on the increase worldwide and in the eurozone too. So the need for the ATM will continue and develop further.

Mr Chew believes the cash deposit machine is only the beginning. “We see more and more from the ATMs, internet and smart phones that the underlying technologies are starting to converge. From the banks’ point of view, convergence brings a lot of benefits in terms of technology.”

Developing technologies that can be deployed easily on other channels becomes very attractive and cost-effective. So a web-based ATM with client-server applications can become a reality and, because the technologies behind this already exist, development is expected fairly soon.

Mr Lutz notes that, although the advent of intelligent deposits and the immediate availability of cash deposits is almost as important as the initial invention of the ATM itself, the third key revolutionary development is in the application environment. “If you have a web-based ATM, it suddenly opens up that device to be anything you want it to be, not just a cash dispenser. You can add applications, you can make it look and feel the same way and you can do advertising.” The convergence of technology gives added functionality and provides more choice for the customer, a key retail banking objective.

And if these revolutions are not enough, conference chairman Dr Patrick Dixon, described as Europe’s leading futurist, highlights the revolution that will be created by the use of radio frequency identifiers. Already being used by retailers such as WalMart, these ‘grains of sand’ could reshape the entire retail landscape by 2020.

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