ADA Rules, Skimming, And Windows Conversion Are Top ATM Priorities, Study Shows

Bank ATM managers have slain one dragon, a transition to better data protection with the widespread rollout of the Triple Digital Encryption Standard. Some 99% of ATMs now use Triple DES, according to Aite Group LLC. But according to new survey results, ATM managers are still fighting several others, including compliance with new Americans with Disabilities Act (ADA) requirements as well as skimming and a still-incomplete transition to the Microsoft Corp.’s Windows operating system.

The findings come in a report from Aite based on a second-quarter survey of executives from 20 of the nation’s 150 largest banks that in aggregate manage 55,902 bank-owned ATMs, or 20% of the nation’s total. Aite compared this year’s results with those from a similar study it did in 2009.

Compliance with government regulations and industry standards ranked top among 15 issues for which Aite asked the executives to rate on a scale of one, for not at all a priority, to five, for high priority. Ninety percent said “maintaining compliance” was a priority or high priority. Much of that priority arises from the need of ATM deployers to meet new requirements in 2010’s update of the ADA that took effect in March and have standards for new construction and alterations that are effective March 15, 2012.

Aimed at making ATMs more usable for disabled people, the standards set specifications for speech output, keypad controls, screen displays, and Braille instructions. Meeting the specifications will require upgrades in both hardware and software, says David Albertazzi, senior analyst at Boston-based Aite Group. New ATMs typically meet the standards, but older ones, especially those still running International Business Machines Corp.’s now discontinued OS/2 operating system, often need both software and hardware upgrades, he says.

Recognizing the priority ATM managers place on ADA compliance, the ATM Industry Association (ATMIA) last week announced it is offering a compliance guide compiled by Tremont Capital Group, a consulting firm that specializes in the ATM business.

ATMs running Windows systems have much more graphical and user functionality (they can allow users to pre-set transaction amounts, give language preferences, and send e-mail receipts, for example) and have steadily gained market share in recent years, but a fair number of OS/2 machines remain. Aite found that 16% of the machines in its survey base still use the IBM system, down from 29% in 2009. For both years, the rest of the machines are Windows-based. OS/2 machines. While small institutions that don’t have deep technology resources were more likely than big banks to have ATMs remaining on OS/2, Albertazzi says he was a little startled that so many machines still use the old system. “You’re talking about mid-‘80s technology so yes, it is still somewhat surprising,” he says.

After maintaining compliance, managing risk is high on ATM managers’ minds, cited by 85% as a priority or high priority at their institution. And 70% said they were concerned or extremely concerned about ATM skimming, double the number with such concerns in 2009. This increase comes against the backdrop of a steady stream of media reports about skimming, with skimmers becoming more sophisticated and harder for cardholders to detect. In addition, 60% of Aite’s respondents were concerned about the use of counterfeit cards at ATMs, up from 41% in 2009. “There is a fairly large concern around fraud at the ATM, and the interesting thing is that there are more kinds of new threats that were not present in 2009,” says Albertazzi.

Some 31% of the ATMs covered in the survey had an anti-skimming solution in place last year. Respondents estimated the number covered would rise to 40% this year and 45% in 2012.

In other findings, respondents representing 12% of the survey’s ATMs said their machines could accept envelope-free bulk-check deposits in 2010, with the share expected to increase to 17% this year and 26% in 2012. Conversely, 73% of the represented ATMs took envelope deposits in 2010. The respondents expect the number to decline to 66% in 2011 and 59% in 2012.

Forty-one percent of respondents said their senior management regards their ATM channel as a differentiator, up from 27% in 2009. On the flip side, only 32% said senior management regarded ATMs as a “table stake,” or a service the bank should have just to be competitive with rivals, down from 50% two years ago. Some 23% of banks consider their ATMs to be a profit center, unchanged from the earlier survey, while 5% this year regard ATMs as a “necessary evil,” up from 0% in 2009.