Older Operating System Lingers, Holds Back ATM Services, Study Says

Banks aiming to improve customer service should accelerate their move away from old ATMs and the IBM operating system that ran them for years, according to conclusions in a new Aite Group LLC study of banks' ATM channels. While the transition from IBM Corp.'s old OS/2 operating system to Microsoft Corp.'s more flexible Windows operating system has been going on for years, it's still far from complete even though IBM stopped supporting OS/2 at the end of 2006. Sixty-four percent of the ATMs covered in the survey were Windows-based in 2008. The survey was based on responses taken from February to April from executives with ATM responsibilities at 23 of the nation's top 80 banks by number of checking accounts. These banks managed a total of 42,780 ATMs last year. Windows-based ATMs can offer customers personalized marketing messages, can save customers' transaction preferences, and have better graphics than OS/2. But two of the 23 banks still were running all of their ATMs on OS/2 last year. In fact, Windows probably is running a lower share of smaller banks' ATMs than the survey average because bigger banks tend to be ahead technologically, according to Aite analyst Kate Monahan. “As we go down market, we might see these lower percentages,” she tells Digital Transactions News. “Say the top 500 [banks], I suspect it would be lower.” Surveyed bankers do say they're continuing to upgrade: they expect 77% of their ATMs to be running on Windows by year's end and 86% at the end of 2010. Asked about another tech-intensive area, envelope-free deposits, the executives indicated that only 12% of their banks' ATMs could take deposits without an envelope in 2008. Respondents predicted the envelope-free share would rise to 14% of ATMs this year. “I was expecting to see 30% to 35%, but I did not,” Monahan says. “It might take three years.” The respondents expect 26% of their ATMs will take envelope-free deposits in 2010. Envelope-free ATMs make images of checks. The deposits cost less to process than deposits by envelope. Imaged deposits also are less prone to errors or fraud. But, as with operating systems, the bigger banks seem to be clearing the imaging ATM hurdle faster than medium-size or small banks. By the end of 2009, surveyed executives among the nation's 10 largest banks indicated their deployments of envelope-free, single-check-accepting ATMs would be 30 percentage points ahead of banks ranking among the top 11 to 50 banks. The biggest banks also tend to have the youngest ATMs. In all, 52% of the ATMs in the survey group were zero to 5 years old; 28% 5 to 10 years; 14% 10 to 15 years old, and 6% 15 years or older. But respondents from the top 10 banks reported that 63% of their ATMs had a median age of zero to 5 years compared with only 50% of the ATMs among banks ranked 11 to 50. New, full-function bank ATMs are expensive?up to $40,000 per machine?but they provide more uptime and better service, according to Monahan. Some 75% of respondents managing ATMs averaging under 5 years old ranked their ATM channel in the top quartile among banks for service compared with only 55% of executives managing ATMs averaging 6 or more years old. Cash withdrawals remain by far the biggest transaction type at ATMs. The executives reported that 65% of transactions at their institutions' ATMs were withdrawals, followed by account inquiries at 13%; other, 10%; deposits, 10%, and transfers, 2%. “On-us” transactions initiated by customers of the bank that owns an ATM averaged 69% in 2008, a percentage Aite expects to grow to 74% in 2010.