TowerGroup: Banks Have Hiked Spending to Roll out Super ATMs

Banks are getting set to unveil revamped fleets of ATMs equipped with the latest technology and able to perform a wide range of advanced transaction functions, such as truncation of check deposits. That's according to a new report from Needham, Mass.-based consultancy TowerGroup, which says large banks in the U.S. will spend $1.8 billion on new machines, machine upgrades, and software development this year, up 12% from last year and well ahead of the 5% increases seen in recent years. “Banks are clearly tuning up their ATM networks in preparation for a new age of automation,” says Jerry Silva, senior analyst for delivery channels at TowerGroup, in his report, “Advanced ATM Technology: Too Fast, Too Furious?” For the most part, says Silva, the new machines have been capable of a broader range of functions for some time, but banks, fearful that consumers wouldn't pay for them, have been reluctant to switch them on. Of the 40 billion ATM global transactions performed annually, he says, 60% are still cash withdrawals, with balance inquiries accounting for another 25%. But bank technology managers, taking advantage of the capabilities and lower costs of Microsoft Corp.'s Windows XP operating system, have been quietly upgrading their fleets over the past year. ATM manufacturers began adopting Windows when IBM Corp. announced it would no longer support OS/2, the long-reigning favorite operating system for ATMs. TowerGroup says 70% of all ATM shipments by major vendors this year will come equipped with Windows, with the balance relying on OS/2. The firm estimates one-fifth of the worldwide ATM base already runs on Windows, a proportion it expects to grow to 30% by 2006. Windows makes possible a wide range of new functions that can be delivered more cost-efficiently than on older systems. One of the most promising, given the impending Oct. 28 effective date for the so-called Check 21 law, is ATM-based imaging of checks deposits. This function, Silva says, would cut the cost to process a check at the ATM by two-thirds. Check 21, shorthand for the Check Clearing for the 21st Century Act, encourages check imaging by conferring legal status on so-called image replacement documents, which are printouts of check images. The IRDs are widely considered a way station to full-scale imaging and image exchange.