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Outsourcing Your ATM Network


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What is ATM outsourcing and is it right for your financial institution?

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Outsourcing Your ATM Network

  1. 1. CMYCMMYCYCMYKeBook_Outsourcing_Your_ATM_Network_print.pdf 1 5/28/2013 11:19:13 AM
  2. 2. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? iCONTENTSThe ATM Money SinkThe Benefits of OutsourcingHardware & Software Maintenance/ImprovementsResource ManagementNetwork ReachIncreased ROIOutsourcing OptionsPartial OutsourcingFull Network ManagementSelecting an ATM Management ProviderAbout Welch ATM122346778910CMYCMMYCYCMYKeBook_Outsourcing_Your_ATM_Network_print.pdf 2 5/28/2013 11:19:13 AM
  3. 3. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 1The ATM Money Sink“ ATM portfolios grow, so, too doprofit-margin pressures.”- Tracy Kitten*ATMs were once a revenue generator. However, a flooded marketcoupled with the current economic crunch has resulted in plummettingprofits. Yet despite the increased availability of cash back anddebit/credit card options at the register of many major retailers,customers still rely on ATM availability for their transaction needs.The dilemma now facing financial institutions has become:How do we maintain or even increase our currentcustomer service availability through ATMs...withoutbreaking our budget?A true solution would need to cover all of the worries and costs of ATMoperation including: Cash Management, Maintenance, Processing,Installation as well as Technological and Compliance Upgrades.Enter the ATM ISO and ATM Outsourcing...* Kitten, Tracy, (04/24/2007). Mind on the ATM Money. 3 5/28/2013 11:19:14 AM
  4. 4. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 2The Benefits of Outsourcing“As an industry, we’ve probably been leaningtoo hard toward thinking the only way to[provide top-of-the-line ATM service] is to doit ourselves.”- Matthew Burns, VP of Electronic BankingNational City Corp.*Hardware & Software Maintenance/ImprovementsWhile customers often give ATMs little thought, they receive an immediatenegative impression the moment they need one and it is out of order. This isnot just an instance of poor customer service. ATM down time means loss oftransaction fees as well as additional maintenance costs.Changing regulations and ATM techology are another concern. New ADA, PCIand DES regulations as well as security provisions and technology requireATM upgrades...too often for many financial institutions to keep up.Outsourcing Solution:Most ATM ISOs provide maintenance and compliance guarantees in their out-sourcing contracts. This ensures your ATM fleet gets the regular mainte-nance and service it requires to stay up and running plus emergency serviceif any breakdown.ATM ISOs also keep up-to-date with all of the latest information & technologyregarding upgrades, updates, virus notifications, regulation compliance,security measures and technology so that your ATMs are compliant andoperational when your customers need them...all with no extra cost to you.*Unknown, (10/12/2005). ATM Outsourcing Growth to Continue. 4 5/28/2013 11:19:14 AM
  5. 5. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 3The Benefits of OutsourcingResource ManagementFinancial Institutions have to organize a multitude of processes in order tomanage their ATM network. All of these processes must function together inorder to provide a positive customer experience. This task can be mademore difficult as each process often means another vendor.* Transaction Processing * Armored Car Services* Cash Management * Monitoring* Maintenance Services * Equipment/SoftwareIf a network offers advanced services such as image processing or depositautomation the task becomes even more difficult. All of this effort culmi-nates into additional full time employee costs.Outsourcing Solution:ATM ISOs offer all of these services and more in one package. Under an out-sourcing contract, financial institutions need only deal with a single vendorto make certain that their network is running efficiently. Fewer vendorsmeans fewer contracts, fewer calls when there are problems, less time, lesshassle, less money and lower employee costs.“Fewer vendors meansfewer contracts, less timespent by employees andlower FTE costs.”CMYCMMYCYCMYKeBook_Outsourcing_Your_ATM_Network_print.pdf 5 5/28/2013 11:19:17 AM
  6. 6. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 4The Benefits of OutsourcingNetwork Reach“The ATM is a ‘must have’ customer service channel for financial institu-tions.”* According to a 2011 Dieringer Research Group consumer study, 74%of consumers consider ATM locations and 54% consider number of ATMsimportant when selecting a financial institution. These numbers show thathaving an ATM network is not just a convenience but a “strategic foundationfor customer service.”*However, providing a reliable ATM network grows more difficult the widerthe network becomes. Distance from main branches can increase problemswith monitoring and make it more expensive for staff or vendors to deal withissues. Research by electronic commerce company FirstData indicates thetotal cost of operating a high-transacting ATM can reach up to $26,000 peryear per ATM for operational costs alone.* A similar study performed by DoveConsulting indicates that ATM costs have a compounded average annualincrease of 6.7%.** Running a network is time consuming and progressivelymore expensive.** Dove, David, (08/01/2011), The Case for Outsourcing ATMs. of ATMsNumber of ATMs6% 21% 74%9% 35% 57%0% 20% 40% 60% 80% 100%Not Important Neutral ImportantATM Importance When Selecting A Financial InstitutionSource: Dieringer Research Group Conjoint Consumer Survey, 2011*Pit, Richard (2011). Evolving Options for ATM Outsourcing: Pooling Can Keep Your Channel Competitive.Retrieved from 6 5/28/2013 11:19:17 AM
  7. 7. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 5The Benefits of Outsourcing“The nature of the off-premises network reallydictates that you outsource just about every-thing. If [outsourcing] services didn’t exist, wecouldn’t even be 65 miles from here.”- Chris Klein, Senior VP of ATM SystemsBank Atlantic*Outsourcing Solution:Outsourcing all or part of an ATM network consolidates services under onecontract with a single vendor, effectively staving off cost increases for theduration of that contract. This consolidation also eliminates the hassle ofmultiple vendors, decreasing the costs for full time employees and theliability of creating a wider ATM footprint.As ATM ISOs regularly manage extensive networks, they are capable ofleveraging their connections and expertise to alleviate the difficulties andcosts that a financial institution would encounter when expanding furtherfrom their main branches.“[Outsourcing programs are] very beneficial in areas where you need apresence but you don’t want to spend the money to build business there,”says Shelly Chandler, VP of Self Service banking for PNC Bank.*Many ATM ISOs also maintain relationships with major retailers and utilizethese associations to place Financial Institution ATMs at popular locations,ensuring higher transaction volume and revenue. Customers recognize theconvenience of surcharge-free transactions located at the retailers theyregularly shop.*Unknown, (10/12/2005). ATM Outsourcing Growth to Continue. 7 5/28/2013 11:19:17 AM
  8. 8. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 6The Benefits of OutsourcingIncreased ROIIt is clear that a dependable ATM network is important and strategic but,due to the changing market, most financial institutions no longer considerATMs a core business. Rather, they have become a customer service expenseand a money sink.* Dove, David, (08/01/2011), The Case for Outsourcing ATMs. Solution:Competing with banking monoliths is about economy of scale and the sameis true of the ATM industry. ATM ISOs can operate ATMs for a fraction of thecost it takes a financial institution to run them because they leverage themanagement of multiple ATMs.These savings are passed on to the financial institution by lowering monthlyoperational costs and consolidating vendor-client interactions.A recent study from Dove Capital Partners reveals that even large bankscould save up to 20% on their direct costs per month per ATM by outsourcingto a third-party managed services provider.* That percentage increaseswhen considering the savings in employee expense. This increases the prof-itability of potential costs at the client level.“Save up to 20% on direct costsalone by outsourcing toa third partyprovider.”CMYCMMYCYCMYKeBook_Outsourcing_Your_ATM_Network_print.pdf 8 5/28/2013 11:19:17 AM
  9. 9. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 7Outsourcing OptionsPartial OutsourcingIt is a long standing practice with financial institutions to outsource separate,distinct functions such as cash management or hardware maintenance. Manyinstitutions select to segment rather than fully outsource due to concernsregarding control, security and confidence in third-party providers. Whendeciding to partially outsource, an institution must consider costs of vendors,employee time and current versus resulting overhead.Partial outsourcing may save time and effort while still allowing the financialinstitution to maintain overall control of their network. However, there canbe drawbacks such as:* Segmentation of ATM network services often results in a lack ofbusiness intelligence in regards to overall performance andcost of a network.* Customer service and satisfaction problems can develop as ATMsgo down and it becomes unclear which service provider shouldbe held responsible.Consolidating outsourced services to a single provider can help reduce theseissues. However, it can be difficult, even in-house, to create complete,comprehensive reports without full ATM management. This results in contin-ued use of employee time and effort for report collection and evaluation.CMYCMMYCYCMYKeBook_Outsourcing_Your_ATM_Network_print.pdf 9 5/28/2013 11:19:17 AM
  10. 10. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 8Outsourcing Options** Dove, David, (08/01/2011), The Case for Outsourcing ATMs.“We can operate off-premise outsourced ATMsfor half of what it costs us to run our (onsite)ATMs.”- James Braddock, VP of UMB*Full Network ManagementFull network outsourcing hands off management of all ATM processes to athird-party provider. As ATM ISOs are capable of running entire networks fora fraction of the cost, many financial institutions select this option solelybased on price tag.However, as most third-party providers have had years of focus in the ATMindustry, they have developed an expertise in ATM management and service.An ATM ISO is not only more cost effective but also more likely to know theins-and-outs of the industry. Thus, they are capable of providing better,more efficient service than a financial institution. This results in bettermonitoring, better response rates and more up time.**There is also the added convenience of consolidated reporting. A third-partyprovider operating a fully outsourced ATM network is capable of providing acomplete report of all activity for each ATM.Finally, there is the maintenance, service and upgrades... complete withcompliance guarantees. A third-party provider eliminates the extra costs ofmaintaining an ATM network, making certain that it is operational and meetsregulations and security requirements including ADA, PCI, and DES.* Unknown (2006). Outsourcing in 2006. 10 5/28/2013 11:19:18 AM
  11. 11. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 9Selecting an ATM Management ProviderWhen a financial institution is choosing a provider to manage it’s ATMs,whether it be partial outsourcing or full network management, it is essentialthat the provider have the expertise to fulfill the role. Here are some basicrecommendations for what to look for in a management partner.ExperienceThe company should have prior experience running an ATM network includingall technical and business aspects of the industry. This ensures that theyhave all of the knowledge to provide maintenance, branding, reporting andATM placement strategies to maximize a financial institution’s network.CustomizationAs each client has different needs and requirements, the company needs tobe capable of designing sourcing strategies that meet the individual needsof said clients. This includes being capable of providing partial outsourcingand full management options.Strategic PartnersA third-party provider should be capable of creating additional value forclients such as offering network expansion through ATM placement withretail partners at popular locations. Another worthwhile addition is expand-ing the surcharge-free population of ATMS for cardholders.Customer CareCustomer service is the focus and purpose of an ATM network. These valuesshould be reflected in how the company deals with financial institution andretail clients.“Customer service is thefocus and purpose of anATM Network.”CMYCMMYCYCMYKeBook_Outsourcing_Your_ATM_Network_print.pdf 11 5/28/2013 11:19:18 AM
  12. 12. Outsourcing Your ATM Network: Is it the Right Move for Your Institution? 10About Welch ATMWelch ATM is an independent ATM company founded in 1973. With over threedecades of ATM industry experience and service, we have developed rela-tionships with over 1,000 financial institutions and major retailers.Welch provides an array of ATM solutions including retail ATM branding,equipment, transaction processing, managed services and more. Welchstrives to provide excellent customer service and works individually witheach client to create strategies that best fit their goals and needs.Welch ATM is the one of the largest ATM companies and a leader in the indus-try. Welch currently manages over 20,000 ATMs nationwide.CMYCMMYCYCMYKeBook_Outsourcing_Your_ATM_Network_print.pdf 12 5/28/2013 11:19:19 AM