Banks in the UK are keen to reinforce their market position, where they are increasingly under threat from such online competitors as Egg, which plan to provide new services via cash machines. Banks are installing new machines in a variety of places - such as train stations - and are keen for consumers to see this now familiar amenity in a new light. In future, rather than simply providing cash and general banking services, such as account balances, cash machines could provide a range of new facilities, from postage stamps to cinema tickets. Personalised cash machine services that recognise regular withdrawal patterns are also a possibility and are being advertised now by some UK banks. But Neil Fairbrother, EMEA channel marketing manager of Motorola's internet and networking group, warns that the automatic teller machine (ATM) network is built on very shaky ground. "Many UK banks still run their cash machines on older, separate network protocols such as X.25," he said. "This has provided a high level of service to cash machines and customers are used to quick, easy transactions. If new applications were to be provided via cash machines, there could be potential bootlenecks." Sizing up the technology If there are more transactions available, the danger of longer high street queues will increase. "Financial institutions are looking at the impact of the internet and web technology on existing applications, such as their ATM machines," said Fairbrother. "Can they guarantee a high quality of service to their ATM customers if they switch to a different architecture, which many would have to do to deliver IP-based internet services?" Suppliers that are queuing to replace ageing bank networks with their brand of kit have to convince IT buyers that they can design new systems to deliver new services in an efficient manner, without clogging up corporate networks. Tom Martin, general manager of ICL's global self-service programme, said it is possible to limit queues building up by designing new services that cut down on transaction times and integrate carefully with existing bank networks. One of ICL's customers is US-based Firststar bank, where ATM machines are loaded with information about customers as a way of predicting what they are likely to want. This avoids unnecessary menu options, such as choosing a language for transactions. The customer information is downloaded from the bank's marketing database to a central ATM network server and from there down to individual ATMs in off-peak times to avoid clogging up the network. "We have had to design the system to avoid additional loading on the corporate network," said Martin. But some of the new services also have legal and business implications. ICL, for example, has already installed cash machines in Cairo that include scanners; mobile phone customers can pay their phone bills automatically by sweeping a barcode on the bill over the scanner. This kind of transaction will be possible only by extending interbusiness agreements between different companies. Mobile transactions Another service that is technically feasible using scanners is paying by cheque, not by physically posting the cheque itself into the banking system but by scanning it in at the cashpoint and sending the digital image for processing. That is currently illegal under UK law and also raises serious technical issues because it would greatly increase the amount of real-time processing needed and the amount of traffic being sent over the ATM network. Despite these obstacles, many believe it will not be long before more varied services are available via cash machines, particularly given the predicted explosion of mobile data services. Wireless connections to the internet are opening new possibilities for mobile phone users. Orange, for instance, is launching a service to enable customers to view their bank accounts and pay bills via their mobile phones, charged at normal data rates. Bob Fuller, chief operating officer at Orange UK, said the issue is about providing flexibility: "Granted, it is still in its early stages, but internet access via mobile phones will provide a huge range of services. And the banks will be keen to compete and may be able to do so on price since mobile phone data rates will still be expensive." Dave Russell, product marketing manager of Compaq's NonStop Systems division, which sells the fault-tolerant servers on which many ATM networks run, said there is plenty of capacity for extra services within most UK banks' existing ATM systems. According to Russell, there is plenty of room for expansion. He said most existing ATM networks could cope with anything up to four times their present transaction volume without difficulty by carrying out most transactions locally and updating central databases at offpeak times. Eventually, most banks will probably migrate their separate ATM networks into their corporate IP-based systems. While this will present some short-term integration problems, the long-term results will be much better manageability of ATM services. Bob Tramantano, vice president of self-service at NCR, which supplies 86 per cent of UK ATMs, said the move will not be easy, but will provide considerable benefits. "It is always a challenge because a lot of networks are still bisynchronous and asynchronous, but network managers are moving towards much better management of these networks," he said. "They are moving to TCP/IP and will be able to use this new-found power to deliver services to many different end points." Since last year, NCR has been running NatWest's network of 2,800 UK cash machines. Tramantano said new services will be available soon from many banks, including NatWest, and that steps are being taken to combat the potential problems. An increase in the number of machines available around the UK is already under way, which will help ease pressure on individual cashpoints. At the same time there have been improvements at the back end in the use of more efficient network management tools, said Tramantano. More up-to-date tools enable managers to configure their ATM networks to provide different services at different times, or to different customers. This could mean, for instance, that it would be possible to pay a bill at a cashpoint only in off-peak hours. Expanding options As yet few banks have explained how they plan to manage customer expectations. If customers have queued in the belief they will be able to carry out transactions at a machine and then find their options limited, that is hardly a shining example of customer service. "The real challenges are how to handle the increased transaction volumes and the duration of the interaction," said Tramantano. "By building more facilities into the terminals and moving ATM networks away from dedicated networks and into TCP/IP, banks can manage their end-points more consistently," he added. "In the past, banks only changed their ATM applications every five years. Now, the combination of more powerful networks and improved self-service devices will enable them to change these applications more often," said Tramantano. This vision of the future is based on the idea that a cash machine is another way for consumers to access a wide range of banking, information and leisure services. So a customer might agree a financial deal on the phone with their bank and then go to a specific ATM where the relevant documents can be printed out. Even if they overcome the technical and business hurdles that are today holding up the expansion of ATM services, not all banks share this vision of the future. Selling cinema tickets alongside banking services will not appeal to every financial institution. "Banks will be asking whether these services are part of their overall strategy," pointed out Tramantano. "They don't want to confuse their customers and they don't want to create long high street queues." Clive Longbottom, strategy analyst at Strategy Partners, believes that banks are more likely to save their ATM networks for distributing cash and leave other extras to their internet banking systems, which are better equipped to deal with that sort of traffic."Unless the standard person withdrawing £50 from a hole in the wall can get their money at least as quickly as before, they are going to get hacked off." Costs greater than benefits Longbottom said that cashpoint machines are expensive to maintain; they have to be stuffed with money, serviced and the screens burn out rapidly. Technically, banks are likely to retain their separate cashpoint networks but will replace the machines themselves. Information and services can be scrapped from the front-end points and squirted reasonably efficiently over existing networks and into corporate systems. "If suppliers can provide firewalled access into the back office, the banks can keep their existing cashpoint networks and it will not be too expensive to replace existing machines," he said. As yet, no UK banks are selling cinema tickets or stamps via their cash machines. Many remain sceptical about expanding their cash machine services in the way NatWest has done, by providing information via ATMs. Nationwide, for instance, said it has no plans to provide general information at cashpoint machines, even though this is technically possible since its ATMs are based on HTML code. "It is not something we are interested in pursuing at this time. Cashpoint machines are for cash," said a Nationwide official. The new NatWest service is still in a pilot stage, so its potential impact on the existing NatWest ATM networks is not yet clear. There are few signs that there is a pent-up demand among UK customers for finding out who won the 2.30 at Chepstow on a handy cash machine. After all, it can often be hard enough just to find a machine when you need to get cash. But in a world where information is becoming more accessible, the banks may feel they have to join in and, whatever the difficulties, make more services available via the familiar cashpoint. MORE THAN A HOLE IN THE WALL - Cash - There are more than 24,500 ATMs in the UK and more than 106 million cards with a cash withdrawal facility. In 1998, £98bn was withdrawn from cash machines. About five million withdrawals were made per day, at an average of £53 each. Just under 62 per cent of all adults were regular users of ATMs last year, each making on average five withdrawals per month. - Banking services - Paying-in services, details of account balances and statement ordering are all widely available now via ATM networks. - Stamps - In the US, stamps are available via some banks' ATM networks. - Cinema tickets - Canadian bank CIBC provides cinema, theatre and airline tickets via its ATM network. - Information - NatWest's In-Touch service provides reminders of birthdays and anniversaries via the bank's ATM machines. - Greetings - US bank Firststar has developed the first personalised ATM that greets customers by name. Analyst Clive Longbottom predicts this will lead to a clear strategy for cashpoint machines. Full banking services will be provided over the internet, where costs are low, while new services from cashpoints will be very focused and speedy, probably involving things like more advertising or special offers.
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