Deposit Automation
Introduction
The introduction of the ATM in the late 1970’s promised
to increase teller productivity and control expenses by
migrating transactions from the teller line to the ATM.
Acceptance was not immediate; it took time for consumers
to adapt to the new technology. For some time the industry
talked about "the 33% wall"—based on the
belief that only one-third of the population would embrace
the reality of self-service financial transactions.
Today we realize how limited that early view of the ATM
was. The consumer has adopted the ATM as one of the important
conveniences for a busy lifestyle. Globally, the ATM population
has ballooned to nearly 1,150,000 (Diebold Global Marketing).
The ATM is the ideal physical distribution channel because
it: 1) provides a relatively inexpensive branded presence,
2) is automated, and 3) can be placed in virtually any location.
For these three key reasons and many more, the ATM configured
for full Deposit Automation enables a bank to reach higher
efficiencies in the operation of their channels.
Today banking customers are demanding additional services
from self-service terminals, and banks view the availability
of many of these services as a significant profit opportunity
or as an opportunity to deepen the relationship with their
customers. While customers demand an expanding number of
services, financial institutions must now make critical,
long reaching decisions concerning their networks and terminal
equipment, to ensure they can meet and exceed the future
demands of their customers while continuing to control expenses.
The integration of automated deposit transactions for checks
and cash at the ATM allows financial institutions to expand
self-service capabilities for their customers, while reducing
teller lines and associated costs.
The Financial Institution
Several trends in the financial service industry are creating
a new paradigm in the self-service channel. Attracting deposits
is a key strategy for financial institutions looking to
enhance delivery, services, operating efficiencies and overall
profitability. In order to remain competitive, banks are
shifting from a product focus to a customer focus. Customer
satisfaction is dependent on a bank’s ability to offer
a comprehensive suite of services to its customers anywhere,
anytime.
The Consumer
Recent U.S based research indicates consumers use the delivery
channels that are most convenient and that offer the greatest
value for the particular transaction being performed.
Consumer Behavior and Preferences
Globally about 80% of all cash withdrawals occur at an
ATM, while a remarkable number of deposits, about 70% in
the US, are still completed through a teller (Tower Group).
ATMs have historically suffered from a lack of consumer
confidence in deposit transactions. Many consumers prefer
to receive a deposit slip from a teller than a machine.
Other reasons ATM deposits have lagged in include a lack
of confidence in the system, fear of error, limited availability
of funds deposited at the ATM, and earlier cutoff times
However, when consumers are asked about their interest
in performing check and cash deposit transactions in a self-service
environment, the response is favorable. The graph left,
below, shows the likelihood that U.S consumers would use
the ATM to conduct a transaction if it was available.
Single vs. multiple acceptance points
To fully gain consumer trust and confidence in advanced
deposit automation functionalities at the ATM, consideration
must be given to the methods and sequence of transactions.
Although ATMs can be configured with modules that accept
both cash and checks into one acceptance point, it is actually
ideal to separate the two medias to allow for more quick
and efficient document processing. If both checks and cash
are deposited into the same module, the reading mechanism
(check imaging and note validation) will read the cash as
if they were checks to verify the information. An additional
risk with a single acceptance point is the potential for
reduced availability of the deposit features.
With multiple acceptance points, if the bulk note acceptor
is out of service, consumers would still be able to make
check deposits. The complexity involved in the technology
to support cash and check acceptance in the same slot will
have negative impact on reliability. Providing separate
deposit points-- one for cash, one for checks-- is ideal
for achieving deposit automation efficiencies and customer
satisfaction.
Providing separate cash and check points of entry to the
terminal, processing them as two steps in a single deposit
transaction and displaying the total transaction on the
screen as well as on the receipt truly emulates the teller
line experience, and enhances the customers level of trust
and confidence in the automated transaction.
The Impact of Deposit Automation on the ATM
Financial institutions initially adopted ATMs in order
to move routine retail transactions off the teller line,
allowing them to reduce personnel costs and reduce operating
costs in the delivery network, and to better focus branch
staffs on more profitable areas such as lending and merchant
banking. Contrary to these expectations, consumers began
using all delivery channels available to them. As a result,
financial institutions were not able to fully realize the
anticipated efficiencies of the self-service network.
When deposit automation services are added to the functionality
of an ATM, an interesting transformation takes place: the
transaction mix begins to mimic that of the teller. With
the addition of automated deposits to the self-service channel,
financial institutions can offer the majority of typical
teller line transactions at the ATM—but at a fraction
of the cost.
A typical teller transaction costs $1.40, while an ATM
transaction costs $0.40. At a quarter of the cost, deposit
automation makes a strong business case for moving routine
transaction processing to the ATM and devoting the branch
to more profitable sales-oriented activities.
Modifying Consumer Behavior
Some financial institutions have had success migrating
a greater percentage of deposits to the ATM channel by influencing
consumer behavior. Some leading financial institutions simply
extended the cut-off time they credited accounts from 4
p.m. to 6 p.m. Others have successfully offered incentive
programs to use the ATM rather than the teller and some
have gone as far as to charge up to a $3 fee for a teller
deposit transaction.
Considering the Business Issues
Next we will discuss four key areas financial institutions
must address when considering the addition of automation
strategies to the self-service channel:
• increasing efficiencies and reducing costs
• minimizing risks
• branch integration
• ease of use
Increasing Efficiencies and Reducing Costs
Optimizing the functionality of all distribution channels
is a key strategy of financial institutions today. Automated
services help reduce costs and give customers greater choice
in access points for banking services. Around the globe,
many institutions continue their efforts to migrate branch
transactions to the ATM to reduce costs. ATM deposits represent
a significant area of opportunity: on average, ATMs handle
only 10-15% of total deposits. Yet, they have the potential
to handle 40 percent A shift to 40 percent would have significant
impact on teller productivity, saving nearly an hour a day
per teller (Celent, 2003) The majority of ATMs deployed
today are equipped with a standard envelope depository.
The cost of managing the envelope deposits can cost financial
institutions millions of dollars a year dependent on their
network and envelope processing procedures.
For example, many FIs employ a dedicated staff to open,
count and qualify the deposit envelope contents. Cost for
envelopes alone can cost institutions several million of
dollars annually. When bulk note accepting and check imaging
devices are utilized in lieu of the envelope depositor,
the reduction in costs and increased efficiencies are realized
immediately. With bulk cash acceptance, notes have already
been authenticated and validated by the acceptance module
and deposited into the secure safe of the ATM. Upon passage
of the Check truncation Act (Check 21), the check image
will serve as the legal document, thus eliminating the need
for the original check for clearing purposes and significantly
reducing network operating expenses.
Minimizing Risk
Deposit automation minimizes the risks of depositing cash
at the ATM. Cash that is deposited in the module is automatically
verified and authenticated. As a global company, Diebold
is able to incorporate local legal stipulations into the
actual design of the ATM module. For example, the European
Union has instituted Article 6 which states that any suspected
or counterfeit notes must be separated from all other diverted
notes and the note must be able to be tracked back to the
depositor.
This function ensures suspect/counterfeit notes will not
be recycled and can assist in the apprehension of those
attempting to pass fraudulent notes. The speed at which
an imaged check can be cleared significantly reduces the
opportunities for check fraud that plague the current system.
Utilization of check imaging modules will eliminate empty
envelope fraud at the ATM and will remove about half of
the ATM check deposit fraud incidents (see pie chart).
Opportunities for check fraud schemes based on kiting and
closed account fraud will also be significantly reduced
as the imaged check data can be sent to the paying bank
within the same day. Check kiting requires two accounts.
For example, a potential fraudster would have two checking
accounts – one is in bank "A" and one in
bank "B." With no money in bank "A"
a check will be written against that account for $500 and
deposited into the account at bank "B." The fraudster
will then withdraw $400 at bank "B". The teller
will give the $400 in cash and the criminal will disappear
before the check bounces.
Branch Integration
Deposits and cash withdrawals (combined with cashing checks)
are the most common activities performed at bank branches.
Seventy percent of U.S. households indicate having made
a deposit at a branch, while 62% said they had conducted
a cash withdrawal or cashed a check.
After Hours Depository solutions have proved valuable as
an extension of the selfservice network. After hours depositories
linked to the ATM can facilitate commercial deposits, providing
multiple receipts indicating the date, time, and unverified
amount of the deposit.
Ease of Use Consumer research reveals that consumers
will use the channel they feel most comfortable with to
conduct their banking transactions. As financial institutions
invest in advanced deposit technologies at the ATM, they
want assurance that these services will be understandable
and easy to use for their customers. The technologies available
today must offer a consistent user interface and intuitive
directions for operation in order to achieve an acceptable
level of consumer satisfaction. Ease-of use is important
both for the consumer and branch personnel managing dayto-
day operations. Having access to cash in escrow has proven
to be an invaluable feature for bulk cash modules making
it easy for branch personnel to access the customers money
if there would happen to be a dispute. The customer’s
money is secure in escrow until they have agreed with the
deposit amount and accepted transaction which will then
drop the money into the safe.
Technology Solutions
Celent estimates that North American deposit-taking institutions
will spend U.S. $3.7 billion this year on branch automation
technology; Diebold anticipates that spending to rise to
U.S. $4.4 billion by 2006. Technological developments in
the self-service arena will make it possible to meet the
requirements of both the consumer and the financial services
industry with this strategy in mind.
Today banking customers are requiring additional services
from self-service terminals, and the banks view the presentation
of many of these services as a significant profit opportunity.
The integration of automated check and bulk cash deposits
at the ATM allows financial institutions to expand selfservice
capabilities for their customers, while reducing teller
lines and associated costs. Most financial institutions
today employ traditional ATM deposit functionality utilizing
a standard envelope depository. Now, new technology and
pending legislation are combining to drive a trend toward
enhanced deposit automation.
When a financial institution is ready to implement enhanced
deposit automation, next generation ATMs can be reconfigured
with check deposit/imaging modules and bulk note acceptors.
Diebold’s Check Deposit Solutions Diebold’s ATM
check imaging device, the Intelligent Depository Module™
(IDM), used with or without the optional Coin Dispenser
Module, significantly impacts the way checks are processed
at the branch level. The IDM module deposits checks into
ATMs, detects and verifies the MICR line, and, through digital
image processing, displays the check on the ATM screen as
shown in the figure, below left.
Diebold has been equipping ATMs with check imaging devices
since 1993. As Diebold continued to improve upon and evolve
the IDM module, the fourth generation of the IDM was introduced
in 2002. The design philosophy of the (IDM) is to provide
a module that is highly reliable in terms of paper handling,
while maintaining the MICRread capability. In order to reduce
the number of check jams that can occur with the excess
paper handling required to align the check under the read-head,
Diebold designed a transport that optimizes the paper flow
by minimizing the movement of the paper. The advancements
made in scanning and optical character recognition technology
allowed for a design which interprets the MICR data as well
as the “courtesy amount” from the digitized image.
The IDM uses a highly sophisticated Intelligent Character
Recognition (ICR) algorithm to accomplish this. In order
to increase the confidence that the data is “real MICR
data” the transport has an array of sensors that detect
the presence of magnetic ink. The read-rate on the MICR
line using ICR is comparable to the read-rate produced on
the first generation IDM using the magnetic read head. Both
technologies achieved a read rate in the 90s, although service
and inconvenience costs due to jams is significantly less
with ICR. A key factor in gaining customer confidence when
making deposits at the ATM is presenting an image of the
check on the screen for visual confirmation and confirming
the successful completion of the transaction by printing
the image of the check on the receipt, as seen below.
Diebold’s Bulk Cash Deposit Solutions Diebold’s
newest generation of bundled cash deposit, the Bulk Note
Acceptor (BNA), will accept a loose stack of up to 100 notes,
then validate and denominate the notes for immediate deposit
credit. By integrating a refined technology into the traditional
ATM, the BNA establishes a new era in banking self- service:
the effective deposit. Utilizing the bulk cash deposit capability,
the ATM deployer can reduce operating service costs by servicing
deposits less frequently than is required by envelope deposits.
The Diebold BNA cassette has the largest capacity in the
industry, the 6,000 note capacity minimizes the number of
deposit sweeps necessary.
Thanks to the escrow and reject capabilities of the Bulk
Note Acceptor cash accepting functionalities, the consumer
is confident that his cash can be returned at any time in
the transaction process, and the money will not be deposited
into the safe until the amount is confirmed and the transaction
accepted. A disputed customer cash deposit or jam can be
easily reconciled prior to consumer deposit acceptance because
the escrow component of the BNA module is located in the
top-hat, not in the secure safe.
Sophisticated note recognition technologies utilized in
the BNA, which counts and verifies bundles of notes, allows
small business users to deposit an exact amount of cash
quickly and safely, reducing the risk of crime, and with
immediate account credit for the deposit.
The BNA is the ideal solution for financial institutions
that wish to maintain the current ATM functionality of dispensing
cash, but adding a single focused and optimized terminal
with the features of accepting cash, envelopes or checks.
It is also the perfect strategy for institutions looking
to reduce queues, provide 24-hour financial services to
their customers, and give their staff the freedom to sell
and generate revenues more effectively.
Small business users can be confident when depositing bulk
notes from their daily receipts, thanks to the screen display
detailing the verification of notes deposited, confirmed
in print on the receipt to provide proof of immediate credit
of the deposit.
Cash Recycling
The concept of cash recycling has been a topic of discussion
and research for many years. Several issues in the industry
have historically limited the widespread acceptance of cash
recycling into the self-service market, including banking
regulations, price, complexity and reliability of the technology.
In today’s environment, great progress has been made
toward addressing these issues, paving the way for widespread
acceptance of self-service recycling applications. The frequency
of use and the currency mix (smaller / larger denominations)
will be determined by the demographics of the customer base
in the area. For example, if the terminal is located in
a branch office next to a factory where hourly employees
are paid a weekly stipend, the currency mix will be larger.
Bulk cash recycling technology offers immediate credit to
the consumer’s bank account. Currency deposits are
verified during the transaction, unlike envelope deposits,
that are verified later in the day or the next day during
settlement and proofing. The bulk cash recycling terminal
is therefore able to fully emulate a teller transaction,
with a significant reduction in the risk of fraud, by verifying
and validating each note, whether as part of a cash deposit
or withdrawal. Self-service, advanced function bulk cash
recycling terminals are ideal for financial institutions
desiring to fully automate the branch environment. Recycling
technology compliments the current self-service branch deployment
of ATMs, Cash Dispensers or other self-service terminals.
This solution allows the institution to move customers out
of the staffed branch to a self-service environment where
the consumer can not only get immediate credit for deposited
cash and make traditional withdrawal, but also make inquiry,
account transfers and other non-cash type transactions.
Bulk cash deposit capability allows the ATM deployer to
reduce operating service costs by reducing the frequency
of service as compared with envelope deposits. Recycling
goes one step further by reducing service operating costs
associated with replenishing the cash supply at the terminal,
as the notes that are deposited are "recycled"
for withdrawal transactions.
Summary
Diebold anticipates a fundamental change in the way financial
institutions and consumers view and use the selfservice
channel. New technologies, and the enhanced utilization
of existing technologies driven by the passage of the Check
Truncation Act, will power the increased utilization and
effectiveness of the ATM infrastructure. The ability to
accept bulk note deposits and to image checks will have
a dramatic impact on the cost structure, and performance
of the ATM channel. As the nature of deposit taking changes,
so will the nature of the branch, as more routine deposits
are moved to the self service delivery channel.
Diebold is well positioned to assist financial institutions
in the migration to deposit automation. The Opteva™
family of ATMs powered by Agilis™ open software applications
(www.dieboldopteva.com), provide unique solutions that can
deliver on the promise of transaction migration and improved
operating costs. As technology shifts to enable more functionality
and enhanced transactions at the ATM, and as the consumer
base grows in their acceptance of technology as a delivery
channel, the opportunity to further improve operational
efficiencies continues to expand. Deposit automation is
a significant step forward in this evolutionary process.
(Authored by: Anna C. Istnick, Product Marketing Manager,
Global Product Marketing and Management Division of Diebold
)
