Banker’s Digest Feature: Outsourcing ATM Management

Interview with Paul A. Albright, VP, Sales & Marketing Outsource ATM

Banker’s Digest Feature

Paul Albright believes that talking to community bankers about reclaiming capital tied up in their ATM networks is an educational opportunity. During their conversations. Albright says he detects a “light bulb going off” moment when the banker says. “why had I not thought of that before?”

Depending on the bank’s size and delivery channel strategy, the ATM fleet can be a sizable capital investment and a management challenge. Capital investment for a basic ATM in a branch or main office or a standalone sophisticated ATM in a drive-thru facility can range from $6,000 to $40,000 per ATM.

Albright says he detects a “light bulb going off” moment when the banker says, “why had I not thought of that before?”

Albright added that after acquiring the ATM equipment, a bank must connect, maintain, and service each ATM. Depending on the size of the bank’s ATM fleet, many of these services may be contracted with a third party vendor or performed inhouse. The bank will also incur personnel expenses since each of the these functions will require a bank employee’s attention.

Then comes the unwelcome announcement that Microsoft’s support of Windows XP software will end on April 8, 2014. Albright says 90-95% of ATMs operate on the Windows XP. To make matters worse, in the last 2-3 years, community banks have had to upgrade ATM hardware and software to comply with new Americans with Disabilities Act (ADA) requirements. While spending to upgrade for ADA compliance, no one gave much thought to a future without Windows XP support and the additional expenditures to move to the Windows 7 or the upcoming EMV requirements, which still have not been finalized in the U.S. Albright said regulators have warned about the need to upgrade software and security features, which include ATMs and computer networks.

The required software upgrade expenditure comes at a time when community banks are seeking to improve profitability, improve efficiency rations, and manage their regulatory compliance. Most institutions have exhausted large-scale cost reductions and are now turning to more creative ways to improve profitability and efficiency ratios. Outsourcing is a key strategy.

Albright’s company, Outsource ATM, is among a handful of companies which offer community banks an alternative strategy to get the most out of their ATM fleets. He counsels bankers to “own the benefits not the hardware.”

Albright said a typical community bank ATM fleet is comprised of 3-10 ATMs. They are a depreciating capital investment which requires a continuing expenditure of money and management time. With Microsoft’s announcement, the community bank is faced with the requirement to bring the ATMs fully up to date. If its fleet is large, the bank can accomplish this inhouse; if the fleet is small, it can seek an outside consultant.

An ATM outsourcing company may provide another alternative. Its services may include:

  • purchase of the bank’s existing fleet with a lease-back agreement;
  • the opportunity for the bank to continue receiving its ATM fees with which to offset the outsourcer’s fees;
  • the opportunity to brand ATMs at additional permanent and/or temporary locations, such as entertainment venues; and
  • maintenance, servicing, and upgrades to the ATMs to keep them compliant and functioning properly.

This partnership allows the bank to focus on non-depreciating, higher earning assets.

He counsels bankers to “own the benefits not the hardware.”

With Windows XP support coming to an end in April, and with up to 95% of ATMs still running it right now, Albright says the security risks are enormous for both banks and their customers.

Paul A. Albright is vice president, sales & marketing at Outsource ATM, Cypress, TX. For contact information, click here.

Bankers Digest
Volume 144, No. 12
March 24, 2014
Feature Article by R. Gilbert Blackman Jr.
Dallas, TX