Which is Right for Your Institution?

Introduction to ATMs and ITMs in Banking

Since their introduction more than 50 years ago, automated teller machines (ATMs) have revolutionized the banking industry. Customers can now conduct some of the most common financial transactions independently and at their leisure, without having to rely on a live teller to assist them.

Now, the banking industry seems to be undergoing another upheaval with the introduction of interactive teller machines. ITMs combines the traditional functionality of an ATM while offering greater self-service transaction and the ability to speak with a live teller to complete your transaction.

With over 500 institutions and 12,000 devices deployed, ITMs are gaining in popularity but still require a strategic plan. As such, you might be left wondering whether ATMs or ITMs are better for your bank or credit union. This guide will discuss everything you need to know regarding the question of ATMs or ITMs, the pros and cons, security, cost, installation, and leading providers for each.

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Technology in Financial Institutions

Growing Market Demand

Over the past several years, we’ve seen a growing market demand for up-to-date technology that benefits both banks and other financial institutions as well as their customers.

Financial institutions have a bad reputation: they’re seen as increasingly old-fashioned and technologically backwards. New inventions such as mobile banking, cryptocurrencies, and robo-investing have disrupted the traditional financial sector. If financial institutions don’t adapt to changing consumer demands, they risk becoming obsolete.

Perhaps the biggest shift in the consumer tech landscape has been what we call the “Amazon Effect.” These days, consumers expect that they can order food or call a car and it arrive within minutes, with just a few quick taps on their smartphone. The success of Amazon itself has been largely because it keeps innovating beyond consumers’ expectations, whether that’s same-day delivery via drone or the world’s first self-service grocery store

Increase Revenue with Technology

In today’s on-demand culture, financial institutions can’t expect their clients to remain loyal to archaic service delivery models. As the millennial generation takes on more buying power, their behaviors and preferences will become increasingly important. For example, 58 percent of customers under 45 considered the quality of a mobile app when looking to switch banks.

The final reason to use more financial technology? It simply makes economic sense. According to a 2012 study, each in-person interaction with a bank teller costs the business $4, compared with $0.17 for digital financial transactions and $0.70 for an ATM. By implementing new technological solutions, financial institutions can cut expenses and increase revenue while building deeper relationships with customers in person.

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Key Indicators Your Financial Institution Can Benefit from Technology

Can Your Institution Benefit from an ATM or ITM?

Despite the rapid pace of tech innovation, there’s no evidence that bank branches will disappear any time soon:

Just because branches aren’t going away, however, doesn’t mean that they couldn’t use some improvement, especially with their technology. Here at QDS, we’ve learned to recognize a few important signals that a financial institution in need of a technological update:

  • Long wait times: If you have lines that stretch out the door, it’s a clear sign that you could benefit from a technological boost. This usually indicates that your business mainly uses manual operations, and may even have recently cut staff.
  • Shorter opening hours: Similarly, if your business is open for less than the standard number of working hours per week, you aren’t keeping your customers as happy as they could be. Whether it’s because you only have a skeleton crew of employees or there’s not enough demand to have full-time hours, it’s a sign that something needs to change.
  • Few choices: Offering clients little choice in how to execute a transaction is a sign that you’re behind the times. For example, customers may want to withdraw bills in smaller denominations, but you only have $20 bills available.
  • Mismatched employees: Employees at financial institutions have two main roles: tellers and service representatives. The former provides services such as deposits and withdrawals, while the latter assists with customers’ questions about their account. If one side of the business is overstaffed while the other is understaffed, technology can better align staffing models for increased productivity.

The four issues above are some key indicators that your financial institution stands to gain from incorporating technology into its workflow. The question that faces you now is: which strategy is right for you — ATMs or ITMs?

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Automated Teller Machines (ATMs)

What is an ATM?

An ATM is an electronic device that allows a bank’s customers to complete basic financial transactions. These may include withdrawing cash, making deposits, checking their balance, and transferring money between accounts.

Most ATMs consist of several elements, including:

  • An electronic screen that customers use to interact with the device
  • A card slot for entering the customer’s debit card
  • A cash dispenser through with money is withdrawn
  • A slot for depositing cash and checks
  • A printer for distributing receipts and balance statements
  • A keypad for entering numbers
  • Buttons for navigating the ATM interface

What are the Benefits of ATMs?

ATMs have several advantages over in-person transactions, which is why three-quarters of Americans use ATMs as part of their day-to-day banking. These benefits include:

  • 24/7 banking: ATMs can be used both during and outside normal business hours, as long as the machine is stocked with money. This is highly convenient for customers who may not be able to come into a branch during the daytime.
  • Location-independent: ATMs don’t need to be attached to a branch of the bank that owns them. In fact, some of the most common locations for ATMs include restaurants and bars, gas stations, supermarkets, and hotels. This gives customers access to banking services even when they’re not near a branch.
  • Lower expenses: As noted above, transactions at an ATM are far more cost-effective for financial institutions than transactions with a live teller. There’s no need to pay salaries and benefits for an ATM, the only costs are hardware, software, and maintenance.

What are the Problems with ATMs?

Of course, ATMs aren’t a perfect solution or a total replacement for in-person interaction. Some of the drawbacks of ATMs include:

  • Future-proofing: Like any other technology, ATMs age and become outdated. It’s essential to future-proof your ATM fleet to ensure that you can still meet customers’ demands. ATMs that can’t be updated to add new functionality will reduce customer satisfaction and hamper your competitive edge.
  • Availability: ATMs work well when they’re available, but can be a major customer pain point when they go down or run out of cash. This is especially true for community banks and credit unions that may not have a nearby branch. In today’s on-demand, 24/7 world, people will get frustrated if they can’t easily complete their transactions.
  • Security: While reasonably secure, ATMs are still susceptible to crimes such as robbery and fraud due to their external location. Some thieves mug ATM users while they’re completing a transaction, while others physically remove the entire device. In addition, criminals can install fake card slots called “skimmers” that read the information on a card’s magnetic strip.

ATMs and Branch Security

The cost of an ATM can vary widely, but the median price tag is roughly $30,000. To get an accurate estimate, however, you’ll need to account for considerations such as:

  • Base price: The base price for an “island” drive-up ATM ranges from $26,000 to $34,000, depending on the vendor.
  • Installation: ATMs typically weigh more than a ton and require technical knowledge to set up, so the transportation and installation costs are high. You should budget anywhere from $1,500 to $3,000 for these services.
  • Deposit automation: Envelope depositories are no longer offered by any ATM manufacturer. Deposit automation allows you to instantly credit customers’ accounts and provide images on printed receipts that prove the deposit was successfully completed. The hardware cost of adding deposit automation carries a price tag of $12,000 to $25,000. In addition, the backend process for getting items from the ATM to your back office clearinghouse costs an additional $15,000 to $30,000.

ATM Installation Process

Installing an ATM is an intricate process that requires a lot of forethought and planning. Two to four weeks before the installation, you should know the answer to questions such as:

  • Where will the ATM be located?
  • Has the site been surveyed to ensure that the location is feasible and appropriate?
  • What is the contact information for all parties involved in the installation?
  • Is there a telephone or network jack within 3 feet of the ATM’s proposed location?
  • Has the ATM network been notified of the upcoming installation?
  • Has all the requisite paperwork from the ATM network been filled out?
  • Will the ATM communicate using dial-up, wireless or TCP/IP?
  • Have you received the ATM encryption keys yet, or will they be loaded remotely during installation?
  • Does the ATM have a network address, router address, subnet mask, local port ID, remote port ID, and network port ID?

For more information about how to prepare for an ATM installation, download our ATM installation checklist.

Installing an ATM with Deposit Automation

If you plan to install an ATM with deposit automation, you have even more work to do beforehand. The components of deposit automation are:

  • Cash and check deposit module hardware: Modern ATMs with deposit automation allow customers to deposit both cash and checks in bulk, together or separately. This slashes transaction time by half while adding convenience for the customer.
  • Consolidation and validation server: Images of the cash and checks from the ATM must be sent to a server where they are stored and validated. You can either host this server yourself in-house or have it hosted and managed for you. Both options differ in terms of cost and suitability, depending on your business needs and requirements. In-house solutions typically cost $15,000 to $30,000 up front with 15-20% annual fees.
  • Image transfer agent: The image transfer agent is software that resides on the ATM that isolates check images and encrypts them for transfer to the server. This agent and its license are purchased directly from the service provider; costs are typically in the hundreds of dollars.

Leading ATM Solutions

The top ATM vendors in the United States include:

  • NCR: The Atlanta-based NCR (The National Cash Register Company) currently enables 700 million transactions every day.
  • Hyosung: First entering the U.S. market in 1998, South Korean ATM manufacturer Hyosung has since grown to become the largest and fastest-growing ATM provider in the country.
  • Diebold: Perhaps best known for attaching its name to the electronic voting machines, Diebold has been in the ATM market since the 1970s.

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Interactive Teller Machines (ITMs)

What is an ITM?

As the name suggests, interactive teller machines (ITMs) build on the functionality of ATMs while adding additional transaction capability. More specifically, ITMs allow customers to speak with an employee located in a remote location. This face-to-face, real-time conversation occurs over video chat displayed on the ITM screen.

The basic components of an ATM, such as the receipt printer and card reader, all carry over to ITMs. However, ITMs usually include additional features such as:

  • A video camera and telephone for conducting conversations with a teller
  • A coin dispenser for distributing different denominations of coins
  • An ID scanner for verifying the customer’s identity
  • A signature pad

ITMs first appeared at the beginning of the 2010s, with more than 400 NCR machines deployed by 2014. As of 2018, ITMs composed less than 10 percent of installed ATMs and ITMs. However, more and more financial institutions are considering ITMs as a supplement to, or replacement for, their ATM fleet.

What are the Benefits of ITMs?

  • Savings per transaction: ITMs and ATMs drastically reduce your per-transaction expenses—from $4 with an in-person teller to below $1 for a self-service device.
  • Operational efficiency: The vast majority of transactions performed by a teller can also be handled by an ITM: cash withdrawals, check cashing, cash and check deposits, and loan payments.
  • Revenue growth: ITMs free up your branch employees to build deeper relationships with clients who require human interaction. In addition, ITMs represent the opportunity for cross-selling and upselling when tellers are chatting with customers, informing them about new services and opportunities.
  • Increased convenience: While employees aren’t available 24/7, ITMs usually provide live video beyond a branch’s standard operating hours. In addition, tellers can provide assistance to customers who have lost or forgotten their ATM cards. By showing the teller a valid ID, customers can still verify their identity and complete a transaction.
  • Competitive advantage: ITMs are a relatively new innovation, which makes them interesting and memorable for your customers. Deploying ITMs can be the key differentiator between your business and your competitors, especially for market segments such as millennials that are attracted to innovation.
  • Greater market presence: Because ITMs can perform nearly all of the tasks done by a live teller, they can extend your reach at a fraction of the cost of opening another branch. You can strategically install ITMs in high-traffic areas such as college campuses, retail parking lots, manufacturing plants, and malls, increasing your brand recognition and market footprint.

What are the Problems with ITMs?

Despite the numerous benefits of ITMs, there are several logistical challenges to overcome. The relatively high cost of implementation, staff training and scheduling, and high cost of IT infrastructure can deter some institutions from making the investment in ITMs.

  • High cost of entry: Like ATMs, ITMs have a high cost of entry, with an average total cost of $60,000 to $80,000. You may have to install multiple ITMs in order to begin seeing the benefits of scale listed above. In addition, ITMs incur more expenses than ATMs, including the operating costs and salaries to run a call center and a high-bandwidth network connection to enable video chat. This leads some institutions to consider ATM outsourcing as a strategy.
  • Staffing challenges: Your branches may only be open weekdays from 9 to 5, but customers will likely want to use the ITM beyond normal business hours. Deploying an ITM requires tellers who can work shifts in the early morning and late evening. You’ll also have to decide how to handle times of peak capacity, when all the remote tellers at your call center may be occupied.
  • Call center implementation: Not all institutions have invested in a call center environment, so ITMs may require you to make this additional investment.
  • Extended transaction time: Interacting with a teller usually takes longer than using an ATM for the same transaction. In addition, if customers are required to speak with a teller for every transaction, they could be left waiting during hours of peak usage.

ITMs and Branch Security

ITMs are a highly useful tool for improving your branch security. Like ATMs, ITMs help to reduce the circulation of cash at your branch among tellers, making it a less attractive target. They make it easier to reconfigure your branch layout with security in mind with no need for bulletproof glass, placing tellers in the locations that make the most sense.

Of course, the biggest security advantage that ITMs have is the use of virtual tellers. By moving tellers to an offsite location, it’s much less likely that your branch will be robbed, which improves morale and satisfaction among your employees.

ITM Buying Guide

The ITM Buying Guide

No matter where you are in the ITM buying journey, QDS will provide you with valuable insights into this self-service technology. From strategy development to solution implementation, our ITM Buying Guide can help you make more informed and confident decisions every step of the way.

ITM Cost

Like ATMs, the cost of ITMs can vary wildly depending on your business goals and requirements. Below, we break down the major expenses for you:

  • Machine: The machine itself will likely cost between $60,000 and $80,000, depending on the model and vendor. ITMs come in different versions, including drive-up, walk-up, and standalone.
  • Back end: Setting up the server and integrating the ITM with your core processes may cost between $30,000 and $100,000, depending on the vendor. This includes the cost of the server, as well as any necessary software licenses and integrations.
  • Professional services: To ensure that all your infrastructure is functioning correctly, you’ll need to spend anywhere between $40,000 and $110,000, depending on the vendor.
  • Annual fees: The bank or credit union may be charged annual fees between $20,000 and $25,000.
  • Unit Maintenance: Annual hardware and software maintenance costs between $5,000 and $12,000 per unit.

As you can see, ITM costs add up quickly. To deploy multiple ITM units and start generating a return on your investment, you’ll probably want to have capital between $250,000 and $750,000.

ITM Installation Process

The ITM installation process is very similar to the ATM installation process, with a few added considerations. As mentioned before, you’ll need to verify that the proposed location has a high-bandwidth connection, so that video chats with tellers won’t be disrupted.

In addition, if deploying your first ITM, you’ll have to deal with the logistics of running the call center, including training employees, finding office space, and setting up the IT infrastructure.

Leading ITM Solutions

Using ITM SolutionThe two main ITM providers in the U.S. are Hyosung and NCR. Although Diebold has deployed an ITM solution in a few larger banks, it has yet to see broader market rollout.

Hyosung focuses more on allowing customers to do transactions in self-service powered by core integration. The core integration allows 80 to 90 percent of transactions to be done without teller assistance. This enables a greater number of self-service transactions so that live tellers can spend more time on meaningful client engagement. ActiveTeller allows assistance in-lobby to be done via tablet or utilizes remote video to support drive through or provide addition in-lobby support. 

NCR, on the other hand, offers the video teller solution Interactive Teller. Instead of focusing on self-service, as Hyosung does, NCR ITMs are intended to centralize and scale face-to-face interactions between tellers and clients, replicating the traditional branch experience.

The decision of Hyosung vs. NCR ITMs will therefore depend on the branch strategy you want to pursue. If you want to encourage self-service and more personal relationships with clients, then Hyosung is your best option. On the other hand, NCR is likely better if you want to centralize the teller function at scale, i.e. for financial institutions that are spread across a wide geographical area.

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Finding the Right Solution For Your Branch

Which Solution is Right for You?

Now that we’ve discussed ATMs and ITMs in great detail, just one question remains: how can you decide whether an ATM or ITM is best for your branch?

To find the right answer, first, think about your staff and branch strategy. With the advent of ATMs (and now ITMs), branches are becoming less a place for transactions and more a place for education and building customer relationships.

If this evolution is in line with your own observations, then you should seriously consider ITMs. Because they can handle a greater variety of transactions, ITMs help free up your employees for more meaningful interactions that require human interaction. If your strategy is more on the traditional banking side then ATMs can be a more cost-effective play.

You might also have real estate concerns, in which case ITMs can be a smart choice. ITMs can expand your territory and customer reach by placing units in remote locations, such as parking lots and private businesses. This gives you the chance to expand your footprint without having to build a new branch.

Finally, consider your drive-through strategy. Most financial institution these days have at least one or two tellers to work the drive-through lanes. If you have ITMs in the drive-through, these tellers can be reassigned to other functions. Instead of 10 tellers manning the drive-through at 10 branches, for example, you can have 3 remote tellers in your call center manning the 10 ITMs.

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When to Work with an ATM Managed Services Provider

Find a Trusted Partner

ATMs and ITMs are far from being simple machines; they perform some of the most important functionality that branches can offer. Unfortunately, they’re also expensive, prone to failure, and subject to regulatory and compliance issues.

If you want to drastically simplify the process of managing your ATM and ITM fleet, strongly consider working with an ATM managed service provider (MSP). When you find the right MSP, you’ll see benefits such as increased uptime, fewer service calls, and significantly lower costs.

Need advice on picking an ATM or ITM? Quality Data Systems is ready to assist you. We can help you make the right choice and see it all the way through, from strategy to implementation and technical support. We take the time to understand your goals, challenges, and opportunities as an organization, and then work with you on solutions that are tailor-made to your needs. By partnering with a thought leader like QDS, you’ll be better positioned for long-term ITM success.

Speak With An Expert

At QDS, we believe in listening and asking the right questions to uncover the real challenges organizations face so that we can help them find the best solution.


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