Two weeks ago I wrote an article about outsourcing your ATM platform, the pros and cons. It was funny how many private messages and emails I got on the subject. Everyone from vendors, processors, manufacturers, and deployers. Some wanted to have a serious debate, some wanted to share war stories, some wanted to tell me their good outsourcing experiences, and others just wanted to give me a ‘high-five’ for the Indiana Jones reference. I sense I will have a few interesting conversations at ATMIA in two weeks.
I am not anti-outsourcing. I am realistic about the future of business. We are in 2015, the world has changed. People are replaced by companies and machines regularly. I should know, we implemented deposit automation in 2009 and watched the deposit settlement team cut from eight plus a supervisor to four plus a supervisor. Those staff weren’t let go, they just moved into open positions in other areas. In my article I simply stated that outsourcing was not the end-all-be-all, and that companies have to look deeper than just the financials when making this decision.
ATM outsourcing has its place. There are benefits and there are pains. Some deployers have very successful outsourcing experiences. We do implement some forms of outsourcing. Everyone does….second line maintenance is paid for [I’m estimating] by 95% of ATM deployers, except maybe some big boys, or 3rd party deployers that may do their own. We use several good manufacturer services, and we use another company for professional quarterly site surveys. Both companies do a very good job for the work we pay for them to do. But we still regularly monitor and document their activities.
What caught my eye today and got me typing was a decent article about reducing the financial and operational impacts of the move to EMV for Credit Unions. I think that the article has some very good points and practices: culling the herd of your debit card portfolio is an effective way of cutting back reissue expense, and I am glad the writer mentioned it!
Then he got to outsourcing:
ATM outsourcing leverages the economies of scale that larger ATM deployers enjoy while allowing credit unions to reduce the cost of maintaining and updating ATMs.
Additionally, credit unions can recapture a portion of the capital originally invested in the ATM by selling this asset to the outsourcing company taking over their ATM management. This process transfers the processing, liability and maintenance of the ATMs to the new ATM owner.
Again, there are benefits. But you must weigh it against the risks as much as the impact to the wallet. As one commenter posted to my earlier article, “Too often FIs see the net gain in reduced operating expenses and don’t factor in the offsetting risk and costs associated thereto.”
What risk some ask? Security. Brand. Reputation. Visibility. Reliability. Operational. Financial.
I ran across an example of extremely poor managed ATM this past week. The ATM is owned by a large deployer. They have outsourced some parts of their ATM platform, and it’s pretty obvious by the condition of things that they are either not monitoring or not holding the branch and/or the ATM management company responsible for the condition of their ATMs:
Here are just a few things you could see upon arrival at the terminal, or using it:
•Module indicator lights not working
•Security down lighting not working
•Fascia lighting not working
•Security camera housing cracked
•Operational stickers vandalized
•Compliance stickers damaged, and not up to spec
•Aged cigarette burns and non-ATM stickers present on ATM
•Network signage in disrepair and network logos non-compliant (not pictured)
•’Homemade’ signage printed by branch slid into network signage blocking network logos (not pictured)
*(all identifying marks blocked out for anonymity)
Two things jump out to me… (1) I honestly had no desire to stick my card into an ATM that looked so bad, much less get an account at this FI, and (2) if the front end of their ATM platform looks like this….what’s the back office, SECURITY, and operations side look like?
Cyber attacks, localized digital attacks, skimming, brute force attacks, etc. are all very real risks that are increasing in frequency. If a deployer or their 3rd party management is not monitoring their ATMs to the point that they physically look like this, for me it calls into question how they are holistically looking at their platform, and monitoring its health.
Yes, I realize I do this for a living and I am overly critical of the site. I also realize that there are some outsourcing vendors that do an excellent and professional job than is demonstrated here. Anyone that reads this and has an example of a good ATM outsourcing vendor, I encourage you to comment with the name of the company so others can take advantage of your positive experience.
So the narrative ends with the idea that, if you only have a handful of ATMs, maybe a partial or full outsource solution is right for you. Maybe the same is true if you have dozens or hundreds of ATMs. The key is that you still have to have someone internally monitoring the health of the platform, its security, its compliance, its reliability, and/or reviewing the reports from your outsourcing vendor documenting how well the ATM platform WITH YOUR NAME AND BRAND ON IT is operating, being maintained, and being secured.
Brand smearing, reputation damage, and confidence deterioration occur easily, are difficult to stop, even harder to repair, and exponentially expensive in the long term.
Choosing outsourcing solutions can be an exceptionally smart and beneficial business move, especially in light of the growing expense of maintaining functional, enhanced, and secure ATM platforms these days. But make sure to analyze more than just the dollars & cents when you do so, choose wisely, and monitor often.
Cruachan Consulting Services, LLC 