FinTechAutomationWhat’s the Value of ATM Deposit Automation?

What's the Value of ATM Deposit Automation?

“ATM deposit processing stands as perhaps the second largest benefit to be gained by a bank’s movement to Check 21-enabled deposit processing,the first being the benefit gained from its effect in significantly reducing the back-office processing structure.”

In November 2004, Jerry Silva, senior analyst at TowerGroup, made this fairly powerful statement about the value of deposit automation to a financial institution. Yet, in a recent survey by BAI, more than half of the responding financial institutions indicated that they had not determined what role the ATM would play into their Check 21 strategy. The industry seems fairly certain about the benefits of Check 21 in the item-processing environment, and the large volume of checks presented at the branch is driving interest in point-of-entry solutions. But the benefits associated with deposit automation in the self-service channel may not be as obvious.

Deposit Automation and ATM Operations

One of the early promises of ATMs was more cost-effective transactions for financial institutions. The average cost of an ATM transaction is frequently compared to the average cost of a teller transaction. Although the numbers vary slightly from study to study, the average ATM transaction cost is generally considered to be about 25 per cent of the cost of the average teller transaction. Averages can be deceiving though.

If the transaction cost associated with an envelope deposit at an ATM is compared to the cost of the deposit transaction at the teller, the ATM costs are actually higher. Blame it on the envelope. Unlike withdrawals or inquiries that are actually completed at the ATM, the traditional ATM deposit is dependent upon the labor-intensive, time-consuming process of opening the envelopes and verifying the contents. Eliminate the envelope and you eliminate the associated costs.

Deposit automation replaces manual handling of deposit envelopes with technology. Checks are imaged and read electronically. Currency is verified and counted. Images and transaction data are transmitted to a central site where the item processing can be completed electronically with minimal operator involvement. No need for daily deposit sweeps. Check 21 ensures that a financial institution can clear the checks without forwarding the original document to the paying bank – an image of the check or a document created from the image is used for further processing. Savings occur in the ATM operation as well as in item processing.

Deposit Automation and ATM Fraud

Empty envelope fraud can present a real problem in the world of ATM deposits. Cautious funds availability policies help mitigate the risk for financial institutions, but deposit automation can greatly reduce that risk. No longer is the financial institution in the position of authorizing a “blind” transaction. The presence of a check and/or currency is verified prior to the transaction request being sent to the host.

In addition to intentional fraudulent activity, innocent consumer errors that result from failure to include all of the deposit content in the envelope or incorrect addition result in time-consuming, costly exception handling. Deposit automation provides an intelligent deposit environment that minimizes the potential for such errors.

Deposit Automation and the Consumer

Consumers love ATMs. In fact, consumers perform more transactions at ATMs than at any other delivery channel. But the majority of consumers continue to show a preference for taking their deposits to a teller rather than an ATM. Once again, you can blame it on the deposit envelope! That pesky envelope prevents the ATM from providing the same high-quality deposit service at the ATM that the consumer receives from the teller.

At a teller, a consumer receives a confirmation of the deposit. With an ATM envelope deposit, the acknowledgement only confirms the amount the customer keyed in as part of the transaction. With deposit automation, the consumer can view the imaged checks and currency totals on the screen and receive printed images and currency summaries on the receipt. Consumer confidence in the transaction is significantly improved.

The time-consuming process of sweeping envelope deposits and processing the contents forces many financial institutions to have earlier deposit cut-off times at an ATM than at a teller. That difference encourages more deposit activity in the branch. Similarly, consumers may find stricter funds availability policies at the ATM than at the teller due to the inability of the financial institution to confirm the content of the ATM deposit until the envelope is processed. But deposit automation changes the dynamics of the ATM transaction allowing extended cut-offs and more flexible funds availability policies.

Financial institutions that have implemented intelligent deposit handling at their ATMs have generally found that deposit activity migrates to that channel from the teller. It’s good news for the ATM channel – more transactions, and more cost-effective transactions – and it’s good news for the branch – less focus on routine transactions and enhanced focus on meeting consumers’ informational and advice needs.

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