Deposit Automation at the ATM: Thinking Beyond Check 21

Check imaging is one of the most talked-about new ATM features. With digital images now having the same legal status as original checks, banks have a huge opportunity to make significant cost savings and give consumers greater flexibility by shifting transactions from the branch to the ATM. Financial institutions are already thinking and planning for a deposit automation solution that can maximize their effectiveness and minimize operating costs. Decisions made today will pave the way for a more profitable and efficient future for financial institutions.

Check 21 – The End to the Paper Chase
With the arrival of Check 21, financial institutions are seeing major cost savings and productivity gains. It is estimated that the average check is handled several dozen times as it moves through the banking system, and it is possible that check imaging will save financial institutions several billion dollars per year.

Check 21 legislation begins to put an end to the “paper chase” of check processing, making scanned images as legitimate as the original document. As Check 21 becomes a reality, financial institutions are beginning to focus not only on check-scanning capabilities in back-end systems but deposit-taking at the point of entry at locations such as ATMs, in order to capture check images as documents enter the bank. The more that check imaging and deposits can be shifted to the point of entry, the greater the productivity gains.

Today, on average eight percent of ATM transactions are deposits — this figure can be as high as 50 percent for some of the large national banks. (Source: Celent). Deposit automation has a high potential to lower both the costs of check processing and cash handling services, and it also improves the customer’s experience at the ATM.

Saul Caprio, Director Business Development for Wincor Nixdorf USA, told ATMmarketplace in December 2005 that the acceptance of more ATM options is evidenced by the growing number of advanced functionality pilot programs at some of the nation’s largest banks. “When you look at check imaging, almost every significant bank in the country is looking at some sort of piloting program,” Caprio said.

ATMs Today: Single-Check Scanning
Many ATMs are now available with optional bill acceptors that are capable of handling multiple banknotes. In addition, many ATMs can be outfitted with a single-check acceptor that allows one check to be deposited into the ATM without a deposit envelope. The check is scanned, the image recorded, and the document enters the bank without human intervention.

This scenario represents what most feel is the state of the industry today, and a combination of single-check scanning and bulk cash acceptance can automate some forms of deposits. For example, single-check scanning is an acceptable solution for consumers who deposit one or two checks at a time. But it is not feasible for other significant categories of depositors: merchants, commercial customers and retailers who make multiple deposits, with multiple checks and stacks of bills.

The ability to service most classes of branch depositors requires a much more robust deposit-taking capability at the ATM: the ability to accept multiple checks and large deposits of banknotes without a deposit envelope in the same transaction. This level of functionality makes ATM deposits very appealing to businesses, because they make more frequent deposits and want to conduct transactions quickly and efficiently, without having to wait in lines, and at the most convenient time for them, even if it’s after hours.

Automated merchant deposits at the branch may not be suitable for big-box retailers, supermarkets or those companies that deposit thousands of checks and vast amounts of cash. Financial institutions can, however, move the majority of their branch business off of the teller line and onto a completely automated deposit-taking system.

Automating merchant or larger scale deposits requires two key technologies:

• The ability to scan multiple checks at the ATM, not just a single check; and
• The capability to accept larger bulk cash deposits at the ATM.

Moreover, it’s important to make the user experience as friendly as possible, so that the customer is not forced to insert checks into one slot and banknotes into yet another slot. The automated deposit solution must also be economical and improve branch productivity.

To fully reap the benefits of check imaging, financial institutions must move beyond the limitations of only using single-check scanning for consumers and focus on automating deposits for a much larger percentage of their customers with bulk deposit solutions.

Bulk Deposits of Cash and Check — An Innovative Entry into the World of Fully Automated Check Processing
Deposit automation solutions combine the processing of checks and banknotes, allowing customers to deposit both cash and checks in the same slot. The process is very convenient and intuitive for the customer, and it can significantly reduce transaction times compared to manual deposits.
The advantages of the bulk deposit solutions include reducing costs at financial institutions, such as those that arise from the extensive post-processing that night safes entail; greater accessibility and service; and the reduction of manual work at the counter, which allows the bank staff to focus more on its customers. Wincor Nixdorf estimates that banks can save up to $125,000 per branch (example based on a depreciation period of seven years) when using deposit automation solutions.

Deposit automation overcomes the limitations of current ATMs that can only scan a single check, opening up a new world of possibilities for automating most classes of deposits. By having a single slot for both cash and checks, compared to one slot for cash and another for checks, deposit automation offers financial institutions with a simple, one-step operation and clear interfaces. Other benefits of a single-slot deposit automation solution include:

• Faster transaction times due to bundled check deposits
• Easier handling process for the branch operator and service technicians

With a deposit automation solution, financial institutions can automate both merchant and consumer deposits at the ATM, providing significant savings to the bank and a new level of convenience for customers. Deposit automation solutions are easy to use, extremely reliable, and can save customers valuable time that might otherwise be spent waiting in the teller line; plus, it gives a wider class of customers the option to make deposits during non-banking hours. Deposit automation solutions allows branch employees to be freed from handling routine deposit tasks, allowing them to focus on complex, service-oriented transactions such as opening new accounts, answering customer inquiries, and more.

Cash Recycling and Verification
While solutions such as check imaging help branches automate most classes of depositors, branches must also take a look at how they can optimize the large amounts of cash that retail merchants deposit at the ATM. For branches, check imaging means that transportation of paper checks can occur less frequently, with no need for daily check pick-ups. However, this is not the case with cash deposits. Many merchants and retailers not only deposit numerous checks on a regular basis, but make larger cash deposits as well. If financial institutions are to more thoroughly automate the deposit taking process, they must find a way to accommodate and take advantage of the large amounts of cash that some merchants deposit.

This component of deposit automation is cash recycling, the ability for ATMs to reuse deposited banknotes. Currently, an ATM in a high-traffic location might require cash replenishment several times a week, taking up valuable staff time or requiring expensive armored car services. Until now, most ATMs have operated under the following paradigms:

• The financial institution puts in the cash and the customer withdraws it.
• The customer makes an envelope deposit at the ATM and the financial institution collects the envelope deposit at the end of the day.
  With deposit automation, financial institutions can become more self-sustaining by recycling much of the cash that is deposited into the ATM.

Cash recycling requires the balancing of cash input/output to maximize the effectiveness of the solution. Once this is defined, the ATM only has to be attended occasionally, and only to pick up imaged checks, according to the business rules of the bank. In order to balance the input and output of cash and to minimize visits to the ATM by staff or armored carrier, cash recycling can be configured in a wide variety of ways to accommodate varying levels of cash deposits and withdrawals, and be equipped with a deposit automation solution that is designed to image checks.

Getting Started with Deposit Automation: Analyzing Branch Automation Requirements
By taking advantage of a full-function ATM and by adding a deposit automation solution, branches can successfully transition many classes of customers to a completely automated deposit-taking process. In addition, by adding a cash recycling solution, branches also have the ability to deposit bulk checks and large numbers of bills while improving cash efficiency at the ATM.

Deposit automation brings a number of operational improvements that can lower costs while boosting productivity:

• Replacing higher-cost deposit functions with a lower-cost automated solution
• Reduced staffing requirements for routine deposit-taking functions
• Improved customer service for both merchants and consumers during peak banking hours
• Allowing customers to make deposits 24/7 with immediate access to funds, according to the bank’s business rules
• Ability to recycle high-volume deposited cash and lower requirements for ATM replenishment

Incorporating a deposit automation solution begins with the right strategy. No two banks or branches are identical – and neither are their automation needs and solutions. Because each location is different, the internal requirements vary. It is important to thoroughly analyze branch transactions, in order to calculate the optimum level and types of equipment that are necessary for each branch.

A business case analysis can help financial institutions chart a development and financial plan to predict the profitability of the automated solution. It can also analyze the automation requirements of branches to determine which combination of automated ATM solutions is best for a location. This analysis provides key information on operating costs, the return on technology (ROI) investments, and what tasks can most effectively be moved from the teller window at that particular branch. With a business case analysis, customers can fully understand the ROI from implementing a deposit automation solution.

Once a financial institution decides to move to a deposit automation solution for its ATM fleet, a comprehensive marketing plan must be put into place. It is important for financial institutions to remember that moving customers from manual deposits to deposit automation solution will take time and training. Twenty-five years ago, financial institutions and their branches began the same process when transitioning their customers from the teller window to the ATM for cash withdrawals.

Employees may need to be on hand to assist their customers for any questions they may have about check imaging or bulk cash/check deposits. Marketing materials should also be available to customers should they have any questions about the deposit automation process. In addition, instructional programs can be included onscreen at the ATM to guide first-time users.

Making the Right Decisions: Today, Tomorrow and Beyond
Financial institutions should realize there is no single solution for complete automation at the branch. The solution depends on the environment and business rules of each branch and the branch’s unique customer base. However, with a deposit automation solution, branches can maximize their effectiveness while minimizing operating costs. It is imperative for financial institutions to review their ATM fleets and determine the optimum levels of automation for their branches. By incorporating a successful deposit automation solution into their planning, branches can make decisions today that pave the way for a more profitable and efficient future.