ATM Deposit Automation Improves Security, Speed, Efficiency

May 27, 2005

“Automated teller machine [ATM] deposit processing stands as perhaps the second-largest benefit to be gained by a [financial institution’s] movement to Check 21-enabled deposit processing, the first being the benefit gained from its effect to significantly reducing the back-office processing structure.”
—Jerry Silva, senior analyst, TowerGroup

Silva makes a fairly powerful statement about the value of deposit automation to financial institutions. Yet, in a recent survey to assess Check 21 readiness within financial institutions, more than half of respondents indicated they hadn’t determined how the ATM would play into their Check 21 strategy. The industry seems fairly certain about the benefits of Check 21 to 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 frequently is compared to the average cost of a teller transaction. Although the numbers vary from study to study, the average ATM transaction cost generally is considered to be about 25% of the cost of the average teller transaction. But averages can be deceiving.

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 a withdrawal or an inquiry that’s completed at the ATM, the traditional ATM deposit depends on 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 financial institution—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 credit unions, but deposit automation can eliminate 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 member 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 Member

Members love ATMs. In fact, they perform more transactions at ATMs than at any other delivery channel. But most members continue to prefer 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 the member receives from the teller.

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

The time-consuming process of sweeping envelope deposits and processing the contents forces many credit unions to have earlier deposit cut-off times at an ATM than at a teller. That difference encourages more deposit activity in the branch. Similarly, members may find stricter funds-availability policies at the ATM than at the teller due to the inability of the credit union 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.

Credit unions that have implemented intelligent deposit handling at their ATMs generally have 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 members’ informational and advisory needs.

Peg Bost is director of financial industry marketing for Diebold Inc., North Canton, Ohio. Contact her at 616-575-7860. This story first appeared in Credit Union Magazine at www.creditunionmagazine.com and is reprinted with permission.

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