Solving the Challenge of Growing ATM Costs: Managed Services or ATM Outsourcing?

women using atm, women smiling at an atm, women smiling in front of a bank

Despite growth in online shopping and cashless technologies, consumers continue to love cash. According to the 2018 Diary of Payment Choice by the Federal Reserve Bank of San Francisco, cash accounts for approximately 34 percent of all payments across age groups, cementing ATMs as a vital touchpoint between financial institutions and their accountholders – especially for younger consumers.

Banks and credit unions face growing challenges as the cost of cash – which can account for 5-10 percent of a financial institution’s (FIs) overall operating costs – continues to rise. Whereas ATM users were once content with surcharge fees as the price they paid for the convenience of quick cash access, recent reports show almost 75 percent of consumers deem surcharge-free ATMs essential. Paired with the growing cost of regulations, financial institutions are exploring third party solutions for increasing efficiency and cutting costs without sacrificing cardholder access to ATMs.

man using atm, man inserting credit card in an atm, bank atm

The Growing Cost of ATM Management

With advancements in security such as EMV and PCI, and the revolving door of Windows operating system upgrades ‒ which sometimes requires expensive hardware upgrades or buying new machines to meet compliance mandates ‒ the cost of ATM management is rising. Routine maintenance, lead times for parts that are built overseas, and tariffs imposed on those imports’ complicate matters even more.

High traffic terminals or large fleets can be especially challenging for FIs to manage as they require more resources and personnel. Cash monitoring, forecasting, delivery and loading are typically only a single facet of an FI employees job duties, pulling them away from more profitable areas of their job like customer service or cross-selling products and services.

Managed Services or ATM Outsourcing?

Although ATM outsourcing is often used as a blanket term for any third-party services, most are not actually ATM outsourcing options. FIs often partner with outside vendors or managed services providers for specific tasks such as 1st or 2nd line maintenance, terminal processing and cash handling. Having an outside vendor manage certain ATM-related tasks can reduce some of the workload, but often create increased vendor management duties for FI personnel.

ATM outsourcing consists of contracting with a dedicated operator to completely manage the operations and daily tasks associated with an ATM fleet. Rather than merely handling specific ATM-related tasks like a managed service provider would, an outsourcing provider offers a complete solution that includes all maintenance, hardware and software upgrades, cash management, handling all regulatory mandates and more so FIs can completely do away with vendor management and compliance worries.

man withdrawing money, cash withdraw, using keyboard on an atm,

True ATM outsourcing offers a range of benefits including:

Reduced Vendor Management – One vendor means one report and one contact to request answers, information or report an issue with any contracted machine.
Better Service – When there are multiple vendors there are often multiple opportunities for miscommunication. A single-vendor operation reduces the instances of errors and helps increase up time.
Easier Compliance – Most outsourcing providers offer regulatory compliance guarantees, reducing the worries and costs generated by ongoing changes to ATM requirements for FIs.

A complete outsourcing solution can also help FIs save on the softer costs of ATM management, such as claims management and processing ‒ leaving more time for employees to focus on building the brand.

To explore the benefits that an ATM outsourcing partner can bring to a FI, and the difference between managed services and outsourcing, download the free white paper, ATM Outsourcing Done Right, from Star Financial Services.