A Window on the Future of the ATM
A report from Celent discusses the significant impact the roll-out of the Windows operating system has had on the global ATM industry and the way banks are looking to use these terminals in their distribution mix. In the US and Europe, 38 percent and 60 percent of banks, respectively, are using Windows technology
According to a report from US consultancy Celent looking at the evolving ATM channel, the rapid growth and evolution of the personal computer (PC) industry over the past several decades is a good metaphor for the future of the ATM market. In the PC space, interoperability is largely taken for granted today: consumers and businesses simply assume that software will run on a PC and peripheral devices will be compatible. The ATM world is only just beginning a similar period of evolution.
Today’s ATM market is shifting towards more open architectures, as marked by the rapid adoption of ATM hardware running the Microsoft Windows operating system, the emergence of multi-vendor software and the move toward TCP/IP based networks.
Financial institutions are rapidly migrating from the old OS/2 standard to Windowsbased ATMs, and Windows has now become the de facto standard for ATM operating systems. In the US, Celent estimates that 38 percent of bank-owned ATMs were running Windows at the end of 2006, a number expected to rise to 69 percent by 2009. The majority of banks in the US are operating at least some Windows-based ATMs today, with many planning to complete the migration of their ATM fleets over the next two to three years. In Europe, the migration has been more aggressive, with over 60 percent of ATMs already running Windows.
Multiple manufacturers
Many financial institutions in both the US and Europe today have diverse ATM fleets that include hardware from multiple manufacturers, often as the result of growth via acquisition. But with the move to open ATM architectures, ATM software and hardware are no longer tightly coupled. As ATM manufacturers have migrated their hardware to run on Windows rather than OS/2, they have also invested in developing next- generation multi-vendor software based on open standards, namely XFS.
Originally developed by Microsoft, the CEN XFS (or simply XFS) standard provides a common application programming interface for accessing and manipulating the various devices of an ATM. XFS essentially provides a multi-vendor software layer for device abstraction, allowing financial institutions to choose the application programs that drive their ATM equipment and resulting in the decoupling of the hardware and software buying decisions.
Adoption of the XFS standard has also given rise to independent providers of ATM application software, giving financial institutions even greater choice in sourcing their ATM software separately from hardware. Celent estimates that 22 percent of ATMs globally are currently running next-generation multi-vendor (eg, XFS-based) software, a figure expected to rise to 37 percent by 2009.
In addition to changes on the hardware and software fronts, the ATM environment is also undergoing changes in the area of network communications. In order to take full advantage of their Windows-based ATMs, financial institutions are also adopting communications based on transmission control protocol/internet protocol (TCP/IP). A key advantage of TCP/IP connectivity over older network architectures such as X.25 or SNA is its ability to support the remote distribution of client software to the ATM through the use of software distribution tools.
Five major suppliers
There are currently five major suppliers of multi-vendor ATM application software in the market: Diebold, KAL, NCR, Phoenix Interactive and Wincor Nixdorf. KAL and Phoenix Interactive are pure- play software vendors dedicated to providing software that can run on multiple self-service hardware platforms. The remaining providers are incumbent hardware vendors that are placing increased emphasis on their software suites coincident with the move to Windows-based ATMs and the adoption of the XFS standard.
The advantages of open standards at the ATM have been proclaimed for a number of years. Over the past three years, enough financial institutions have made the transition to non-proprietary environments that the benefits to banks can be measured, as can the challenges they face on the path to modernising the ATM channel.
Benefits include improved customer experience, ease of innovation, and the decoupling of hardware and software purchasing decisions. For instance, more than 90 percent of customers surveyed by one financial institution responded that the bank’s new ATMs were better than other ATMs they had used. These customers gave high ratings to the bright and easy-to-read screens as well as the ability to customise preferences.
This survey was conducted via the ATM itself at the end of the customers’ transactions, illustrating the bank’s newfound ability to use the ATM as a dynamic and easy-to-update tool for interacting with customers rather than just a static device that delivers cash. There are challenges, however. The XFS standard does not yet address all the transactions that an ATM can perform. Furthermore, evolution of the standard is typically a year or two behind the product development efforts of hardware manufacturers.
There is also the issue of software configuration and change management. The level of change occurring along the ATM software stack in an open environment can be daunting. Application software is frequently modified to address user interface changes, the launching of marketing campaigns or the addition of new transaction types. Banks also face the need to frequently install Windows security patches.
Antivirus agents
Antivirus agents are now a must at the ATM. Managing a Windows environment and keeping ATMs up to date requires much more effort than in a closed OS/2-based environment. In response, financial institutions that are running a TCP/IP-based network are implementing software distribution, configuration and change management tools to help them manage this complexity.
At many financial institutions, the move to Windows-based ATMs running on TCP/ IP-based networks is catching the attention of banks’ chief security officers because of the new security requirements this migration poses. Suddenly, software firewalls and anti-virus software agents are required in the ATM environment.