ATM & Self-Service Software Trends

2022

ATM &

SOFTWARE TRENDS

Sponsored by

Developed & published by

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Ann All, contributing

Tom Harper, CEO

Kathy Doyle, President

Bradley Cooper,

Kim

Less Cash, Fewer ATMs

Cash has been on a steady decline with the growing adoption of digital payment. However, the COVID-19 pandemic accelerated this trend. In the UK, for example, UK Finance found that 23.1 million consumers used cash only about once a month in 2021, up sharply from 13.7 million in 2020. The banking body believes this trend will continue, predicting that cash will be used for only six percent of payments in the UK by 2031.

As cash payments decrease, so do the number of ATMs. The number of machines worldwide dropped two percent in 2021, according to the Global ATM Markets and Forecasts report. Declines in ATMs were especially large in China, Russia, and Brazil. Some countries did see small increases in 2021, including the U.S. and India. The report forecasts a further global decline of five percent between now and 2027. It predicts just two regions will see growth in ATMs after 2022: Latin America and the Middle East and Africa.

That doesn’t mean ATMs are going away, though. They’ve come a long way since they were invented by John Shepherd-Barron in 1967 because he wanted to be able to obtain cash outside of normal banking hours. Convenient cash access is still the primary purpose of the ATM. Today it can do much more, though, even offering much of the functionality of a fullfledged branch if desired.

And customers still like them. A 2021 PYMNTS study found that 41 percent of respondents used ATMs for some portion of their banking business. In fact, digital trends may be ushering in a new role for them.

With the new possibilities for ATMs, the way banks support them will need to change, said Steve Hensley, KAL’s Executive Vice President for Global Sales. Even though most ATMs today currently use Microsoft’s Windows operating system, their software still tends to be closely tied to the companies that manufacture the machines. With such a small number of vendors providing software, this has also limited the kinds of hardware that can be used.

“Up until now, the ATM has been treated as an island,” Hensley said. “But with the increasing adoption of cloud technology and the introduction of XFS4 (the latest introduction of a clientserver architecture for ATMs and other devices), banks will have the option of using different software and different hardware modules. Up until now, ATMs have moved at the vendors’ pace. Now they can move at the banks’ pace.”

A Self-Service Branch Strategy

Forty-five percent of those surveyed for the 15th edition of the ATM & Self-Service Software Trends report said the way they delivered services made them more reliant on ATMs in the past 12 months. Another 34 percent said their reliance on ATMs remained about the same. Just 16 percent said they became less reliant on their ATMs.

In follow-up interviews, respondents cited numerous factors for the ATM’s continued importance, including branch closures, staffing shortages, customer interest in expanded service hours, and new technologies such as contactless and card-free transactions.

Some banks are taking their cues from other industries and moving more interactions to self-service channels. This leaves staff free to handle more complex – and typically more lucrative – transactions. PNC Bank is in the midst of an ambitious project to convert roughly 60 percent of its branches to digital-first banking centers, reports Crain’s Cleveland Business (free subscription required). While staff will be on hand, they will direct customers with basic transactions to self-service machines like ATMs.

A PNC spokesman told Crain’s that staff numbers at converted branches will remain the same, at least initially. But they will assume new roles. “Employees will be less focused on completing transactions and will be more focused on assisting customers with complex financial needs and solutions and providing financial advice and expertise,” the spokesman said.

Interview Insights

INTERVIEW QUESTION: 45% of banks told us that in the last 12 months, the way they deliver services has made them more reliant on their ATMs. Why do you think this is? Has the way you deliver your services made you more or less reliant on your ATMs?

Yes, we are more reliant – not only in the last 12 months, but also in the last years starting with the moment when we have closed the cash desks and continuing with offering different services to our customers at ATMs (e.g., cardless transactions).

— Unguroiu Vlad, ING Bank, Romania

Yes, most certainly during periodic COVID spikes, ATMs and self-service in general was the only option for clients when lobbies were required to be closed. Closing on our merger this year, ATMs (and branch locations) are a critical client need and we’ve found our clients vocal about the number of locations and presence in certain geographies. We will soon be embarking on a transaction migration and branch transformation strategy which will include careful examination of in-lobby self-service and ATM locations and transaction support.

— Ryan Loesch, Truist Financial Corporation, U.S.

It depends a lot on the point of view of the type of client of each bank. Currently in Mexico the banked population is very low and the digitalized population is even lower. There is a dependency on developing ATM services in order to depressurize branches. However, there is an inflection point where digital banking and ATMs will converge, and I think that is where most banks are moving.

— Rodrigo Huys Ordaz, Banorte, Mexico

Post pandemic, there was a significant impact on ATM transactions as people were confined to their homes. This is the time when digital payments gained prominence. However, once people started moving out of their homes for work, we saw an increase in the number of ATM transactions. Also with increased vaccination across the country, ATM transaction volumes have again picked up. Even though the usage of digital modes of payment increased exponentially, ATMs continue to be a part of the payment ecosystem. Our bank focuses on the need and convenience of our customers, and Kotak ATMs are an important channel for servicing them.

— Puneet Kapoor, Kotak Mahindra Bank Ltd., India

Yes, the ATM today is a very convenient and efficient channel for providing remote services. Due to the process of digitizing plastic cards and an increase in the number of contactless cash withdrawals (wallet, contactless withdrawal, ApplePay, etc.), the ATM will continue to acquire more and more new functions.

— Oleg Semenenko, TBC Bank, Republic of Georgia

Yes, location consolidations, staffing shortages, and the increased consumer pressure for expanded service hours make the ATM the ideal platform to address 24/7/365 accessibility.

— Matt Snow, Regions Bank, U.S.

Yes. Many banks sped up cashless (or cashierless) branch strategy and/or reduced number of branches. In such locations, banks and clients are more reliant on ATMs when it comes to cash and other services that ATMs can provide.

— David Novotný, Česká spořitelna, Czech Republic

ATMs Taking Over for Tellers

Mobile phones and apps have changed how we do everything, from dating to driving. Banking is no exception. The popularity of digital banking, especially via mobile apps, doesn’t seem likely to fade. An Ipsos-Forbes Advisor U.S. Weekly Consumer Confidence Survey found that 78 percent of Americans with bank accounts prefer using their bank website or a mobile app to conduct their financial business. Apps edge out websites, with 41 percent selecting it as their favored channel, vs. 37 percent for websites.

Just as changing digital habits are impacting the number of ATMs, they are also impacting the number of bank storefronts. The consumer preference for digital banking has led to a dramatic decline in physical branches. The number of branches in the U.S. has been steadily declining since 2008. There was an especially large dip in 2020, due to the pandemic.

Like ATMs, though, it’s not likely that brick-and-mortar branches will go away. In a recent report based on its 2021 Digital Banking Survey, PwC found that 25 percent of bank consumers identify as “phygital” – which PwC defines as active users of both digital channels and branches. This is an eight percent increase over 2020.

Jonathan Valenti and Ryan Alderman, both principals in Deloitte’s Financial Services practice, say consumers favor digital channels for routine transactions – but prefer in-person assistance for more complex services like applying for a loan and opening a new checking account. They also prefer the human touch for informational purposes like asking about new products or getting financial advice.

This seems to be what PNC is counting on with its new branch strategy. The Crain’s article quotes a PNC executive who said the bank’s goal is “to create the space and the time for our branch employees to facilitate the in-person interactions that we know are so valuable to our customers.”

More banks may adopt this model as they seek to lower their branch overhead while keeping their customers engaged. To make this model work, at least some ATMs will likely need to add more robust functionality, including the option of remotely interacting with tellers. These fuller-function machines are often called interactive teller machines (or ITMs). Nearly 18 percent of those surveyed for the ATM & Self-Service Software Trends report already have ATMs with this feature, while 30 percent plan to implement it in the near future.

Customers Like Contactless Transactions

Deloitte’s Valenti and Alderman say that mobile banking apps should be positioned at the center of a multi-channel strategy. They cite several types of functionality that should be included in a successful app, one of which is prestaging ATM transactions.

There was strong interest in integrating ATMs with mobile phones among ATM & SelfService Software Trends respondents. Nearly 41 percent of them said they have already implemented this technology, up from 23 percent last year. In addition, nearly 32 percent have implemented the technology for contactless transactions.

At Česká spořitelna, the largest bank in the Czech Republic, the bank’s recent implementation of pre-staged transactions has been hugely popular with its customers. It saw several thousand of the new withdrawals in the first month of production. The transaction, which the bank calls QR withdrawal, is completely touchless.

The bank uses ATM software from KAL to facilitate these transactions. The software integrates with its mobile banking application (called George). All ATMs in the bank’s fleet display a unique QR code on the home screen. Customers submit their withdrawal request via George, scan a QR code at an ATM within 15 minutes and receive their cash – no PIN or card needed.

“Our clients can prepare everything in their mobile application and then just pick up the money from any of our 1,500 ATMs,” said David Novotný , the bank’s Product Owner/Squads ATM Network and ATM SW Innovations. “This feature has other benefits too, such as not needing to have your card on you at all or needing to remember your PIN. Some clients also appreciate the speed and privacy, as you can pre-stage the transaction whenever you have time, like on public transport or in the privacy of your home.”

Interview Insights

INTERVIEW QUESTION: 37% of banks say that touchless ATM withdrawals are a priority for them to implement in the near future. Do you think this is due to increased convenience or consumers being more conscious in the post-pandemic world? How did the pandemic affect your ATM network?

China banks have offered touchless ATM withdrawals since quite a long time ago, including contactless withdrawals, phone withdrawals, face withdrawals, and QR code withdrawals. Most reason is to make services more convenient. Of course Covid reduced the usage of cash also to some extent. China banks turned off the recycling function of ATMs during heavy Covid time to avoid contact.

— Xie GongHui, Zijin, Fulcrum Technology Co.,Ltd, China

I believe this is mostly convenience driven. The global pandemic has had an impact in the reduction of cash usage, hence ATM transaction volumes, although we are now seeing a return to similar pre-pandemic volumes.

— Pablo Santa Teresa, Anonymous Bank, Asia-Pacific

Let us bring a different perspective on “contactless ATM,” which is iris/neuro ID authentication methodologies. The ATMs may become contactless with a flexible integration of technologies such as IRIS + neuro ID + voice recognition etc

— Nathan Anand, Bank in SEA, Cambodia

Yes, cardless transactions on ATMs and POS are relevant and will continue to be adopted. The self-service channels like ATMs and digital grew since the pandemic, with a clear winning by the digital channels. ATMs continue to be stable regarding total amounts of cash disbursed prior and post-pandemic, but reduced in number of transactions.

— Juan Carlos Espinosa Ortega, Former Head of Digital Banking & Innovation for HSBC Mexico, Mexico

Speed of the transaction is the key here. Less about the pandemic and more about the perceived risk of handling cash in the public space.

— Matt Snow, Regions Bank, US

I think that is not only about the pandemic situation but how you can give better experience for our clients. (You can save your time). We have already implemented touchless in Czech Republic.

— Miroslav Šimončík, Czech Republic

If you are referring to NFC at the ATM I think it is not only safer from a pandemic perspective but also from a convenience (speed) and a safety (less likely to encounter skimming) perspective. Transaction volume differences and cash delivery impacts were a couple impacts from the pandemic. Also, more ATM employees worked from home vs. in the workplace, which was a significant change.

— Anonymous, From a Bank in the U.S.

Apart from pandemic impacts, FDK (function display key) buttons and card reader for some models were very prone for vandalism and skimming.

— Francis Chaula, NMB, Tanzania

Lower Cost and Better Experience Are Top ATM Priorities

The top two priorities for respondents of the ATM & Self-Service Software Trends survey are reducing operating costs and improving customer experience. Both achieved a rank of about seven on a scale of one to 10. This put them well ahead of increasing ATM availability, the third-ranked priority with a score of 5.64 percent.

One technology that helps banks achieve all three of these objectives is cash recycling. It allows both customers and businesses to deposit cash into ATMs that can then be dispensed to other ATM users. While the capability has been around since the 1980s, interest in it seems to be growing. This may be driven, at least in part, by moves like PNC’s to migrate more branch transactions to a self-service model while reserving staff for more strategic interactions.

In addition to freeing up staff, cash recycling offers several other key benefits:

• Enhanced Security – With no need for bank personnel or cash-in-transit personnel to load cash into machines, the environment is more secure.

• Less Downtime – Since machines aren’t available for use when they are being loaded with cash, recycling also results in less downtime.

• Lower Cost – In addition to reducing CIT costs, banks lower the labor expenses associated with back-office counting and handling of cash. According to a Diebold Nixdorf whitepaper, one of its bank customers in Belgium cut its cash management costs by 50 percent after adopting cash recycling.

Time to Move Off the Mainframe

Technologies must be updated to support all of this new functionality for the ATM and other channels. Banks will need to strengthen some key capabilities, notably updating their technology architecture. Banks will “almost certainly need a platform that is API-enabled, allowing (them) to rapidly adapt to any new opportunities, whether internal and external,” write PwC analysts in a recent report based on its 2021 Digital Banking Survey. “Cloud-based systems now make it far easier to develop and test products, scaling up and down resources quickly as demand rises or falls.”

While banks have clung more tightly to their networks of physical data centers and mainframe computers than many other industries, that appears to be changing.

In 2021, JPMorgan Chase spent $2 billion on new data centers designed to support cloud capabilities, reported a Network World article. At the same time, it also utilized cloud platforms from Microsoft, Google, and AWS. The article quotes Chase CEO Jamie Dimon as saying the company planned to move 30 to 50 percent of its applications and data to the cloud in 2022.

One of the advantages of cloud migration is the enhanced flexibility it offers, Dimon told financial analysts on a call explaining Chase’s move. “In the old days, you used to modify that mainframe system four times a year, [for] big releases and stuff like that... Now you can go in and modernize a little piece of it every week, every day. And so that’s why it’s so important to do this.”

Chase isn’t the only big bank making a strong cloud play. In February, U.S. Bank announced its intent to consolidate its physical data centers in favor of a more cloud-centric infrastructure. Just a few months later, Accenture released a report called The Great Cloud Mainframe Adoption: What Banks Need to Know. According to the report, 82 percent of banks surveyed planned to move more than half of their mainframe workloads to the cloud. Most of them intend to do so within five years

Again, the pandemic was a factor. It accelerated banks’ cloud plans because it forced them to quickly move physical operations such as call centers to virtual environments. Other reasons banks are finally making their move, according to Accenture:

• Cloud providers have proven they can meet demands for security and availability as well as address strict regulatory requirements

• The number of technical personnel with mainframe skills continues to decline

• The cost of supporting aging mainframes is gowing.

To take advantage of cloud capabilities, banks need a way for their applications to more easily reside in the cloud. That is part of the impetus behind the latest revision of the XFS (extensions for financial services) standard. The current version of this client-server architecture, 3.X, was released in 2000. Its major innovation was providing a common API that allowed banks to choose ATM software irrespective of the hardware being used. The standard has undergone several iterations in the 20 years since it was first introduced and is now receiving its first major overhaul.

This newest version, XFS4, was created by a committee with more than 30 members, including ATM heavyweights like KAL, Diebold Nixdorf, and NCR. It was released to the international standards body CEN in January. CEN’s role is to ensure the standard is independent and not controlled by any single vendor.

Of special interest to ATM deployers, the standard:

• Is OS agnostic, giving them the ability to use any operating system they like

• Offers native support for end-to-end security

• Allows hardware devices like card readers to be exposed directly into the cloud.

The new standard has the potential to be “very disruptive,” said KAL’s Hensley. “It allows banks to start envisioning the future direction for their ATMs.”

Not surprisingly, XFS4 isn’t well-known outside technical circles. Forty percent of respondents of the ATM & Self-Service Software Trends survey had heard of it, while 60 percent had not.

In an effort to raise awareness of the new standard, KAL established an open-source workgroup to create an SP-Dev Framework. The framework will be freely available for anyone to use. Its purpose is to facilitate the rapid creation of new SPs and to enhance the interoperability between applications and the new SPs. The group also hopes to assist with the migration of XFS3 applications to XFS4 and to influence the design of new hardware types to work with XFS4.

About 60 companies are part of the group, Hensley said, including ATM manufacturers, ATM component vendors, system integrators, test tool developers, and software vendors. The group is open to all and is a good way to become more familiar with how the new standard will affect development roadmaps.

While he acknowledges that it could take several years to implement XFS4, Hensley said it’s important for banks to have it on their roadmaps. “They should be asking in their RFIs and RFPs how vendors will support it,” he suggests.

Brad Nolan, Vice President and Chief Marketing Officer for Hyosung America, said the emerging standard is spurring interest in managed services among banks.

“XFS4 is still relatively new, having only been released this past year. While the modernized, cloud-based, OS agnostic architecture has promise, it will take time to implement as changes such as these require new device drivers and services to be established,” Nolan said. “Many banks lack the investment dollars and technology resources to undertake an overhaul of their ATM stacks and are increasingly looking to managed service providers to bring their expertise to the table.”

Interview Insights

INTERVIEW QUESTION: XFS4 is the new major version of the XFS global software standard for ATMs, although many banks told us that they have never heard of it. It is operating system agnostic, cloud based and provides end-to-end security. What do you see as the biggest benefits of XFS4 to your future plans for your ATM network?

XFS4 will provide more flexibility to the banks when selecting and implementing type and make of ATM devices to be included in the ATM, OS, etc.

— Ricky Fang, Impromptu Solutions Sdn Bhd, Malaysia

The biggest benefit is system agnostic. This can reduce the costs of ATM solution and to be independent from Window platform.

— Anonymous, Poland

We should all look at this as a major transition away from legacy/proprietary code that hinders us from quickly fixing known vulnerabilities.

— Eric Stone, MUFG Union Bank, N.A., U.S.

This being OS agnostic and cloud based technology, there would be a shift from the traditional architecture of ATM driving from central application. That would bring down the cost as well as deployment time for any new product on ATMs.

— Manohar Bhoi, Electronic Payment & Services Pvt Ltd, India

The biggest benefit for the banks will be to expand their networks and work with multi-vendor platforms, as opposed to the traditional monopolies existent between ATMS and the expensive regional switch and processing companies.

— Mauricio Thierry, Hyosung Solutions, Mexico

Flexibility with OS and multi-vendor software are the keys to maintaining any fleet of devices in a world where a single sourcing model is also a single point of failure.

— Matt Snow, Regions Bank, U.S.

This new standard may be able to rebuild banks’ ATM business, speed up the development of smart branches, offer better customer experiences. We keep watching and studying on the new standard.

— Xie GongHui, Zijin Fulcrum Technology Co.,Ltd, China

What About Windows 11?

When asked what they thought the biggest benefits of XFS4 would be, 31 percent of respondents to the ATM & Self-Service Software Trends survey chose operating system independence. This was well ahead of the second most popular choice, faster innovation, named by 23 percent of respondents.

The overwhelming majority of ATMs use Microsoft’s Windows operating system. The response to the XFS4 question may point to banks’ dissatisfaction with upgrading Windowsbased ATMs. The complicated exercise doesn’t just involve the banks themselves. ATM manufacturers must create the device drivers that allow the OS to run on their machines, and transaction processors must certify it to use in their networks. The upgrades often require hardware upgrades and, in worst-case scenarios, sometimes render ATMs obsolete.

Moving ATMs from Windows 7 to Windows 10 proved to be an especially big challenge because many banks attempted it during the pandemic. Supply chain issues created long waits for new hardware, and staff was in short supply to visit machines that needed field upgrades.

Some banks are still using Windows 7, which exposes them to increased security risks from running an old OS and possible fees for being in violation of PCI DSS requirements. Microsoft released a newer version of its flagship OS, Windows 11 IoT Enterprise, in October of 2021. Yet there seems to be little interest among financial institutions in looking at Windows 11.

Sixty-six percent of respondents to the ATM & Self-Service Software Trends survey said they had already upgraded some or all of their ATMs to Windows 10. Thirteen percent haven’t yet done anything but are planning to migrate to Windows 10 in the relatively near future. Twelve percent are considering alternative solutions, while just three percent are changing their plans and waiting for Windows 11.

Scott Anderson, Vice President, Banking Software Product Management at Diebold Nixdorf, isn’t surprised. He said that most financial institutions upgrade their OS because of regulatory and/or PCI requirements.

“PCI dictates you should use an OS that still receives security updates/fixes. Some financial institutions try to extend this as long as possible by buying Microsoft ESUs or compensating

security controls,” Anderson said. “Most in the industry follow the LTSB/LTSC version of Windows IoT with the latest LTSC version being Windows 10 LTSC 2021. This channel is supported for 10 years or until Jan. 13, 2032. So, I don’t see OS upgrade cycles change as they are mainly dictated by the lifecycle policy provided by the OS vendor and the lack of desire from any financial institution to upgrade the OS to just upgrade the OS. Windows 11 will not change this.”

Interview Insights

INTERVIEW QUESTION: 66% of banks told us that they have already upgraded some or all of their ATMs to Windows 10. Do you plan to migrate your ATMs to Windows 11? Are alternative operating systems (such as Linux) interesting to your organization? Why?

We are in the process of migrating to Windows 10. Linux was discussed before migration process, but additional expenses for Linux support on ATMs was more expensive than Windows 10 licenses.

— Tengiz Papidze, JSC United Finance Corporation, Georgia

We are fully migrated to Windows 10, and I see us staying with 10 vs 11 in the near future. The factor that might drive us to 11 would be to take advantage of cloud APIs that may be more accessible to Windows 11. However, this would be part of a comprehensive cloud strategy.

— Ryan Loesch, Truist Financial Corporation, U.S.

China banks are less willing to upgrade to Windows 11, mostly considering the stability of system. And because Microsoft stopped supporting Windows 7, some banks began to plan to upgrade to Windows 10. Many more banks started to try Chinese brand Linux; on one side to reduce the upgrading cost of Windows, on the other side, banks didn’t see ATM performance improve too much even upgrading Windows.

— Xie GongHui, Zijin Fulcrum Technology Co.,Ltd, China

I believe the banks will only plan to migrate their ATMs to Windows 11 one year before end of support for Windows 10. Linux will be a good alternative for the banks, as they will not have to worry about spending much on ATM hardware upgrade whenever a current version of Windows OS is coming to the end of support.

— Ricky Fang, Impromptu Solutions Sdn Bhd, Malaysia

We are yet to upgrade the ATMs to Windows 10. We would like to explore other options like Linux or multi-OS environment to overall reduce the cost, efforts, and downtime on account of OS version upgrades.

— Manohar Bhoi, Electronic Payment & Services Pvt Ltd, India

Yes, we are planning to switch to Windows 10, but we are not considering switching to Windows 11 yet. Ideally, I would like to have Linux as an operating system, since this is an open platform and does not require the infusion of such financial resources compared to Windows.

— Oleg Semenenko, TBC Bank, Republic of Georgia

Until there is a requirement to do so, we will stay on Windows 10.

— Eric Stone, MUFG Union Bank, N.A., U.S.

Time will show us what possibilities we have and then everything needs to be evaluated – stability, support, licenses, operational costs, etc.

— David Novotný, Česká spořitelna, Czech Republic

Considering Linux as a Windows Alternative

While XFS4 opens up the possibility of using an operating system other than Windows, it won’t happen quickly, Diebold Nixdorf’s Anderson said. “Multi-vendor was and is important for financial institutions as it enables them running the same application on multiple vendors’ hardware, and, by this, enabling a free choice of vendor. But for decades CEN/XFS was only available on Windows and all low-level drivers and tools were all developed on Windows. Turning that ship will take time.”

One option for an alternative operating system for ATMs is Linux. It has already proven itself in demanding financial environments including the New York Stock Exchange, which uses it for generating quotes and processing orders. It is well suited to cloud deployments, thanks to its minimal software stack and thin client approach. Enterprise vendors like Red Hat provide and support Linux distributions.

While XFS4 makes it possible to use Linux on ATMs, both service providers and client applications will need to be addressed, notes Kit Patterson, a Senior Software Architect at KAL.

Service providers are like device drivers for ATM devices, and XFS defines the interface for them. These service providers are tied to the hardware, so they typically have to be written

by the hardware manufacturer – or alternatively, a third party, writing service providers for specific hardware. While there are no XFS4 service providers available for production use today, manufacturers are actively working on implementing them.

The KAL-sponsored open source SP-Dev Framework simplifies implementing service providers, Patterson said. “The .NET-based framework runs on many platforms, and it’s already been demonstrated running services providers on Linux platforms including Red Hat Enterprise Linux, and ‘Raspbian’ Linux on inexpensive RaspberryPi hardware.”

Once XFS4 service providers become available on Linux hardware, it will be possible to create native client applications that take advantage of the flexibility and cost advantages of Linux systems. Client applications can be written using all of the native technologies on Linux. Also, different versions of Linux (distributions) can be picked to support different levels of hardware, including small inexpensive systems or even resource-constrained legacy systems. Customers can pick a Linux distribution with a price that matches their needs, Patterson said – though KAL recommends a fully-supported version such as Red Hat Enterprise Linux.

XFS4 also supports cloud based environments. This opens up new architectures for ATMs, with distributed client applications running in the cloud that connect to user-facing ATMs. The ATM can run on low-powered hardware with a small footprint version of Linux, or even on a firmware-powered machine without an operating system. This obviously minimizes the cost of implementing and maintaining ATMs.“The application can take full advantage of the power and cost savings possible with the cloud,” Patterson said.

Existing applications will need to be rewritten to work with XFS4 service providers, Patterson said. KAL’s Kalignite Platform can help with this, since it will transparently support both XFS3 and XFS4 service providers. “Bigger changes will obviously require more work, but with bigger advantages. For example, creating a purely ‘cloud native’ application using XFS4 service providers might require a major rewrite or a completely new application.”

New Way of Working

In addition to adopting technologies used in mobile application development, some banks are also looking to adopt a way of working that is common among mobile development teams. Called DevOps, it involves bringing together development and IT operations teams with the aim of shortening development cycles and more quickly reacting to customer needs.

A large Czech Republic bank credits a combination of a DevOps model and multi-vendor software from KAL with its ability to deliver more frequent innovation. Where the bank previously did one or two ATM software releases a year, it now does them every four to six weeks. The bank has introduced contactless transactions, offers instant payments at ATMs,

and even sends SMS messages to customers if they forget to take their cash or their card at ATMs. Not surprisingly, this approach has enhanced customer satisfaction. Its customers rank ATMs as their favorite of its bank services.

Two keys to making the DevOps model work are mutual trust and excellent communication between the development and production teams, points that are highlighted in a video that details the project .

The teams worked together to identify areas where automation was most needed. One of those areas was testing. The bank is now gradually introducing automated testing for stability, performance, and virtual reality for its most used transactions. Automation contributes to a higher quality of releases, and it gives the teams more time to pilot and design new services and technologies.

Devil Is in the Details

Increasing technological complexity and upgrade cycles are two factors that appear to be increasing interest in managed services. It’s an appealing proposition to let an outside party handle all of the details of upgrading and maintaining ATMs. There are many different kinds of managed services, from outsourcing a single service such as cash management or ATM monitoring to using a third-party provider for complete turnkey management.

Respondents to the ATM & Self-Service Software Trends survey tapped day-to-day operational monitoring and management (mentioned by 54 percent) and ATM software development and testing (mentioned by 44 percent) as the top two types of managed services they are interested in for their ATM estates. Forty-three percent said they were interested in outsourcing all ATM responsibilities. Just 18 percent said they had no interest in managed services for ATMs.

Both Hyosung America’s Nolan and Diebold Nixdorf’s Anderson say interest in managed services is growing among their customers.

As more financial institutions reduce their physical footprints and convert their branches into advising centers (much as PNC is doing), ATMs and other self-service devices will be more prominently seen as a brand ambassador and a touchpoint for consumers to manage their finances, Anderson said. Because of this, they “cannot afford to have an ATM network that is not high performing.”

“FIs are realizing that managing the ATM channel is not their core expertise. They are looking at how they can outsource to experts who have the expertise and sophisticated tools to ensure they keep up with new trends and continuously refresh it based on new requirements

to meet consumer requirements, compliance, regulations, etc.,” Anderson said. “By outsourcing their ATM estate, FIs can reduce complexity, deliver a broader range of services and a more compelling user experience, and increase revenue.”

“Self-maintaining an ATM fleet can be costly, and is becoming increasingly risky as the sophistication of cyber crime rises,” Nolan said. “More and more banks are looking to managed services providers who have already made investments in security and customer experience to provide turnkey ATM management.”

Interview Insights

INTERVIEW QUESTION: One of the outsourcing models KAL and other vendors offer is providing complete day-to-day operational monitoring and management for your ATM estate. What is your opinion on using managed services for your ATM estate? Do you already outsource some/all of your ATM services such as software development, testing, monitoring etc.?

We have a full ATM/CDM outsourcing model. Bank isn’t owner of devices anymore – all processes are on outsourcer’s side. There is still our logo on the ATM/CDM network.

— Katarzyna Kardasz, NG Bank Slaski S.A., Poland

We are a very large bank with a lot of internal support. As a result I do not see us pursuing full managed services at this time. We do rely on third parties for software development and some monitoring.

— Anonymous, U.S.

We are completely insourced for monitoring. Better, faster and cheaper are the three requirements to consider for any outsource model. Always hard for me to imagine a third party more interested in keeping our machines running than our own team members.

— Matt Snow, Regions Bank, U.S.

We already provide managed ATM services to other customers, hence we certainly see merit in this model.

— Pablo Santa Teresa, Anonymous Bank, Asia-Pacific

For day-to-day running of our ATM network, we have outsourced the activity to managed services vendors. Development and testing of any new software is done jointly by the bank IT team and the vendor’s technical team.

— Puneet Kapoor, Kotak Mahindra Bank Ltd., India

No, we currently do not have any outsourcing models. Maybe a SOC (security operations center) could be interesting.

— Alejandro González Calzada, BanCoppel, Mexico

ATM services outsourcing is common in China, including software development, testing, maintenance, etc. Meantime China banks are increasing internal technology teams and setting up banks’ own technology sub-companies, to enhance the ability of technology self-control.

— Xie GongHui, Zijin Fulcrum Technology Co.,Ltd, China

Many Things to Many People

Most of us are familiar with the story of the blind men and the elephant. When six blind men are introduced to an elephant for the first time, each comes away with a vastly different opinion of what the great beast is like. The one who touched the elephant’s leg compares it to a tree, while the one who felt the truck believes it is like a snake. The others liken the animal to a wall, a spear, a rope, and a fan.

As with the parable of the elephant, an ATM is many things to many people. Much depends on where it is deployed and what kind of technology it supports. That seems clear from this 15th edition of the ATM & Self-Service Software Trends report. Respondents see it as everything from a basic cash dispenser to a sophisticated substitute for a brick-and-mortar bank branch.

One thing seems clear: new technologies and service models will be needed to keep the ATM relevant in an increasingly digital world. “Our vision is to take the existing ATM, extend it with XFS4, and integrate it in the cloud,” said KAL’s Hensley.

Survey Demographics

Similar to 2021’s ATM & Self-Service Trends report, respondents this year were fairly evenly divided between financial institutions and others (a category that includes independent ATM deployers, service providers, transaction processors, and ATM hardware vendors). Forty-six percent of respondents identified themselves as FIs, while 54 percent were others.

Geographically, the largest representation came from North America (33 percent), followed by Asia with 21 percent and Europe with 19 percent. The largest number of respondents, 43 percent, have one to 500 ATMs. This is followed by 31 percent with 501-2,000 ATMs and 25 percent that have more than 2,000 ATMs.

APPENDIX

Analysis of financial institution survey results

of

interface

interface

ATM withdrawal

Touchless ATM withdrawal

of the above

of the above

deposits for off-us customers

deposits for off-us customers

teller assist

Remote teller assist

Video wall with relevant charts and graphs for ATM estate monitoring

Video wall with relevant charts and graphs for ATM estate monitoring

Biometrics (e.g. facial recognition for identification)

Biometrics (e.g. facial recognition for identification)

Video electronic journal Other Support for net promoter score

Video electronic journal Other Support for net promoter score

of

all that apply.

Mobile phone integration Advanced security (TR34 for RKL, TPM,

Mobile phone integration

transactions

security (TR34 for RKL, TPM, Whitelisting etc.)

etc.)

transactions

infrastructure

7.

Touchless ATM withdrawal

Customer-centric

(e.g.

interface

recognition for

Remote teller

deposits for

etc.

8.

Video

Support

Support

None

in

Select

9. What are your priorities for

ATM network? Prioritise the following with “1” indicating most important and “9” indicating

important:

Improving ATM security

Improving ATM security

Improving ATM security

Migrating transactions to self-service

Migrating transactions to self-service

Migrating transactions to self-service

Tightening integration between ATM and mobile

Tightening integration between ATM and mobile

Tightening integration between ATM and mobile

Deploying more frequent updates

Deploying more frequent updates

Deploying more frequent updates

Improve speed of transactions

Improve speed of transactions

Improve speed of transactions

Increasing ATM availability

Increasing ATM availability

Increasing ATM availability

Simplifying your ATM network management

Simplifying your ATM network management

Simplifying your ATM network management

Improving customer experience

Improving customer experience

Improving customer experience

Reducing your operating costs

Reducing your operating costs

Reducing your operating costs

3.44

5.04

4.43

3.44

3.34

3.34

4.43

5.04

5.04

4.43

4.34

4.34

3.44

3.34

5.64

5.64

4.34

4.69

4.69

4.69

7.14

5.64

7.14

6.95

6.95

10.

your

Don’t know

Don’t know

No

Don’t know

7.14

6.95

11. Last year, around 40%

Considering the recent W11 announcement,

about upgrading to W10 in the relatively near

best describes your circumstances:

Already upgraded some or all ATMs to W10

Already upgraded some or all ATMs to W10

Already upgraded some or all ATMs to W10

Haven’t done anything but am still planning

Haven’t done anything but am still planning

Haven’t done anything but am still planning

migrate to W10 in the relatively near future

W10 in the relatively near future

to W10 in the relatively near future

Changing plans and waiting for W11

Changing plans and waiting for W11

Changing plans and waiting for W11

Considering alternative solutions

Considering alternative solutions

Considering alternative solutions

12.

you heard of

13. What do you think the biggest benefits of XFS4IoT will be?

Operating system independence

Operating system independence

Operating system independence

Operating system independence

Faster innovation

Faster innovation

innovation

innovation

don’t know

I don’t know

know

I don’t know

Improved security

Improved security

Improved security

Lower cost 5%Cloud native support

Improved security 11%Lower cost 5%Cloud native support

Lower cost

Lower cost 5%Cloud native support

Cloud native support

14. What types of managed services are you interested in for your ATM estate? Select all that apply:

Day-to-day operational monitoring and management –trouble shooting, software distribution, helpdesk etc

Day-to-day operational monitoring and management –trouble shooting, software distribution, helpdesk etc

Day-to-day operational monitoring and management –trouble shooting, software distribution, helpdesk etc

Day-to-day operational monitoring and management –trouble shooting, software distribution, helpdesk etc

All software development and testing

All software development and testing

All software development and testing

All software development and testing

All ATM related responsibilities

All ATM related responsibilities

All ATM related responsibilities

All ATM related responsibilities

ATM host processing – terminal driving, acquiring, switching etc.

ATM host processing – terminal driving, acquiring, switching etc.

ATM host processing – terminal driving, acquiring, switching etc.

Not interested in managed services for our ATMs

ATM host processing – terminal driving, acquiring, switching etc.

Not interested in managed services for our ATMs

Not interested in managed services for our ATMs

Not interested in managed services for our ATMs

15. What alternative banking delivery services are you considering or have already implemented? Select all that apply:

Mobile and home banking services

Mobile and home banking services

Mobile and home banking services

Additional banking services in retail spaces

Mobile and home banking services

Additional banking services in retail spaces

Additional banking services in retail spaces

Additional banking services in retail spaces

Remote teller assistance and video services

Remote teller assistance and video services

Remote teller assistance and video services

Remote teller assistance and video services

None of the above

None of the above

the above

Pop-up banking services

the above

Pop-up banking services

Pop-up banking services

Pop-up banking services

Other

Other

Analysis of NON-financial institution survey results

Note:

16.

North America

North America

South America

Africa

Europe 22%

Europe

Asia 18% Australia

South America

Africa

Asia 18% Australia

17.

Stayed

Stayed

Other

Other

19.

phone integration

Video

Video

with

for

Biometrics (e.g. facial recognition for identification)

Biometrics (e.g. facial recognition for identification)

None of

None of

above

for

for

Advanced

Contactless

Contactless transactions

Advanced security (TR34 for RKL,

Cloud-based infrastructure

Customer-centric

interface

Video

Video

with

21. What advanced ATM functionality technologies do you think banks plan to implement in the near future? Select all that apply:

Mobile phone integration

Mobile phone integration

Mobile phone integration

Mobile phone integration

Cloud-based infrastructure

Cloud-based infrastructure

Cloud-based infrastructure

Cloud-based infrastructure

Contactless transactions

Contactless transactions

Contactless transactions

Contactless transactions

Advanced security (TR34 for RKL, TPM, Whitelisting etc.)

Advanced security (TR34 for RKL, TPM, Whitelisting etc.)

Advanced security (TR34 for RKL, TPM, Whitelisting etc.)

Advanced security (TR34 for RKL, TPM, Whitelisting etc.)

Other

Other

Other

Other

None of the above

None of the above

None of the above

None of the above

2% 3%

2% 3%

2%

2%

22. What do you think banks priorities are for their ATM network? Prioritise the following with “1” indicating most important and “9” indicating least important:

3.01Deploying more frequent updates 4.58Tightening integration between ATM and mobile

3.01Deploying more frequent updates 4.58Tightening integration between ATM and mobile

4.18Improving speed of transactions

4.18Improving speed of transactions

4.18Improving speed of transactions

3.01Deploying more frequent updates 4.58Tightening integration between ATM and mobile

3.01Deploying more frequent updates 4.58Tightening integration between ATM and mobile

4.18Improving speed of transactions

Don’t know 50%

Don’t know 50%

4.37Migrating transactions to self-service 4.76

5.04Increasing ATM availability

5.04Increasing ATM availability

Increasing ATM availability

Increasing ATM availability

Simplifying your ATM network management

5.23Simplifying your ATM network management

4.37Migrating transactions to self-service 4.76

5.04

5.23Simplifying your ATM network management

4.37Migrating transactions to self-service 4.76Improving ATM security

4.37Migrating transactions to self-service 4.76Improving ATM security

Improving ATM security

5.04

5.23Simplifying your ATM network management

5.23

Improving ATM security

Improving customer experience

6.55Improving customer experience

Improving customer experience

Improving customer experience

Reducing your operating costs

Reducing your operating costs

Reducing your operating costs

Reducing your operating costs

23. Do you think banks ATMs currently use TPMs for enhanced security?

Yes 20%

Don’t know

Yes

Yes

6.55

6.55

6.55

7.27

7.27

7.27

7.27

24. Last year, around 40% of participants were thinking about upgrading to W10 in the relatively near future. Considering the recent W11 announcement, what statement best describes banks circumstances:

Already upgraded some or all ATMs to W10

Already upgraded some or all ATMs to W10

Don’t know

No 30%

No 30%

Already upgraded some or all ATMs to W10 Haven’t done anything but am still planning to migrate to W10 in the relatively near future

Already upgraded some or all ATMs to W10

Haven’t done anything but am still planning to migrate to W10 in the relatively near future

Haven’t done anything but am still planning to migrate to W10 in the relatively near future

Haven’t done anything but am still planning to migrate to W10 in the relatively near future

Considering alternative solutions Other

Considering alternative solutions Other

Changing plans and waiting for W11

Changing plans and waiting for W11

Yes 20% 52% 17% 10%

Changing plans and waiting for W11

Considering alternative solutions Other

Considering alternative solutions Other

Changing plans and waiting for W11

16% 5%

ACKNOWLEDGEMENTS

KAL ATM Software and ATM Marketplace would like to thank the following for their contributions to this report:

BanCoppel Bank in SEA

Banorte Česká spořitelna

Electronic Payment & Services Pvt Ltd

Fulcrum Technology Co., Ltd

HSBC Mexico

Hyosung Solutions

Impromptu Solutions Sdn Bhd

ING Bank

JSC United Finance Corporation

Kotak Mahindara Bank Ltd

MUFG Union Bank

NG Bank Slaski S.A.

NMB

Regions Bank

TBC Bank

Truist Financial Corporation

Zijin Fulcrum Technology

ABOUT THE SPONSORS

KAL is a world-leading ATM software company and preferred supplier to megabanks such as Citibank, ING, UniCredit and China Construction Bank. KAL’s standardized ATM software enables banks to regain control of their ATM networks, reducing costs and improving competitiveness. It is installed and supported in over 80 countries and runs on over 300,000 ATMs from nearly 50 different manufacturers.

ATM Marketplace, owned and operated by Louisville, Kentucky-based Networld Media Group, is the world’s largest online publisher of news and information for and about the global ATM industry. Content on the site is updated every business day and is distributed to financial services industry professionals around the world three times weekly in a free e-mail newsletter.