Improving Consumer Access to Payment Services through ATM Kiosks

White Paper

Business Process Services

Subramanian Hariharan, Delivery Manager, Corporate Banking, BFSI BPS

Subramanian has over 11 years of experience in the Banking, Financial Services, and Insurance (BFSI) domain. He holds a bachelor's degree in Commerce with an advanced diploma in Management Fundamentals. He currently manages teams that support cash management and are part of the Commercial Banking vertical.

About the Author

Self-service payment channels and unattended kiosks have the advantages of speed, convenience, and availability. Among self-service kiosks, Automated Teller Machines (ATMs) have the highest presence and acceptance among consumers. They continue to be a strong viable alternative for banks as compared to branch locations and are now being increasingly used to provide a variety of services, other than dispensing cash. The single biggest benefit of an ATM is its potential to act as a self-contained, accessible and secure extended arm of financial institutions. Just as ATMs have been used to reach the un-banked and under-banked geographies and increase regulated financial penetration, they can also be used to provide consistent payment solutions and enhanced retail experience, irrespective of the location. They can be leveraged as a channel to dispense other services that require secure monetary transactions, such as credit card or utility bill payments and purchase of travel tickets.

This white paper addresses how banks and other enterprises can use ATMs or self-service kiosks to offer other services and provide an enhanced customer experience through ATM kiosks. It details some of the services that can be provided using ATMs, the ways in which they can be provided, and the challenges that enterprises might face while using ATMs to provide these services. It also takes a look at the emerging trends in the adoption of ATMs.

Contents

1. Introduction 5

2. Using ATMs as self-service kiosks for value-added services 5

Illustrative example of how ATMs can be used for credit card payments 6

3. Business benefits of using ATMs as self-service kiosks 7

4. Tapping into the versatility of ATMs 8

5. Trends likely to impact adoption of ATMS as a self-service channel 9

6. Challenges to consider in using ATMs as a self-service channel 10

7. Conclusion 11

1. IntroductionGlobally, banks and financial institutions are experiencing rising costs of customer services and engagement and need to adopt cost-effective customer engagement channels. At the same time, emerging economies are witnessing an increase in the demand for financial and non-financial products and services. Enterprises need to provide these offerings at lower costs and at locations with limited infrastructure development and consumer literacy. All of these challenges can be addressed with a single solution − ATM adoption.

The rise in the adoption of self-service kiosks in many areas is a positive trend for enterprises looking to reduce costs as well as those that cannot afford an extensive brick-and-mortar presence. Like other self-service channels, ATMs provide significant cost savings in the form of reduced per-transaction costs, and have a positive impact on both the capital and the operational expenditure of banks.

2. Using ATMs as self-service kiosks for value-added servicesKiosks and unattended channels are on the rise in areas where customer service is crucial but it is not possible to set up a branch or office. By using self-service channels, consumers can purchase a variety of goods and services without the help of a sales assistant. These interactive, self-service channels can be applied to a number of areas. However, they also require significant investment. It is therefore important for banks or third-party deployers to target ways of realizing a positive ROI. One way to do this is to provide multiple services using the same kiosks or leveraging existing kiosks for providing new services.

ATMs still happen to be big crowd pullers for banks. They are now being increasingly used to provide other services like credit card payments since the interface of an ATM is easy to navigate, explore and use. It is a logical move to use ATMs to provide other value added services. This is also supported by the fact that among self-help kiosks, ATMs have the best penetration in many regions and this density is likely to grow. Currently, an ATM is equipped with a card reader, a cash dispenser, a cash/envelope collector, and a printer. Using these, a cardholder can conduct financial transactions such as cash withdrawal, cash or check deposit, payment of utility bills, printout of mini account statements, and transfer of money between linked accounts.

ATMs can be more than mere cash dispensers. However, value-added services require a link to the account owner’s bank and specific accounts. Also, ATMs are connected only to ATM networks and not to other payment gateways such as those of credit cards. Hence it is difficult to provide all of these services comprehensively at each ATM.

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To counter this challenge and make these transactions card-issuer agnostic, banks can adopt white-labeled (WL) ATMs, deploy virtualized web ATMs, or modify their existing ATMs.

1. Web ATMs: Web ATMs refers to the various technologies that are used to link the ATM networks and the internet. 1Such technology enables ATMs to not only connect to interbank ATM networks but also to other networks for e-

commerce like bill payments, advertising, credit card payments, etc. This also enables quick and easy deployment of software and updates to individual kiosks.

22. White-label ATMs : The ownership of white-label (WL) ATMs lies not with any financial institutions (FIs) but with third parties called independent ATM deployers (IAD) who deploy them and generate revenues by charging fees for every transaction. This concept is prevalent in the Americas and the UK and is gaining acceptance in emerging economies as well. WL ATMs accept cards from multiple banks and, apart from regular features, also offer value-added services such as remittances, travel ticketing, and third party advertisements. This means that providers act as financial services kiosks and are able to profit from services beyond mere cash dispersal.

3. Modified or Enhanced ATMs: Many ATM vendors in emerging economies have devised specialized machines embedded with biometric devices for authentication. These ATMs offer the option of multiple languages, including the local language. This provides greater ease of use for the rural population or not-so-tech-savvy users, which in turn enables wider ATM acceptance and usage, even in remote and less developed areas.

Thanks to the latest developments in data transmission and storage, ATM functionality, and transaction security, enterprises have the opportunity to provide consumers with a very accessible and user-friendly self-service channel.

Illustrative example of how ATMs can be used for credit card payments

ATMs can now be used for paying insurance premium, institution fees, taxes (in certain countries), as well as making remittances, ticketing, and for third-party advertising. ATMs can provide secure access to customized applications using additional features such as credit card readers, bar code scanners, receipt and ticket printers, and biometrics.

To illustrate how such payments can be made possible, consider credit card bill payments using ATMs. This can be adopted in either of two ways:

1. Solution 1: The existing ATM machine can have an option to accept credit cards issued by any bank. The customer using the ATM will have a unique ID (UID) like the PAN in India or the Social Security number in the US. The following scenario explains how ATMs can facilitate this.

1.1. The user inserts the debit card into an ATM and is requested to select a preferred language and then enter the personal identification number (PIN). Upon entering the PIN, various options appear on the screen including an option to link credit cards to the account.

1.2. Upon choosing the option to link credit cards, the ATM allows the customer to key in the card details using the numeric pad and also provides an option to select the card issuing bank’s name.

1.3. The customer keys the credit card number, re-confirms this by keying it again, and finally chooses the issuing bank.

[1] An interbank network, also known as an ATM consortium or ATM network, is a network that connects the ATMs of different banks and permits these ATMs to interact with the ATM cards of other banks within a given network

[2] ATM Marketplace, “How to Improve ATM Profitability and Overcome Interchange Fee Increases”, http://global.networldalliance.com/downloads/white_papers/NCS_WP_HowToImprove_ToLaunch.pdf, 2012, January 2014

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1.4. The ATM acknowledges receiving the details by handing out a slip.

1.5. Once the credit card details and user details are matched between the banks, the card can be tagged.

1.6. The next time the user uses any ATM machine using the same debit card, the user will be able to make payments towards credit card dues through the ATM.

1.7. The UID can be linked to every relationship that the customer has with any bank. The customer can also link all utilities accounts. Since the bank already carries a record of all these utilities accounts, the customer can use the linked credit card to make payments towards utility bills.

2. Solution 2: The ATM kiosk can have another slot exclusively for credit cards. This would have to be integrated in new ATM machines during their manufacturing and setup phases.

2.1. Every customer who enters a banking relationship registers a UID or other unique identifier, which is used to link credit cards and debit cards through the ATM.

2.2. Once an account holder inserts the savings account debit card, the user should be allowed to link credit cards of other banks to the savings account.

2.3. This option will allow the user to tag the credit card in order to make regular payments through the ATM. Alternatively, the customer can use the ATM as a one-time payment window for the credit card dues and other utility bills that the customer has already registered for at the bank.

However, for other uses, the ATMs can include bar code scanners, biometric scanners, etc. This means that ATMs should now be viewed as a blend of IT and telecom business as well as retail.

3. Business benefits of using ATMs as self-service kiosksATMs provide the following advantages to the customer as well as the business:

1. Enhanced customer experience: ATMs can help enterprises retain and grow their customer base by enhancing customer experience.

a. Customer convenience: ATMs can extend the transaction hours on bill payments, ticketing, fee payment, and other transactions beyond office hours and beyond branch premises to convenient locations.

b. Ease of use: ATMs have a simple UI that most bank customers find easy to use and are familiar with. As mentioned earlier, many ATMs use local language and biometrics for authentication, unlike internet or mobile interfaces that require the user to be ‘net literate’, or websites that do not have regional customization implemented. In many cases, the UI of some websites is not as user friendly.

2. Better quality of transactions: The quality of transactions via ATMs is better than those on the Internet or mobile.

a. Persistent connectivity: ATMs provide dedicated and assured connectivity, Unlike the internet connection in many regions, ATMs provide dedicated and assured connectivity.

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b. Security: Transactions on ATMs are more secure than those on the internet. The web is more vulnerable to hacking, viruses, phishing, etc. The introduction of the Europay, Mastercard® and Visa® (EMV) standard, biometrics, contactless cards, and mobile authentication further reduces chances of fraud in ATM transactions.

3. Impact on topline and bottom line: By offering multiple applications on one machine, deployers can not only increase customer satisfaction but can also realize a positive ROI faster.

a. Reduced per transaction cost: Most retailers are facing increased pressure on margins and ATMs help in reducing the operational cost by reducing the cost of each transaction as compared with transactions conducted

3at brick-and-mortar outlets .

b. Reduced headcount savings: As transactions move away from brick-and-mortar spaces to self-help channels, employees in the outlets can be redeployed to attend to more complicated enquiries and tasks that add more value to the business, or the head count can be reduced to save costs.

c. Additional revenues: ATMs can provide a healthy ROI for ATM owners. Value-added services like ticketing or remittances are typically provided against fees. Additional revenues can also be generated from third-party advertising.

4.Tapping into the versatility of ATMsATMs have become the most popular channel of consumer interaction and the most used marketing tool to reach a variety of geographies and increase regulated financial penetration. The latest trend in unattended devices with touch screens combines a secure payment solution with a multimedia delivery platform capable of delivering targeted branding, promotions, etc.

Given the wide range of user demographics, ATMs employ a simple and easy-to-use graphic user interface (GUI). They employ a limited set of keys, each transaction can be completed in a few steps, each step is accompanied by an on-screen prompt for the user, the on-screen text can also be displayed in a local-language, and the text is usually accompanied by images to enhance understanding. This makes ATM kiosks extremely user friendly. Using ATMs, some of the potential value added services that could be dispensed are:

1. Bill payments: Long queues at collection centers or insufficient literacy for online payments pose a serious problem for consumers while paying utility bills. Hence, bill payment using ATMs will be a welcome feature for most consumers. Customers can register their utility accounts with banks. ATMs can then be used to check the dues and pay bills. Since these payments are linked to bank accounts, the approval of such payments will be faster and easier as well. On debiting their accounts, customers can receive printed receipts for the transactions. This can be extended to accept credit card payments, institution fee payment, making charitable contributions, etc.

[3] KioskMarketplace.com, “Self-service banking continues to expand at Chase”, November 2012, January 2014, http://www.kioskmarketplace.com/article/204157/Self-service-banking-continues-to-expand-at-Chase?rc_id=564 8

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2. Deposit automation using check imaging: Also known as ‘envelope free deposits’, this offers functionality to scan a check for faster and assured processing. This is a win-win for customers who are able to ensure faster and assured processing as well as for banks who can reduce incidents of ‘lost checks’ as well as the cost of resource

4 utilization in check processing. This technology can be extended to offer customers a way to scan and pay bills at the ATM, or to complete a transaction that requires scanning a document.

3. Sale of financial and other products: ATMs can be used to sell products and services such as travel tickets, mobile phone recharge cards, financial products, and movie and theatre tickets, etc. The in-built printer can produce the relevant ticket, statement, or receipt, and the ATMs can facilitate secure and approved payments.

4. Information kiosks: ATM owners can charge customers a fee for providing non-financial information. For example, the Union Bank of India has used ATMs to establish ‘Village Knowledge Centers’ (VKCs). VKCs target the socio-economic development of the local rural population in remote areas by giving them information on various vital inputs such as weather, fertilizers, price of crops, etc. The bank also offers counseling via financial

5education centers at 51 of the 200 VKCs.

5. Third-party advertising: Banks can effectively use the wait time at ATMs to promote brands, products, and services based on customer information available in their accounting and CRM databases. These can then be converted into potential sales. For example, if a customer has been making regular payments for the purchase of a product category, then advertisements and offers for those particular products can be displayed. If customers are interested in the advertised service or product, they can use the ATM to print a receipt with the contact details of regional sales representatives or the location of the nearest outlet.

6. Remittances: ATMs can be used to make cross-border remittances for migrant workers and tourists. This reduces the delay inherent in postal money orders or wire transfers, and eliminates the dependence on intermediaries

6 and the need to travel to a brick-and-mortar outlet. A recent news article quotes the Governor of the Reserve 7Bank of India (RBI) on how people without bank accounts can use ATMs to receive money.

7. Public announcements: ATMs can be used to make public announcements and disburse important information. For example, police in the UK have used ATMs to publicize their ‘don’t drink and drive’ campaigns.

5. Trends likely to impact adoption of ATMS as a self-service channelThe new generation of ATMs is expected to adopt innovation and technology within the self-service channel that will further enhance operational efficiency, consumer experience, and security.

Converging ATMs and mobile channels: It has been predicted that in the five years between 2012 - 2017, mobile technology will have the largest impact on ATM industry. The most popular trend is expected to be the deployment

[4] Diebold, http://www.diebold.com/industry-solutions/financial-solutions/Pages/deposit-automation.aspx, January 2014; NCR Corp., 2013, accessed January 2014, http://www.ncr.com/products/payment/retail-bank/NCR-Aptra-Deposit-Gateway

[5] Union Bank of India, http://www.unionbankofindia.com, 2010, January 2014

[6] NCR Corp., http://www.ncr.com/locations/uk/products/banking/deposit-atm-machines#foreign%20exchange, 2013, January 2014[5]

[7] The Economic Times, “Individuals without bank account can soon receive money from ATMs: Raghuram Rajan”, Feb 13, 2014, February 2014, http://articles.economictimes.indiatimes.com/2014-02-13/news/47305310_1_bank-account-atm-machines-rbi-governor-raghuram-rajan

of solutions that integrate mobile banking and marketing with the self-service channel. The impact of this is likely 8to range from contactless transactions at ATMs to making impromptu payments.

Two-way video technology: ATMs are being equipped with two-way videos to provide consumers the option of human interaction for advanced or complex transactions. It can also be a good way for enterprises to connect with consumers in remote locations.

Adopting 4G: Enterprises can create communication links not only with the deployers and the FIs but also with third parties, by adopting 4G in ATMs.

Chip and pin or EMV: EMV is a technical specification that facilitates interoperability between chip-based credit or debit cards and point-of-sale devices or ATMs. The chip on an EMV card stores encrypted data to protect against unauthorized transactions. This standard has been adopted widely and the ‘EMV liability shift’ will be instituted in

9the U.S. starting October 1, 2015.

Contactless cards: Other than EMV and biometric scanners, contactless smart cards are being added to ATM kiosks to reduce chances of fraud. Contactless cards use ‘near field communication’ and are so easy to use that a customer can simply wave the card close to the terminal to initiate an ATM transaction.

6. Challenges to consider in using ATMs as a self-service channelCustomers expect transactions across channels to have increased security and accessibility, and they also demand timely delivery of services. Before adopting ATMs to propagate self-service in various payments and non-financial transactions, ATM owners must review the challenges in doing so.

1. Secure payment: ATM owners must assure customers that payments through this channel are secure. The wide adoption of secure certified verification EMV (commonly known as ‘chip and pin’) is a major step towards providing this assurance. This method can authenticate a card and it can also verify a customer's identity. This

10secures the payment and drastically reduces chances of fraud.

2. Software threats: While ATMs are more foul-proof than the internet, they can be susceptible to malware attacks and anti-skimming jammers. ATM owners can reassure users by providing effective security solutions to protect

11 against targeted threats and attacks.

3. Regulatory norms: It is necessary to comply with local regulations before deciding to deploy any of these services. For instance, in some countries regulatory authorities do not allow advertising for third-party products in ATM kiosks. In other cases, white-label ATMs may not have regulatory acceptance.

[8] ATM Marketplace, “The future of ATMs”, 2012, January 2014, http://www.atmmarketplace.com/whitepapers/5157/The-Future-of-ATMs-Mobile-Security-and-Regulations-Oh-My-Infographic

ATM Marketplace, “Five Ways Mobile Technology will Revolutionize ATMs”, September 2013, January 2014, http://www.atmmarketplace.com/whitepapers/6675/5-Ways-Mobile-Technology-will-Revolutionize-ATMs

[9] Visa,“Play It Smart With U.S. Chip Payment Transactions”, http://usa.visa.com/download/merchants/play-it-smart-with-chip-payment-transactions.pdf, 2013, January 2014

[10] Chase Paymentech Solutions, LLC, “FAQ: EMV Chip Card Technology”, https://www.chasepaymentech.com/faq_emv_chip_card_technology.html, 2014, January 2014

[11] NCR Corp., “Software Security”, http://www.gokiosk.net/self-service/archives/NCR_whitepaper_Software_Security_WP.pdf, January 201410

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4. Consistent and timely services: The best way to attract customers is to ensure that transactions are fast, secure, and consistent. Though speed is of essence, the large volume of consumer payment and service transactions, diverse range of technologies, and multi-vendor terminals can load the ATM network infrastructure heavily. Enterprises must ensure persistent network communications and application performance for uninterrupted service availability. ATM owners must also be aware of third party hand-off issues and take steps to guard consumer interests.

7. ConclusionThe costs of customer services and engagement are rising, and enterprises need to move towards self-service and cost effective engagement channels. ATMs have proven to have both these characteristics and enjoy a high degree of consumer acceptance. ATMs not only provide an easy-to-use customer interface but also a secure one. Coupled with the ease of propagation and penetration of ATMs, enterprises have an almost ideal channel for customer self-service.

Both FIs and non-FIs can take advantage of the flexibility of ATMs for dispensing a variety of services with the help of the wide range of technologies available for use with ATMs. Several innovative solutions have already appeared on the market and paved the way for leveraging the versatility of ATMs.

Though the channel is subject to regulatory barriers and vulnerabilities, the value-added services available on ATMs currently are merely the beginning. Given the benefits of enhanced customer experience, positive impact on both the top and bottom line, and the assurance of better transaction quality, we believe that ATMs will soon emerge as a powerful channel of self-service for a wide variety of services. We suggest that ATM owners and providers work to enhance the security, assurance, and persistence of transactions to ensure an even wider acceptance.

All content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties. Copyright © 2014 Tata Consultancy Services Limited

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