The Bankwatch

Real or not, there is an evolving thread questioning the infallibility of chip and pin.  We know that the card not present issue is a contributor, but this comment regarding ATM’s having difficulties is a new one to me, and will require further investigation.

We have to understand this dynamic, and both individual banks, and industry groups need to get on top of it.

MoneyExpert.com – Financial news article

“Chip and pin security is fallible,” a spokesman for credit payments association Apacs, which conducted the survey, told the Times. Recent research has suggested that cash machines are not always able to discern the difference between genuine cards and cards that have been cloned.

Relevance to Bankwatch:
Its been assumed as part of the business case for chip that fraud could be successfully managed down.  So while enormous cost has gone into the introduction of chip, yet consumers remain sceptical.

Spent a great day with Juergen and Uwe from Wincor today. Only thing wrong is that the day wasn't long enough. Wincor are showing very high growth curves in their delivery and penetration of ATM's worldwide. They are showing Diebold and NCR, that being the old installed base, is not enough.

Key point in my mind, and why the smart companies are using Wincor's is that they are entirely open, based on open standards. Their ATM's are just (I say "just" lightly) IBM P4 PC's. The interfaces, connections, and hardware are all standard off the shelf stuff. This makes their machines cheaper, simpler, and easily extendible to web services. You can use their application software or your own, such as Phoenix. The old days, where ATM manufacturers (and telephone applications too) relied on proprietary software, hard coded into the hardware are long gone.

In a multi channel environment, where you want to extend your brand experience into the channel, and be consistent across channels, they have a winning product.

Wincor Nixdorf – Company

Wincor Nixdorf is one of the world’s leading providers of IT solutions to retailers and retail banking. The Company’s extensive portfolio, which consists of hardware, software, consulting services, system maintenance and other services, is centered around the business processes at work within banks and retail chains which operate extensive branch networks, and is aimed at optimizing costs, reducing complexity and improving service to the end customer. Wincor Nixdorf uses the expertise in its core business with banks and retailers to diversify into other sectors. These include lottery companies, service station operators, hospitality and corporate restaurant businesses and large industrial companies.

Technorati Tags: wincor, nixdorf, atm, multi_channel

Wells have been working towards this since 2002.  Note how they are just not imaging the cheques, and reading them automatically, they are clearing them immediately and passing that benefit to the customer with same day credit for cheques.

Finextra: Wells Fargo introduces envelope-free ATM deposit system

• Envelope-Free ATMs offer customers some important benefits:

• Faster and easier ATM deposits – customers can deposit stacks of bills (up to 30 bills in different denominations) and checks (up to 10) directly into the machine at one time.
• Assurance that checks or cash deposits have been received – customers can see on-screen check images and a count of each denomination for cash deposits.
• Proof-positive receipts – customers receive a check image of deposited checks on their receipt and an itemized listing of deposited bills.
• Instant credit for cash deposits – funds are immediately credited to the customer’s account, just as if they made a cash deposit at the teller window.
• Same day credit for check deposits – the deposit cut-off time has been extended from 4:00 p.m. to 7:00 p.m. (weekdays), giving customers same-day credit for deposits even after the banking store has closed.
• ATM does the math for you – customers insert cash and a listing of every deposited bill is provided on-screen. Customers insert checks and the character recognition software reads and posts an image of the check and the amount on the screen.
• Saves trees – by making envelope-free deposits, Wells Fargo customers are helping to reduce unnecessary waste – potentially saving more than a thousand trees per year and reducing air pollutants by more than a quarter million tons of CO(2) equivalents.

ATM’s across the world are being used for new and innovative services, that keep customers satisfied.  North American ATM’s just provide the basics.

WSJ.com – The Envelope-Free ATM

In Russia, a consumer can put rubles into an automated-teller machine and get U.S. dollars in return. In Brazil and Venezuela, the machines print checks. And banking customers in Indonesia can use an ATM to schedule and pay for the ritual sacrifice of a goat.

However something as simple as envelopeless cheque depositing which sounds cool, is not necessarily a good use of investment.

Unlike traditional machines that swallow an envelope and require the customer to key in the deposited amount, the new versions read checks and count cash themselves. They can display an image of the check on the screen, and also print an image of the deposited check on a customer’s receipt. Bank executives literally “oohed” and “aahed” when a representative of ATM maker NCR Corp. demonstrated the technology at an industry conference last fall.

The costs of the cameras and cheque handing, to achieve this are significant, and given cheques are going away, does this make sense?  Perhaps the North Americans have this part right.

Relevance to Bankwatch:
The ATM manufacturers find it easy to wow Bank Executives in the ATM space because those folks generally haven’t been engaged in the online banking space.  The online bankers know innovation, and understand the importance (now, post dot com crash) of not getting caught up in the technology, and remaining focussed on the customers needs.

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Something we take for granted in the West hit Shanghai as their debit card system collapsed.

City's bank card system collapses

SHANGHAI'S major department stores, restaurants and some automatic teller machines failed to accept bank cards since noon today because of a network breakdown at China Unionpay, the country's integrated system for bank cards transactions.

While the card base is enormous, the ATM base is smaller than I'd expect.

China has issued more than 920 million bank cards, including debit
cards and credit cards since the end of last year, up 142 percent from
2002, the year when China Unionpay was set up.There are 86,000 automatic teller machines and 406,000 point of sales machines in the country so far.

Technorati Tags: debit_card, china

In Canada, bank customers have shifted away from the branch. 46% never visited a branch last Fall.

London Free Press – Business – Bank branches take a back seat to Net, drive-through

An annual research study released recently by research organization TNS Canadian Facts shows just more half of Canadians (54 per cent) visited a bank branch last fall, the lowest level of branch banking since the tracking study began in 1994.

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Matt and the fabulous team that run Worpress are the folks that built the sotware, and host this blog, so its worth noting this post below. I have been blogging consistently for 3 years, and in the 4 months since I switched to WordPress I am totally converted.

They are responsive, and continually improving the product. Best of all, they are real people behind the "code" and that point is very obvious to users of WordPress.

Good luck Matt, and thank you for WordPress. Philosophically you are pinko (in the nicest possible way).

Photo Matt » A Little Funding

The best thing that can ever happen to a web service is to have passionate users. Users that notice and email you the second there’s a database problem, users that really push the limits of what you can provide, and users that are phenomally successful and bring thousands of others to your doors.

A simple example of the international nature of ATM fraud.

Information from ATM cards skimmed in Auckland used in Canada to fleece accounts of thousands

(IRN News Via Thomson Dialog NewsEdge)There has been a third case of skimming of money cards at an Auckland ATM machine.This time it is at a BNZ machine at Pakuranga Plaza.

Information is thought to have been stolen from 60 cards.

That information has been used in Toronto in Canada with the fraudsters taking a total of $49,000.

It was only when card holders queried transactions that the BNZ realised its ATM machine at Pakuranga Plaza had been tampered with.

The BNZ is urging anyone who may have used the Pakuranga machine in March to check their accounts for irregularities.

With the recent ATM fraud, its natural and required to revisit security measures, and specifically the transmission of customer information between ATM's and bank host systems. That information travels a long way over disparate systems from the ATM, often through a processor, and then on to the bank.

This paper issued by Redspin Inc. is based on their experience conducting internal security audits for US banks. Their key point is found here:

ATM_Vulnerabilities_04_10_06.pdf

Given the current application protocol, confidentiality of user account information is clearly a significant issue. While the PIN is encrypted, the card number, expiration date and current balance are not. How valuable is that information? It can be used to create a duplicate physical card to be used for signature-based transactions or on-line purchases.

This is something each bank must do to ensure the security internally transmitted data is adequately secured. The surprise for this Bank that was audited, was that after implementing Triple DES (Visa requirement), they assumed that they were at end of job.
Redspins conclusion:

ATMs are not immune from this trend because they share the very same network and similar protocols as POS devices. While this paper has focused on the smaller to mid-sized bank architectures, even larger banks with TCP/IP ATMs are vulnerable without the proper controls. All of these devices use the same application layer protocol with sensitive customer information transmitted in the clear.

Relevance to Bankwatch:

In this case the bank was obviously small, however all banks must perform regular security audits to ensure they are providing the right level of service and security for their customers.

This paper from Selfserviceworld.com, is intriguing and captures the general trend we can all see, for ATM type machines showing up everywhere within otherwise traditional shops and stores.

TheFivePromisesofSelf-Service.pdf

There is a new generation of ATM like machines that are available to Banks. These machines will perform additional functions, and are only limited by the Banks' imagination and technology constraints. These ATM's can provide "assisted self service". Customers can perform the bulk of the transaction, (commercial deposit, wire transfer, purchase a draft) at the ATM, and complete with the CSR.

This provides greater efficiency to the CSR team, and speed and control to the customer.

Examples:

Source Technologies

IBM

NCR

Relevance to Bankwatch:

Banks in Japan and Europe already have ATM's inside the branch. There are a new generation of machines with enhanced functionality that offer significant advantages to Banks' to (semi) automate complex in-branch transactions.